Securing business funding is a critical step for small business owners and entrepreneurs looking to accelerate growth. Whether you're starting a new venture, expanding an existing company, or investing in research and development, choosing the right funding source can significantly impact your business’s future.
Two of the most common funding programs available in Australia are government grants and private funding (such as loans, private equity or venture capital). But which one is the best fit for your small business? This guide explores the benefits, eligibility criteria, and key differences between these two funding sources to help you make the right decision.
1. Understanding Business Funding Options
Funding is essential for Australian businesses to invest in new opportunities, expand operations, generate working capital for growth and enhance technology and customer services. The two main sources of business funding are:
Government Grants
Government grants programs provide financial assistance to small business owners, startups, and established enterprises. These are often non-repayable and are designed to support specific industries, projects, or communities.
Private Funding
Private funding includes capital raising venture capital, angel investors, private equity, family offices, venture debt and crowdfunding. Unlike business grants, some of these funds typically require repayment, whilst others require you to issue shares in your company in exchange for the funding, ultimately diluting your own ownership in your company. Non-Dilutive Funding
There are also really clever ways to fund your startup without diluting your equity. There are some traditional and new forms of debt available to start-ups in Australia.
We focus on 25 of these strategies in our eBook.
2. Government Grants: Free Business Support with Eligibility Criteria
What Are Business Grants?
Business grants are financial assistance programs provided by federal, state, or local governments to support small business initiatives. They aim to stimulate innovation, create jobs, and help businesses adapt to market challenges.
Types of Government Grants in Australia
1. Business Boost Grants Program
This program provides direct funding to high growth businesses looking to expand, invest in new technology, or improve their operations.
2. Small Business Grants Schedule
A regularly updated small business grants schedule outlines available funding programs for businesses in different industries and locations.
3. Business Growth Fund
This fund supports businesses with high growth potential, helping them invest in equipment, technology, and workforce development.
4. First Nations Artists Grants Program
Designed to support First Nations artists and businesses in the creative sector, these grants help fund arts projects, cultural initiatives, and community programs.
5. Research and Development Grants
Businesses involved in research and development can access grants to innovate, create new products, and drive technological advancements.
Eligibility Criteria for Government Grants
To apply for business grants, businesses must meet specific eligibility criteria, such as:
✔ Having an Australian Business Number (ABN)
✔ Operating in an eligible industry (e.g., arts, technology, energy, or manufacturing)
✔ Demonstrating a plan to use the funds for business growth
✔ Meeting the annual turnover requirements
3. Private Funding: Loans, Investors, and Self-Financing
What Is Private Funding?
Private business funding comes from non-government sources like business loans, angel investors, and venture capital. These sources provide financial support but typically require repayment or an exchange of equity.
Types of Private Funding
1. Business Loans, Non-Traditional Forms of Debt, Venture Debt
Banks, debt funds and financial institutions offer business loans to fund expansion, purchase assets, or manage cash flow. These loans can be secured (requiring collateral such as the assets of the company, or the personal assets of the Directors of the company) or unsecured.
2. Venture Capital, Private Equity, Family Offices and Angel Investors
Startups and high growth businesses can attract private equity investors, such as venture capitalists, family offices or angel investors, who provide funding in exchange for ownership equity.
3. Crowdfunding and Peer-to-Peer Lending
Crowdfunding platforms and peer-to-peer lending offer alternative ways to find grants or raise money from individual investors in exchange for shares in the company, or products from the company
4. Key Differences Between Government Grants and Private Funding
|
Factor |
Government Grants |
Private Funding |
|
Repayment |
Not required (free funding) |
Required for loans. Not required for equity funding when traded for shares. |
|
Eligibility Criteria |
Some have strict eligibility criteria |
Every single private funder, debt or equity, has its own eligibility criteria called a ‘mandate’ and you must match your business with their mandate in order to successful achieve investment. For debt - lenders have strong financial metrics that must be matched. |
|
Application Process |
Time consuming and administratively complex. However if you set up systems for tracking your R&D funding, for example, this can be an easier process. |
A capital raise usually takes between 6-9 months. Loans can get approved faster for companies with solid financials. |
|
Amount of Funding |
Typically smaller grants but R&D funding grants can extend into the many millions. |
Larger funding amounts available |
|
Business Growth Support |
Often includes support services - each grant is targeted to support a particular function within the business such as marketing, commercialising an export or research and development of innovations. |
Investors providing capital in exchange for shares usually advice and mentorship, connections, extra capital in future rounds, or enter into commercial partnerships. Lenders usually don’t. |
|
Use of Funds |
Restricted to approved projects or functions within the business, and usually grant money is provided in arrears of the activity occuring. |
For capital investments - the use of funds is agreed with the investors prior to the investment, and any changes to that plan are agreed as part of the governance process. For loans - the use of funds has to be very specific and use for other purposes can be considered a breach. |
5. Finding and Applying for Business Grants in Australia
If you’re looking for small business grants, here are some key steps:
1. Search for Available Grants
Use government websites like:
🔹 business.gov.au – Lists federal and state grant opportunities
🔹 Queensland Small Business Month – Highlights funding for businesses in Queensland
🔹 Australian Capital Territory and South Australia portals – Provide location-specific funding
2. Check Eligibility Criteria
Ensure you meet requirements such as:
✅ Holding an Australian Business Number (ABN)
✅ Operating in eligible industries like research and development, arts, or hazardous areas
✅ Proving how funding will accelerate growth
3. Submit an Application
Most grants require a detailed application, including:
📌 A well-developed business plan
📌 Financial statements demonstrating annual turnover
📌 A clear outline of how the funding will be used
6. When to Choose Private Funding Over Government Grants
While business grants provide free funding, they aren’t always the best option. Private business funding may be better if:
✔ You need fast access to capital
✔ You don’t qualify for grants due to eligibility criteria
✔ You require larger investments for high growth businesses
You don’t have a strong audit trail - when you are applying for grants, you need to have a rock solid audit trail, proving you have done the work or activities you are claiming against. If you have not kept good records, then I wouldn’t recommend applying, because being audited can be really problematic.
7. Combining Government Grants and Private Funding for Maximum Growth
Most businesses use a hybrid funding model, combining grants with private funding sources. If you are building a technology company in Australia, then you are most likely applying for R&D grants each year, as well as seeking external funding sources. For example:
✅ Use a business boost grants program to fund initial R&D, then seek business loans for scaling.
✅ Secure a business growth fund grant for hiring employees, then attract private equity investors for further expansion.
8. Final Thoughts: Choosing the Right Business Funding
Both government grants and private funding offer valuable resources for Australian businesses looking to grow. The best choice depends on your business needs, eligibility criteria, and long-term goals.
Government Grants Are Best If:
✔ You meet strict eligibility criteria
✔ You need funding for specific projects
✔ You’re willing to go through a long application process
Private Funding Is Best If:
✔ You need quick access to business funding
✔ You want flexibility in how you use the funds
✔ You’re open to repaying loans or sharing equity
Looking for the right funding for your business? The Funding Guide helps businesses navigate funding programs, identify business grants, and connect with private investors.
👉 Visit www.fundingguide.com.au today to explore your funding options!
