Business Grants

Page 1 of 13 BUSINESS AND INTERNATIONAL RELATIONS COMMITTEE REPORT Agenda Item 5.1 15 July 2008 SMALL BUSINESS GRANTS – GUIDELINES 2008/09 Division Presenter Purpose 1. To seek Committee’s approval for proposed amendments to the current guidelines for the Small Business Grants program for the 2008/2009 financial year including revision to Business Support Services category, grants approval process and the consideration of ethical issues as part of the grants assessment process. Commerce and Marketing Jane Sharwood, Manager Business and International Recommendation from Management 2. That the Business and International Relations Committee approves: 2.1. 2.2. 2.3. the revised guidelines for the Business Support Services category of the Small Business Grants program 2008/2009; a new approval process for the Small Business Grants program 2008/2009; and the inclusion of an ethical charter in the information provided to applicants for the 2008/2009 Small Business Grants program, as a guide to matters that will be considered by the Independent Review Panel in addition to existing grants assessment criteria. Background 3. The December 2007 meeting of the Business and International Relations Committee resolved to: “…request a report be brought back to the Business and International Relations Committee suggesting some guidelines to direct the ethical allocation of business grants”. 4. The operations of the Small Business Grants program, is part of the overall corporate review of Council’s grants and sponsorship programs. This review aims to develop a consistent approach across Council to the management of all grants programs. It is anticipated the outcomes of the review will be implemented in 2009/2010 financial year. However this will not be finalised before the information session for applications for the 2008/2009 Small Business Grants. Registrations are currently being received for the first information session for the 2008/2009 Small Business Grants to be held on 24 July 2008. Based on previous grant rounds, an audience of up to 200 will attend the information session resulting in 50 to 60 applications by the closing date 18 August 2008. A second round of applications will be sought in early 2009. 5. Page 2 of 13 6. The Small Business Grants program has been running for nearly twelve years. Over that time it has supported the establishment, expansion and growth of over 200 businesses to a level of over $4 million. The program is the Council’s main source of financial support provided to small business development activity within the city. The program has two grant rounds in March and August each year, making total allocation up to $600,000 on an annual basis. Given 96 per cent of all businesses within the City of Melbourne are classified as ‘small’ to ‘medium’ size, with many being micro businesses (with less than five employees), this program represents a significant investment by Council in supporting the economic and business development in the city. The objective of the Small Business Grants program is to encourage the establishment, growth and retention of sustainable business that enhances the City of Melbourne’s reputation for innovation, business vitality and environmental sustainability. The program seeks to support businesses that demonstrate solid market potential and have a sound business model including long term financial viability. Priority is given to those businesses in the City of Melbourne’s key industry sectors of advanced manufacturing, biotechnology, finance and business services, creative industries, higher education, information and communication technology and retail. The maximum grants are: 10.1. start up – up to $30,000; 10.2. business expansion – up to $30,000; 10.3. export entry – up to $10,000 on a dollar for dollar basis; and 10.4. business support services – up to $10,000. 7. 8. 9. 10. 11. The current guidelines for the Small Business Grants program were introduced two years ago and ratified by the Business and International Relations Committee in June 2007 for the 2007/2008 financial year. Proposed Small Business Grants Operational Guidelines 2008/2009 can be found at Attachment 1. 12. Key Issues Business Support Services Category 13. Over the past two years, no applications that comply with the current Business Support Services (BSS) category have been received. Currently, the BSS grants are targeted at member based organisations to help with the delivery of training and development initiatives to improve the performance of small businesses located in the City of Melbourne. Member based/industry associations play an important role in supporting their members, the majority of whom are small businesses. Associations act as a trusted source of information, advice and expertise for their members, often have a significant role in setting the strategic direction of the industry they represent and can influence public policy. These organisations also offer a range of products and services to their members including business productivity tools, advisory services and market intelligence, to accelerate their business growth. Potential applicants for the BSS category were deterred from making applications as they did not comply with the funding objectives and criteria. This has resulted in a review of the current guidelines to assess the need to expand the current guidelines to fulfil the objectives of program and assist member based business organisations. 2 14. 15. Page 3 of 13 16. There are two proposed additions to the current guidelines: 16.1. to enable member-based organisations that are a national association or a Victorian/Melbourne chapter of a national association for a specific industry to apply for a grant to assist with its expenditure directly related to establishing their office in the City of Melbourne; and 16.2. to enable other member based organisations, to apply for funding for initiatives that will introduce and deliver new, innovative products/services that will create significant tangible outcomes for their members. 