Government Programs: Cheap Startup Funding With Strict Rules
Governments are looking at funding startups and innovation in their communities. Though the competition is fierce, coupled with stringent criteria, access to this relatively cheap startup funding can be an absolute game-changer for a startup. Grants are usually available for high-end technological and scientific research developments and projects. Even under these categories, they may apply more to some fields than others, which forms the basis for certain restrictions on who can apply. This is done to screen out some businesses and streamline the grant to target companies and individuals. They will usually require you to match the funds that are given with other funding. Grants typically require you to be very detailed on how you will spend the money, and have varying control mechanisms afterward. Government-backed loans are desirable to new businesses, as they typically offer better repayment terms over a more extended time.
It is an opportunity for the generation of employment, wealth, and promotion of indigenous industries. Government funding is provided to help businesses expand in their market and provide them with a means of implementing their developmental strategies; to help new and existing companies procure technologically advanced equipment; to aid the training and recruitment of skilled individuals; and to unearth novel ways of doing things in fields such as science, for the benefit of humanity.
A startup applying for government grants needs, at minimum, a full description of the project, a definition of its merits, the proposed expenses that will cover its operating cost, and information about the background of those taking part.
The advantages: government funding supports critical business development and improves the chances of success of a project. In some countries, startups registered under government programs can be exempted from tax up to a fixed period. There are relaxed norms for public procurement, with no requirement for prior experience or a requisite turnover.
The disadvantages: to get a government grant, one must have a feasible proposal, which is sometimes difficult, and completing it takes research, time, energy and attention. Government loans are given for short-term use, and you cannot use them just any way you wish. And government entities are more risk-averse than private funders and do not provide lump-sum awards; instead they reimburse costs, which can be difficult for a small business because of the lag between fronting payments and waiting for reimbursements.