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(photo credit: Reuters)
The Start-Up Nation thrives on cash. Where can an Israeli business find financial assistance? Try government sources, including the Israel Innovation Authority (formerly the Office of the Chief Scientist) and Matimop.
Here is a brief overview: Competitive Research and Development: This program offers Israel’s primary financial incentives for R&D activities from the Israeli government. It provides companies in all areas with support for the development processes of new products or for the upgrade of existing technology.
Conditional grants of 20% to 50% of the approved R&D expenditures are available, with an additional 10% in development zones (periphery areas). The grants are conditional because they are repayable via royalty payments from sales, if they occur.
Business R&D in Agriculture: This program encourages the development of agricultural products intended for sale and export. Grants are at similar rates as grants for competitive R&D.
“Tnufa”: The Tnufa incentive program is for fledgling entrepreneurs interested in formulating and validating an innovative technological concept and in reaching the R&D stage. The conditional grant is up to 85% of the approved budget, with a maximum grant of NIS 200,000 for a period of up to two years.
Incubators: The incubator offers a supportive framework for the establishment of a company and development of a concept into a commercial product. Today there are 18 technological incubators and one designated biotechnological incubator, which are privately owned by experienced groups. The conditional grant is up to 85% of the approved budget, with a budget limit of NIS 3,500,000 for two to three years. The incubator provides 15% of the approved budget. No financial investment should be required by the entrepreneur.
Alternative Fuels for Transportation: This program supports the development of petroleum substitutes in Israel.
Companies may receive a loan, matching up to 50% of the total amount invested by private investors. Loan amounts start at from NIS 750,000 (compared with NIS 1.5 million invested by private investors). The maximum aggregate loan amount is NIS 30m. (compared with NIS 60m. invested by private investors), available until 2020.
Renewable Energy Technology Center: The Renewable Energy Technology Center in the Eilat region supports technological ventures and R&D projects starting from the stages of applied academic research and early-stage entrepreneurship.
Conditional government grants for companies in the pre-seed and seed stages range up to 85% of the approved R&D expenditures by the Israel Innovation Authority and 15% by the Renewable Energy Technology Center’s licensee over a period of two to three years.
Greenhouse Gas Emissions Reduction: This program is for implementing new Israeli technologies in the fields of energy efficiency and greenhouse-gas emissions reduction. Companies may get a conditional grant of 40% of the installation cost.
Generic R&D Arrangement for Large Companies: This program is for large Israeli companies with revenues of at least $100m. and total R&D expenditures of more than $20m., or alternatively, Israeli companies that employ at least 200 employees directly in R&D. Grants range up to 50% of the approved R&D expenditures for long-term R&D plans or for an R&D project executed in cooperation with another Israeli company. The grants are not repayable.
R&D Centers of Large Israeli Companies in the Periphery: This program is for Israeli companies with total sales revenues from their activities in Israel of more than $100m. that set up a development center in the periphery. More than 50% of production within the program must be in Israel.
Furthermore, the company’s R&D center will employ workers living in outlying areas at the rate not less than 40% of all employees in the first year of operations, 50% in the second year and 60% in the third year. Conditional grants of 65%-75% of the approved R&D expenditures are available for a period of two to three years.
R&D for Space Technology: Conditional grants of up to 85% are available for a period of 36 months.
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Business-Academic Collaboration: Several incentive programs promote cooperation by collaborating researchers from academia and industry. The grants are not repayable. The government grants may range up to 66% for generic pre-competitive technological R&D (Magnet program), 66% for applied research (“Magneton” program), 90% for academic research groups in Israel seeking to carry out applied research, which is not mature enough to be supported by the industry or by the Magneton incentive program (“Nofar” program), and 50% for life-sciences R&D that includes the purchase of laboratory equipment costing at least $150,000 (TZATAM program).
International collaboration: Support for international cooperation projects is carried out through the EU Framework Program for Research and Innovation, binational funds (e.g., “Bird” for US-Israeli projects) that finance joint projects of Israeli and foreign companies, or by bilateral parallel support programs.
Aliya and Integration Ministry: The Aliya and Integration Ministry offers loans to new immigrants and returning residents to establish or promote a business. The maximum loan is NIS 125,000 initially, plus another possible NIS 125,000 after three years. The interest rate is prime plus 1.75%. Required collateral is generally 10%. The borrower must invest equity of 25%. The repayment term is generally six years, with a grace period of 12 months.
As always, consult experienced advisers in each country at an early stage in specific cases. In particular, check repayment terms.
firstname.lastname@example.org.The writer is a certified public accountant at Harris Consulting & Tax Ltd.