Paper prepared by Sean Pritchard
13th August 2010
Responding to the Economic Downturn Strategies: Supporting the start-up of new businesses and the creation of new jobs.
Background
In April the Economic Development Department prepared a business case for a business support component of the States of Jersey Economic Stimulus Plan 2009/10. This plan has been considered and the Treasury Minister has now approved £1 million stimulus funding to Jersey Enterprise, to support the delivery of the objectives detailed in the stimulus action plan.
This paper outlines the proposal to introduce an Enterprise Grant, outlines who will be eligible, what the grants can be used for and how the successes of the scheme will be measured and reported.
Proposal
In 2009 the Jersey Enterprise team have witnessed an increase in the level of interest from clients either considering or actually setting up a new enterprise. In some cases the enquiry has been as a result of being made redundant or concerns over job security.
The first 18 month period is critical for start ups. Set-up and initial operating costs during this initial period are typically greater than actual income received. This negative cash flow and the fear of being in debt, deters many entrepreneurs from starting an enterprise. Those that have started in 2009 have found it very difficult, in the current economic climate, to raise a bank facility and end up using credit cards and personal loans from friends and family to support the company in its early stages
To help support the initial set up cost and to share some of the risk in an attempt to encourage start-ups a new Enterprise Grant of 50% towards the cost of essential fixed asset purchases up to £5000 is recommended.
Eligibility
On average 900 licences are issued to new undertakings every year. This is across all sectors of the economy and it is accepted that not all actually start trading. The introduction of an Enterprise Grant will be targeted at new start-ups and for those who can prove that without the support the business will not start trading. It is therefore recommended that the flowing principles apply.
1) Business issued with a Regulation of Undertaking Licence after the 1st of August 2009 can apply and can only apply once. Entrepreneurs with a shareholding in a company trading prior to the 1st August who set up a new enterprise after this date will not be eligible.
2) The grant application can only be for the costs of purchasing fixed assets which are essential to the business success but excludes personal computers and motor vehicles.
3) Applications must be made in advance of making any commitment to purchase any new equipment, funding the remaining cost from their own resources and not receiving any other financial support from any other States body for the purchase of the equipment. The Enterprise Grant application form (Appendix 1) must be fully completed and at least two quotes confirming the asset costs must be supplied.
4) The start-up enterprise must result in the employment of at least one full time paid member of staff.
Grant approval process
All grant applications will be considered by the clients Account Manager and subject to the application being eligible as describe above the Account Manager will raise a purchase order which will be considered by a Director within Jersey Enterprise. This process ensures that a full audit trail is maintained and that a separation of duty is maintained between the Account Manager and the client.
Subject to the Purchase Order approval, applicants eligible for grant funding will be sent Approval Letters confirming the value of the grant available. (Appendix 2- Approval Letter)
Claiming the Grant
After receiving the Approval Letter and receiving and paying in full for the fixed asset the Enterprise Grant Claims Form (Appendix 3) must be completed and returned with all supporting paperwork to Jersey Enterprise. Upon receipt and subject to the claims form being complete payment will be processed within 21 days.
Resources
The Enterprise Grants will be funded by £200,000 allocated under the economic stimulus plan. The delivery and management of the schemes will not require any additional manpower resources within the Department.
Measurement
Each recipient of an Enterprise Grant will be allocated an account manager by Jersey Enterprise. The account manager, who will provide business support to the recipient, will ensure that the new undertaking receives continuous support and guidance to ensure that the start-up has the greatest chance of success.
The success of the scheme will be measured in three different ways:
1) The number of new-start ups supported
2) Gross value of investment made by the start-ups receiving an Enterprise Grant
3) The ratio of investment by the start up to the amount of the Enterprise Grant i.e the leverage delivered by the provision of the Enterprise Grant
4) The number of new jobs this scheme creates.
5) Sustainability – the percentage of new undertakings still trading after one, two and three years
These measurements will be reported on a monthly basis to the Stimulus Project Team and, in the case of sustainability, reported on an annual basis.
Codes of Directions
The introduction and management of the Enterprise Grant would comply with the States Financial Codes of Direction, specifically 5.4 Obtaining Money from Grants
Recommendation
That the Minister for Economic Development agree the introduction of the Enterprise Grant scheme as part of the Jersey Enterprise Fiscal Stimulus package approved by the Treasury & Resources Minister in July 2009.
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