Starting and growing a business can be challenging particularly in these difficult days. It takes a lot of planning, money, and time to bring a business idea to fruition.
However, the rewards are well worth it when you finally see your company take flight.
Sustaining a thriving startup isn’t easy, but with the right help it can be attainable. And luckily for budding entrepreneurs, the government offers several programs that support startups and entrepreneurs.
In this blog we’ll discuss some of these programs in detail so you know what they entail, who is eligible for them, and how they can help your business succeed.
What is the government’s role in supporting startups?
The key role the government plays in supporting startups is to promote innovation by funding it.
Organizations like the National Science Foundation, the National Institutes of Health, and the Department of Defense are all sources for research and funding that can benefit the entire country.
When it comes to funding entrepreneurs, the government often plays a supporting role by offering grants and loans for startups. However, there are also programs that provide funding directly to startups. The most notable of these are listed below.
The SBIR/STTR Program
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are designed to support early-stage technology research and commercialization efforts of small businesses, respectively.
The SBIR/STTR programs are administered by the federal government, but they are open to any business with less than $100 million in annual gross revenue and less than 500 employees.
SBIR/STTR proposals are selected on the basis of their technical merit, their commercial potential, and the potential for generating employment in the United States.
A business can submit a proposal for funds for any type of research and development, including health care, energy, technology, space, and more.
The funding amount is often between $200,000 and $2.0 million. And while that may seem like a small amount, SBIR/STTR programs have been successful in bringing many important innovations to the market.
Hiring Provisions for Small Businesses
Small businesses can take advantage of hiring provisions with the Work Opportunity Tax Credit (WOTC) and the Internal Revenue Code programs.
The Work Opportunity Credit offers a 50% tax credit for the first two years and 25% after that for hiring individuals who are veterans or members of a targeted group. Further, the credit is based on the number of employees hired, not the number of work hours they work.
The hiring provisions of the Internal Revenue Code can reduce the cost of doing business by making it cheaper to hire people with disabilities, veterans, and our nation’s active-duty military service members. This can help businesses create new jobs, fill gaps in the labor market, and increase the economy’s overall employment rate.
Hiring Provisions are tax provisions that encourage hiring veterans and job-seekers with disabilities.
With WOTC and IRC programs, a company can benefit from using top-notch workers and reducing their tax burden at the same time.
Grants and Loans for Startups
While funding is great, it’s not free. And sometimes it’s challenging to dig deep into your own pocket when you have a business to run.
This is when grants and loans can be useful. A grant is money you don’t have to pay back and is often provided by an organization like the Department of Defense or the National Science Foundation.
The grant application process can be rigorous, but if you make it through, you’ll likely get funding to help jumpstart your business.
Loans come from a lender and typically have terms of up to 10 years. They are an excellent source of financing for startups because unlike grants, you are required to pay them back.
Tax credit for new business owners
Tax credits like the one for a new business can be a huge help for startups.
The tax credit works like this: If a person owns a business for less than 39 months, he or she can deduct up to $5,000 from their income taxes.
This has the potential to save a lot of money for a lot of people.
For example, if a person makes $50,000 a year, s/he can deduct $5,000 from his/her income taxes. This means he/she would have $45,000 left to pay taxes on.
This credit is in addition to the standard deduction that all business owners can take, which means it increases your tax burden by zero.
The credit is available to new and active owners of S-corporations and Partnerships. As a new business owner, you may qualify for a new business income tax credit.
3-2-1 mentorship program
The 3-2-1 mentorship program is a partnership between the Small Business Administration (SBA), the Department of Commerce, and the Small Business Development Center Network.
Each state runs their own SBA office that is dedicated to helping entrepreneurs.
The 3-2-1 mentorship program aims to provide hands-on assistance to startups. The program partners with various universities and industry associations to provide assistance to startups.
Enterprise Startups Acceleration Program (ESAP)
ESAP is a program created to help small businesses grow by providing access to a network of investors and industry experts.
ESAP works to connect companies with investors who can provide capital and industry experts who can help entrepreneurs achieve their goals.
In order to be eligible for ESAP, a startup must have raised $5 million or more in equity financing. ESAP funds can be used to help finance the development, acquisition, or expansion of new businesses.
The program is run by the Small Business Administration and the Department of Commerce. ESAP connects startups with investors and mentors by providing two critical resources: access to a network of investors and expert industry advisers.
Wrapping up
The government has a key role in supporting startups. They can provide grants and loans for research and development, hire provisions for veterans and immigrants, and a tax credit for new businesses.
There are also a number of funding programs dedicated to supporting early-stage startups. In addition to grants and loans, there are programs that support early-stage startups through incubators, mentorship programs, and free facilities.
If you are planning to start a business, it’s important to know how the government can support you. By knowing the different programs available, you can make an informed decision on what to pursue.