17. The costs associated with training and development initiatives will remain an eligible funding item for the BSS category. Small Business Grants approval process 18. Under the current 2007/2008 Small Business Grants guidelines, the grants approval process is as follows: 18.1. all applications to the Small Business Grants program are assessed internally on a competitive and merit basis. This internal assessment process includes a financial risk assessment and comments from an industry sector expert relevant to the applicant’s business proposal; 18.2. to ensure a fair and transparent process, the assessments and recommendations are reviewed by an external Independent Review Panel (IRP). The IRP is comprised of a small group of external representatives who have extensive practical experience and skills in operating successful small businesses; and 18.3. the IRP considers the conforming applications and makes recommendations for grants approval or refusal. Taking these recommendations into consideration, the Manager Business and International, under delegation, determines the final outcome of each application and approves the amount of the grant to be offered. 19. For the 2008/2009 Small Business Grants program the Independent Review Panel makes final recommendations to the Business and International Relations Committee. All other aspects of the process will remain the same. Unsuccessful applicants will have the opportunity to discuss the deficiencies of their application with Council officers, as it may be appropriate to consider an application to subsequent rounds of the program. Successful applications will enter into a 12 month funding agreement with City of Melbourne and be required to meet agreed performance measures in relation to anticipated outcomes identified in the applications. 20. 21. Ethical guidelines for Small Business Grants 22. The following assessment criteria are applied to all applications to the Small Business Grants program: 22.1. how innovative/creative is the proposed project; 22.2. has the business concept been validated/tested?; 22.3. anticipated business outcomes (quantitative and qualitative); 22.4. financial risks; 3 Page 4 of 13 22.5. benefits to the City of Melbourne; and 22.6. other consideration such as industry sector expert's comments, Council's priority markets/industries and Council's policies and priorities. 23. 24. Similar criteria are applied to Export Entry applications with the additional criteria of the export potential and the tangible export outcomes of the proposed project. A draft ethical charter has been developed for the 2008/2009 Small Business Grants program (Attachment 2). This statement is broadly based on the charter developed by Australian Ethical Investment Ltd (1986), one of Australia’s first ethical investment charters utilising the concepts of positive and negative investment screening. Applicants will be asked to address the ethical charter in their application to the Small Business Grants program. Given that work is currently under way to develop an overall Council ethical statement for future grants programs, it is recommended the following approach is adopted for the 2008/2009 Small Business Grants program that all: 25.1. grant applications are assessed on an individual basis, against program and individual grant category objectives and criteria on a competitive and merit basis; and 25.2. a preference will be given to applications which demonstrate sustainable business practise and business practises in line with the ethical charter. Time Frame 26. It is proposed that amended guidelines for the Small Business Grants operate for the 2008/2009 financial year. 25. Relation to Council Policy 27. The Small Business Grants program is an integral part of the Business Development Fund (BDF). The BDF provides financial resources with which Business and International pursues the objectives of Advancing Melbourne’s Interests – Business and International Strategy 20082012 and the innovative and vital business theme of the City Plan. Consultation 28. The external Independent Review Panel (IRP) members are supportive of the proposed guideline changes for the Business Support Services category. Finance 29. The Small Business Grants Program has been allocated $600,000 from the Business Development Fund in 2008/2009. In 2007/2008, $583,552 was allocated under the Small Business Grants program to 27 business projects. There are no direct financial implications arising from the recommendation contained in the report. 30. Legal 31. No direct legal implications arise from the recommendation made in this report. 4 Page 5 of 13 Comments 32. The Small Business Grants (SBG) program is a merit-based grant program encouraging and supporting innovative small businesses currently located or intending to locate in the city as well as business/industry associations located in the city. The new guidelines will be communicated to the relevant stakeholders and the small business community. 33. Attachments: 1. Small Business Grants - Operational Guidelines 2008/09 Program 2. Draft City of Melbourne Ethical Charter 5 Page 6 of 13 Attachment 1 Agenda Item 5.1 Business and International Relations Committee 15 July 2008 SMALL BUSINESS GRANTS Operational Guidelines 2008/9 program City of Melbourne July 2008 COM_SERVICE_PROD-#4661850-v6-JUL08_BIRC_SMALL_BUSINESS_GRANTS__GUIDELINES_2008_09_ATT_1.DOC 1 Page 7 of 13 1. Objectives The main objectives of the Small Business Grants Program are to: • encourage the establishment, growth and retention of sustainable and ethical businesses that enhance the City of Melbourne’s reputation for innovation, business vitality and environmental sustainability; support innovative businesses that demonstrate a sound business model, including financial viability and solid market potential; increase the overall value and volume of exports from the City of Melbourne; create employment opportunities and increase the level of business investment in the City of Melbourne; and foster innovative partnerships and collaboration between businesses and/or business support groups. • • • • Collectively, these objectives seek to encourage and support new, creative and different business activities and projects that will contribute to a thriving and competitive business environment within the City. In addition, the program seeks to encourage more City based Melbourne businesses to engage and expand their international activities. 