10.12.2021

Small Business Grants in California

Written by Aine Hendron

california

Accurate as of October 2021

When running a small business, having positive cash flow is essential for sustainability. One way you can achieve continuous positive cash flow is by accessing a small business grant. 

Here’s a guide to small business grant funding currently available in the state of California.

How do small business grants work?

Small business grants are sums of money given to businesses that are non-repayable and don’t require you to give away any equity in your company. This funding might come from private foundations, banks, building societies, or philanthropic groups [1]. 

Grants are often aimed at businesses in specific locations, certain industries, that have certain business structures or provide a specific type of service. They can also depend on the age of the business or the gender of the business owner. 

Small business grants are highly sought. Most grants require businesses to participate in a rigorous application process. Not all applicants are successful and there may be limited conditions that dictate who can apply. The application process time and the grant amount can vary massively from grant to grant. 

What are the different types of small business grants?

There are many types of small business grants in California, from tax relief schemes to cash awards. Typically, small business grants can be classed among one or more of the following categories: 

Direct grants

Direct grants are what most people think of when they imagine a grant: the ‘free money’ type of grant. Direct grants may be given to a business to cover the cost of a specific project or for start-up essentials like hiring new staff or purchasing equipment. In some, but not all, cases lenders will expect businesses to provide 50% of the value of the grant. 

Resource and training grants

Some grants provide reimbursement for money invested into the training and development of employees’ skills. The most well-known resource and training funding agency is the Employment Training Panel (ETP). Businesses determine their own training needs and how to provide training, and ETP assists with applying for credit and other aspects of participation.

Soft loans

A "soft financing" or "soft loan" is a loan given with next-to-no or no interest with extended grace periods, offering more leniency than traditional loans [2]. They offer much more generous repayment terms than regular bank or building society loans, as well as lower interest rates.

Tax-relief

Tax-relief grants aren’t like typical grants where you are given money. Rather, you can save money for your business. These help businesses maintain a positive cash flow and keep businesses from falling into debt. 

Current grants available

Here is a breakdown of the grants available to small business owners in California throughout the fiscal year 2021/22. 

California Competes Tax Credit (CCTC)

The California Competes Tax Credit (CCTC) is an income tax credit available to businesses that want to locate in California or stay and grow in California.

Eligibility criteria: 

  • Businesses of any industry, size, or location. 
  • Applicants will be analyzed based on twelve different factors of evaluation, including the number of full-time jobs being created, amount of investment, and strategic importance to the state or region.
  • The business must have expansion plans to create jobs in California over the next five years or be at risk to leave California.

Application period:

  • January 3, 2022 – January 24, 2022
  • Applications for the California Competes Tax Credit will be accepted online at www.calcompetes.ca.gov
  • The tax credit award process is a four-part program with a quantitative analysis phase, a qualitative analysis phase, a negotiation phase, and a committee hearing

Funding available:

  • January 2022 - January 2022: $95 million available
  • March 2022 - March 2022: $89.7 million, plus any remaining unallocated amounts from the previous application periods available [3].

Employment Training Panel High Unemployment Area (HUA) Funding

The Employment Training Panel (ETP) grants funding to employers for training that upgrades the skills of their workers in high-unemployment areas (HUA) of California.

HUA training focuses on workers who have full-time jobs and fairly stable employment but earn low wages and lack the essential job skills necessary to improve their employment opportunities. 

If State Average Unemployment Rate Is:

High Unemployment Areas Are Defined As: 

Less than 10% >>

Counties with an unemployment rate 25% higher than the state average.

OR

Sub-county areas containing large numbers of unemployed workers and having an unemployment rate 25% higher than the state average.

10% or Higher >>

Counties with an unemployment rate 15% higher than the state average.

OR

Sub-county areas containing large numbers of unemployed workers and having an unemployment rate 15% higher than the state average.

 

Eligibility criteria:

  • Businesses must be based in a high unemployment area.
  • Small businesses with 100 or fewer full-time employees in California, but no more than 250 worldwide.
  • Employers must provide proof that training hours have been completed and trainees have been retrained in well-paying jobs for a specific period of time at a specified wage before ETP reimburses payment.
  • Trainees must earn at least the state or county minimum wage rate (whichever is higher) that is in effect at the time of ETP payment. 

Application period:

Apply now on the etp.ca.gov website.

Funding available:

  • For small businesses delivering standard retraining related to work-based skills training, the flat rate is $20 per hour. For providing initial training to new hires, the rate is $23 per hour [4].
  • Fixed-fee reimbursement rates are used to determine the amount of funding ETP will reimburse eligible businesses for each employee trained after the completion of training. 
  • A flat hourly rate inclusive of training and administrative costs based on training delivery methods (e.g. Class/Lab, E-learning, Productive Lab, Computer-Based Training) and type of training (e.g. computer skills; manufacturing skills) [5].

Research & Development (R&D) Tax Credit 

The R&D tax credit is a country-wide program that’s designed to provide a tax incentive for companies to increase spending on research and development in the U.S. 

Eligibility criteria:

  • Businesses that have paid for or incurred expenses while conducting qualified research activity in California. Qualified research expenses include wages, supplies, and contract research costs.
  • The California R&D tax credit also reduces income or franchise tax liabilities.
  • C-Corporation, S-Corporations, LLCs, Partnerships

Application period:

Taxpayers claim the California R&D Tax Credit on FTB Form 3523, for the year the Company paid or incurred qualified research and development expenses in California.

Gross receipts for the prior four years are required.

Funding available:

15%-20% of the excess of the qualified research expenses over the base amount, plus 24% of the basic research payments [6].

Simplify business management with a reliable POS system

Financial management is a huge part of running a business, but it doesn’t have to be stressful and time-consuming. By choosing the right financial software for your small business, you can turn your attention to other areas of your business, like operational efficiency and taking care of your customers. 

Epos Now offers state-of-the-art POS systems for businesses in various industries. We let you choose the tools and insights to help make your business achieve its goals. 

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  • Create and send invoices using simple templates and a built-in VAT calculator
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  • Simplify employee management for more efficient scheduling and payroll

Request a free call back from one of our experts today.

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