Do you have enough money to execute against your business plan? If not, then where will you get the capital you need?
Funding is a key element of any startup. The amount of capital that a startup receives is directly related to the viability and growth of the business.
Thus, if your startup does not have enough capital for operations, then it may be time to consider government funding. Finding government funding for startups isn’t as challenging as one may think as we explained here. In fact, there are several benefits that come with applying for government funding as a startup.
We have outlined five key points that should be considered before applying for government funding:
Who Can Apply for Government Funding?
The first thing that you need to know about government funding for startups is who can apply for it. As the name suggests, this is funding that is provided by the government. Government funding can be received by non-profit and for-profit organizations. Yet, for each funding/grant the exact criteria need to be checked on their website.
The US government agencies that can provide funding to startups include:
– National Science Foundation
– Department of Agriculture
– Department of Defense
– Department of Health and Human Services
– Department of Commerce
– Department of Energy
– Department of Transportation
– Department of Education
– Department of Veterans Affairs
– Department of the Treasury
There are a few key considerations when choosing a government partner. First, it is important to identify the government agency that has the expertise you need. Next, it is important to identify the government agency that has the programs that align with your business model. Once you have identified the key considerations, then it is time to start reaching out to government agencies for partnerships.
Below, we explain several important benefits of government funding for your startup, particularly in its early years.
1. Tax Benefits of Government Funding
When a startup receives government funding, there are many tax benefits that come with it. The main tax benefits of government funding include:
– Tax Deduction: If you are an entrepreneur, the income that you receive is not taxed. However, the money that you receive from investors is taxed. Thus, if you receive government funding, then you are getting the same amount of money as before. However, now, you typically do not need to pay tax from the government funding/grant.
– Investment Tax Credit: One of the most significant tax benefits of government funding is the investment tax credit. This is because it reduces your tax by up to 30%.
– Partnership: If you are associated with the funding, then you are eligible for certain benefits as a partner.
If you are interested in exploring the tax benefits of government funding, then it is important to partner with a government agency that has tax benefits for investors.
2. Networking opportunities
Another key benefit of government funding is networking opportunities. It is common knowledge that businesses need to be networking.
Therefore, if you are a startup, then you are most likely networking. However, with the high costs of networking, it is difficult to keep up with the pace.
With government funding, you are provided with a team of people. Thus, if you are networking, then the networking opportunities get doubled.
This networking opportunity is especially useful if you have a new business. Thus, government funding can be a great help to accelerate your growth. Networking can be useful when you want to pitch other companies or investors to partner with you in future deals.
3. Help with Job creation
Government funding can be a great help in creating jobs.
The unemployment rate in the United States is at 3.5% as of July 2022. However, it is important to note that the unemployment rate can vary from state to state and from time to time.
Thus, if you are looking for government funding for your startup, then you should check out the unemployment rate of your state.
If the unemployment rate in your state is high, then it may be a good idea to apply for government funding. This is because government funding can create jobs in your state.
Thus, the money that you receive from government funding can be used for hiring people.
Government funding can be a great help in creating jobs. One of the main benefits of government funding is that it can create jobs. Thus, it is important to apply for government funding if you want to create jobs.
4. Strong brand recognition
A strong brand is one of the most important aspects of any business. If your brand is strong, then you can easily gain customers.
Thus, government funding can be a great help in building your brand and your reputation in the startup ecosystem. Research has suggested that startups that received government grants have more success with attracting venture capital and other types of resources they need.
A significant portion of the investment from government agencies is used to promote the brand recognition of the recipients. All these evidence would suggest that startups with grants and government funding are more likely to garner much-needed resources.
5. Collaboration with other startups and professionals
Government funding can be a great help in networking and building your brand. If you receive government funding, then you can collaborate with other startups and professionals since you have the opportunity to attend meetings, workshops, etc. that the government grant organizers typically organize for grant seekers/winners.
This network can come handy later on when you try to scale your business or approach venture capitalist.
Bonus: How to Apply for Government Funding?
Before you apply for government funding, it is important to understand how it works and how it benefits you. Government funding for startups works in a similar manner as private equity funding.
First, you will need to identify the government funding agency that you want to apply for funding from.
Next, you will need to write a business plan and submit it along with your application.
Finally, you will need to follow the requirements for government funding. If you follow these steps, then you will be able to successfully apply for government funding for your startup.
If you would like to know more about how to apply for government funding, you can read this post.
Final thoughts
With government funding, you can get a substantial amount of money that comes without any equity in exchange. Thus, if your startup doesn’t have capital to execute on its business plan, then it can apply for government funding.
Government funding is money that comes from the government without any equity in exchange. Thus, if your startup doesn’t have capital to execute on its business plan, then it can apply for government funding.