2. Eligibility Small businesses are eligible to apply for a grant that will make a measurable contribution to the Small Business Grants Program’s objectives. The business must: • • • have a registered Australian Business Number; be located or committed to locate within the City of Melbourne municipality; and be a sole trader, an Australian registered company, business co-operative or partnership and have documentary evidence of an appropriate legal structure. Businesses must comply with relevant National and State laws and Council policies that impact on the business proposal submitted to the program. Business Support Groups (ie member-based organisations) are eligible to apply for a grant under the Business Support Services category. Government departments or agencies, unincorporated associations, franchisees and subsidiaries of larger companies are not eligible to apply. Branches of foreign companies and organisations, or individuals providing trade facilitation services to businesses are not eligible to apply for an Export Entry grant. COM_SERVICE_PROD-#4661850-v6-JUL08_BIRC_SMALL_BUSINESS_GRANTS__GUIDELINES_2008_09_ATT_1.DOC 2 Page 8 of 13 3. Categories of Grant The four categories of grant are: (a) Start-Up Designed to assist with the establishment of a new and innovative business that will increase the diversity of the City’s business community. Businesses must be able to demonstrate ‘business readiness’ (i.e. the product/service is financially viable, validated by comprehensive and tested market research and available for prompt introduction to consumers). (b) Business Expansion Targeted to assist with the expansion of an existing innovative business. Business expansion is defined as: • an existing City of Melbourne small business introducing a new, innovative activity/product/service as part of its expansion phase; or • an existing innovative small business relocating to/within the City as part of its business development strategies. Businesses applying to this grant will need to have a demonstrated level of existing business success, supported by financial documentation. (c) Export Entry Targeted to support ‘export-ready’ small businesses looking to enter the international market for the first time as well as experienced exporters seeking to expand into new markets. Small businesses are eligible to apply for a grant on a ‘dollar-for-dollar’ basis for export initiatives that will make a measurable contribution to the program’s objectives. Business can apply as: New Exporter • has export turnover of less than 5% of total annual dollar turnover; and • has an export strategy and demonstrated export readiness/capability. Current Exporter • demonstrated export experience in one or more overseas markets; and • seeking to explore export opportunities in a new market or launching a new product in an existing market. A maximum of three grants can be made to a business, with each grant occurring in three separate financial years. The approval of subsequent grant(s) will be subject to the satisfactory completion of agreed performance measures of any previous grant. COM_SERVICE_PROD-#4661850-v6-JUL08_BIRC_SMALL_BUSINESS_GRANTS__GUIDELINES_2008_09_ATT_1.DOC 3 Page 9 of 13 (d) Business Support Services Business support services are activities specifically designed and delivered to improve the performance of small businesses primarily located in the City of Melbourne. This category of grants is targeted at business support groups that comply with the following description. A business support group is a member-based organisation that: - comprises a group of small businesses having common products/services or colocated within a precinct in the City; and - has a majority of its members located within the City of Melbourne. Member-based organisations that are a national represented body or a Victorian/Melbourne chapter of a national represented body for a specific industry, they are eligible to apply for a grant to assist with their expenditure directly related to establishing or relocating to the City of Melbourne. All other member-based organisations, are eligible to apply for funding in two key areas: • Expansion initiatives: the costs associated with introducing and delivering a new, innovative product/service that will deliver significant tangible outcomes for their members; and Training and Development initiatives: the costs associated with the delivery of training and development related initiatives designed to improve the performance of small businesses in the municipality. • Intending applicants are advised to commence discussions with the Business and International Branch very early in the development phase of their project or initiative. 