From social unrest in 2019 to COVID-19 this year, plus the global political conflict, it is a very difficult time for Hong Kong SMEs. A business upgrade and transformation with government funding could be a good idea in economic adversity. Not only save some money, but also gain resilience in the future. HSBC interviewed around 200 local firms before, and more than 60% reflected that they would transform during the pandemic. By “SME Reachout”,1 both BUD Fund and TVP Fund are popular government funding schemes. How should we choose between the BUD and the TVP? BizMagnet Consultancy consolidated the features of these schemes, let’s see how you should make the decision of funding.
Use BUD Fund to discover mainland China and Free Trade markets
Under the BUD Fund, there are “Mainland Programme” and “FTA Programme” to provide one-on-one basis subsidy. For example, a project with budget $800,000 can be granted $400,000; a project with budget $1,500,000 can be granted $750,000 and so on. An enterprise can get at most $1 million in every application, and the cumulative subsidy is $4 million. The amount is really attractive.
Nonetheless, the followings should be met to get the approval of BUD:
1. Must target mainland China or Free Trade Agreement markets
The BUD Fund is an export fund, that the Mainland Programme is for mainland China business while the FTA Programme is for free trade agreement economies. The Free Trade Agreement (FTA) markets include 10 ASEAN members in Southeast Asia, Macau etc totally 19 countries or regions. Please find the detail in the article “FTA economies at a glance“. If your business operates in Hong Kong only and you have no plan to enter the above markets, please forget the BUD Fund.
2. Must align with the project scope
Moreover, the scope of the BUD Fund is clear that the fund is for branding, upgrading and sales only. And a project should contain more than one item. For example, a factory owner told us that he wanted to use the BUD to purchase new machines only. He had no plan to develop a brand nor promote the business. Purchasing new machines is certainly an upgrade, but it should not cost more than 70% of the entire BUD project. This factory owner planned to spend the whole budget on new machines, which is not applicable in the BUD scheme.
Reference: Why did BUD Fund application fail?
TVP tech solution to enhance efficiency
The Technology Voucher Programme (TVP) provides 3/4 subsidy to technology application. For example, the government will grant $150,000 to a $200,000 project; $450,000 to a $600,000 project and so on. Each Hong Kong company can obtain $600,000 at most. Because the grant ratio of the TVP is the highest among all SME funding, the TVP is one of the most popular schemes.
Nonetheless, a TVP application should fulfil the below:
1. Customized technology solution
There are always guys asking, “Can I buy computer with TVP money?”. A TVP project must be solution-based, or “software system”, and specific. So the cost of general computers, office equipment, printers, projectors etc is not covered by the TVP. On the other hand, office software suite like Microsoft Office is not a specific purposing solution, either. More than that, a TVP project should be a customized solution. If the item is a off-the-shelf software (readily available products), it should not cost more than 50% of the entire budget.
2. No marketing
Another common TVP misunderstanding is about marketing fee. Nowadays many businesses promote online with advanced technology, such as keyword advertising, copywriting and video shooting. But all these are daily expenditure and not reimbursable with the TVP. Please remember that the TVP fund only supports the upgrade or transformation of system solution to enhance productivity or service quality. Another operations expenditure or asset purchase is not covered by the TVP.
BizMagnet summarized several TVP successful cases in 2020, you may take a look.
Up to here, we have already given quite a lot of information, and let us summarize:
If you decide to open mainland China or other FTA markets, or if you already have a business there and plan to upgrade, brand, and transform, you should consider applying for the BUD Fund. (Marketing-oriented)
If you think your business is inefficient, or lack of new service, and a technology solution can help to enhance the efficiency or provide better services, you should consider applying for the TVP Fund. (Efficiency-oriented)