New fund for marketing development in the global marketplace

A good businessman won't miss an opportunity to use "other people's money" - this is known as the "Opium Principle" and has nothing to do with drugs but everything to do with developing your business.

By LEON HARRIS
taxes 2 88 (photo credit: )
taxes 2 88
(photo credit: )
A good businessman won't miss an opportunity to use "other people's money" - this is known as the "Opium Principle" and has nothing to do with drugs but everything to do with developing your business. Examples include equity from private investors and venture capital funds. In this regard, government assistance is also worth using if the terms are reasonable. Therefore, it is interesting to note that the Israeli Ministry of Industry, Trade and Labor has launched a new Fund for Marketing Development in the Global Marketplace (Ha-Keren HaHadashah LePituach HaShivuk BeShuk HaOlami). Israeli exporters with export marketing plans can apply to the Fund for loans from commercial banks that are underwritten by government guarantees issued by the Fund. The aim is to finance the establishment of an international marketing network. These government-guaranteed bank loans are available to exporters with annual sales not exceeding $10 million in the fields of industrial products, professional services, software, subcontract jobs and movies. A loan of up to $100,000 is available if sales in the preceding year were no more than half a million dollars. A loan of up to $1m. is available if annual sales were between $500,000 and $10m. The term of the loan is for up to five years with a grace period of a year and a half before repayments begin. The interest rate is a matter for specific negotiation between the recipient and the bank. Priority will be given to loan applications showing potential for a large increase in exports based on new or unique products or even where there is a degree risk. The loans must be applied to finance the following types of marketing expenses: maintaining offices abroad, participation in trade shows in Israel and abroad, advertising abroad, market surveys, sales promotion abroad, acquiring a company abroad that will increase sales, marketing trips, preparing a presentation and expert advice about marketing in the global marketplace. Expenses must be directly related to marketing and likely to contribute significantly to achieving the goals in the marketing plan. A balanced marketing mix is needed. Once a marketing plan is approved, the exporter will receive 50% of the approved loan. Six months later, the exporter must submit a report showing that it has incurred at least 70% of the marketing expenses, whereupon the other 50% of the loan will be released. The exporter is allowed to make changes to the approved marketing plan without having to go back for permission provided no type of expense increases by more than 20%. To sum up, a government guaranteed marketing loan may help kick start your sales abroad. leon.harris@il.ey.com The writer is an International Tax Partner at Ernst & Young Israel.