4. Overall Grant Conditions Applications must be made in the form prescribed by Council by the date set for each grant round. There are two rounds in each financial year - August and March. Applications are required to demonstrate the measurable contributions that will be made to the achievement of the program objectives, as specified above. In addition, each application must specify anticipated quantitative performance outcomes to be achieved at the end of the 12-month agreement in the following areas: For applications from new or existing businesses : • the level of intended investment in the business (exclusive of the grant); • the number of jobs to be created; • the gross turnover; and • the long term viability of the project. For applications from ‘export ready’ businesses: • the expected or previous export earnings; • the level of intended investment in the export activity of the business (exclusive of the grant); • the number of jobs to be created as a result of the export activity; COM_SERVICE_PROD-#4661850-v6-JUL08_BIRC_SMALL_BUSINESS_GRANTS__GUIDELINES_2008_09_ATT_1.DOC 4 Page 10 of 13 For applications from business support groups: • the location, type and number of businesses that will benefit from the proposed initiative; • the nature and extent of the anticipated business development outcomes; • any new business or employment creation potential; and • any business or City promotion opportunities that the initiative can offer. Where necessary, the Manager, Business and International will formulate specific criteria for use in the application documentation and do so in accordance with these guidelines. 5. Application Assessment Each application will be assigned a Case Manager who will handle the application from assessment process to the conclusion of the funding agreement period that applies to any successful application. The application will be assessed against the program and individual grant category objectives and criteria on a competitive and merit basis. Applicants will be asked to address sustainable business practises and respond to the Ethical Charter in their application. An assessment report will be prepared for each compliant application for consideration by an external Independent Review Panel (IRP). The IRP will consider the conforming applications and make appropriate recommendations to the Council’s Business and International Relations Committee. Taking these recommendations into consideration, the Committee will determine the final outcome of the application and approve the amount of the grant to be offered. All decisions made are final. There is no review or appeal process however unsuccessful applicants are invited to discuss their application’s deficiencies with their Case Manager. In some cases, it may be appropriate to consider re-applying in a subsequent round. 6. Performance Measurement Grant recipients will be required to enter into a funding agreement with Council and meet agreed performance measures in relation to the anticipated outcomes, as identified in the application. Grants recipients are also required to have the appropriate business insurances. To assist with the successful development of their business, grant recipients will also be required to utilise business advice and counselling support during the period of their funding agreement. Recipients are required to submit two reports during the period of the agreement, detailing progress against the agreed measures. Recipients will also be required to recognise the Council’s support (in an agreed manner) and to participate in any public promotions organised by Council to promote the Small Business Grants program. COM_SERVICE_PROD-#4661850-v6-JUL08_BIRC_SMALL_BUSINESS_GRANTS__GUIDELINES_2008_09_ATT_1.DOC 5 Page 11 of 13 Attachment 2 Agenda Item 5.1 Business and International Relations Committee 15 July 2008 The City of Melbourne, through the Small Business Grants Program 2008/9 seeks to support small businesses that will contribute to one or more of the following; 1. 2. 3. 4. 5. 6. 7. 8. production of high quality and properly presented products and services; development of locally based ventures; development of appropriate technological systems; amelioration wasteful or polluting practices; development sustainable land use and food production; preservation of endangered eco-systems; human happiness, dignity and education; and the dignity and well being of animals. The City of Melbourne, through the Small Business Grants program 2008/9 will avoid supporting small businesses that unnecessarily; 1. pollute land, air or water; 2. destroy or waste non-recurring resources; 3. extract, create, produce, manufacture, or market materials, products, goods or services which have a harmful effect on humans, non-human animals or the environment; 4. market, promote or advertise, products or services in a misleading or deceitful manner; 5. create markets by the promotion or advertising of unwanted products or services; 6. acquire land or commodities primarily for the purpose of speculative gain; 7. create, encourage or perpetuate militarism or engage in the manufacture of armaments; 8. entice people into financial over-commitment; 9. exploit people through the payment of low wages or the provision of poor working conditions; 10. discriminate by way of race, religion or sex in employment, marketing, or advertising practices; and 11. contribute to the inhibition of human rights generally. This draft Ethical Charter is based on the Australian Ethical Charter (1989), Australian Ethical Investment Ltd from www.austethical.com.au Docs #4718098 1 Page 12 of 13 Agenda Item 5.1 Business and International Relations Committee 15 July 2008 FINANCE ATTACHMENT SMALL BUSINESS GRANTS – GUIDELINES 2008/09 The Small Business Grants Program has been allocated $600,000 from the Business Development Fund in the 2008/2009 budget. There are no direct financial implications arising from the recommendation contained in the report. Joe Groher Manager Financial Services Page 13 of 13 Agenda Item 5.1 Business and International Relations Committee 15 July 2008 LEGAL ATTACHMENT SMALL BUSINESS GRANTS – GUIDELINES 2008/09 No direct legal issues arise from the recommendation to the report and the subject matter of the report is within the objectives of Council. Section 3C(1) of the Local Government Act 1989 (“the Act”) provides that: “The primary objective of a Council is to endeavour to achieve the best outcomes for the local community having regard to the long term and cumulative effects of decisions.” Section 3C(2) of the Act provides that in seeking to achieve its primary objective the Council must have regard to facilitating objectives including: “(d) to promote appropriate business and employment opportunities;” Kim Wood Manager Legal Services