Work and Income Enterprise Allowance
Financial capital is a basic requirement of any start-up business. Without it, a start-up can’t sustain itself to the point where it begins to make money. If you’re unemployed and have few assets, sourcing financial capital from lenders can be difficult. In response, the Government introduced the Enterprise Allowance administered by Work & Income New Zealand ( Work and Income).
However, before applying for the funding, you need to know whether you – and your business idea – are up to the task, and whether the Enterprise Allowance is a practical option for your situation.
On this page:
- What is the allowance?
- Am I eligible?
- Will it affect my benefits?
- What are the requirements?
- Before you apply
- Applying: what is a business plan?
- Other sources of assistance
What is the allowance?
The Enterprise Allowance can come in the form of a subsidy, a grant or the combination of both, and is designed to help you overcome the financial barriers to self-employment so you can support yourself as a business operator.
The allowance is not a loan. However, you could be asked to pay back the grant given to you if you breach the agreed terms and conditions stated in the Enterprise Allowance agreement.
There is no formal application form to fill out to apply for the allowance. However, you are required to prepare a business plan and have it independently assessed.
The subsidy
The Enterprise Allowance subsidy is a temporary weekly sum to tide you over during the initial establishment phase of the business when it won’t be generating any income. The amount and length of the subsidy is dependent on your weekly living expenses and the cash flow you forecast for your enterprise in your business plan. You are then expected to be financially self-sufficient by the end of the subsidy period.
The grant
This is a lump sum payment to be used for start-up capitalisation – in other words, to cover the essential start-up costs involved in setting up your business. The amount given is based on your estimation of costs outlined in your business plan. The grant must not be spent on any ongoing costs such as a power or telephone bills. You need to supply Work and Income with invoices for the items you need to purchase and the receipts for the items after they have been bought. Examples of appropriate items or services the grant can be spent on include:
- plant and equipment
- initial stock
- manufacturing materials
- renovating premises
- one-off start-up fees, such as legal costs, bonds or initial advertising.
Are you eligible?
To be eligible for the allowance, you must be:
- of working age
- disadvantaged in the New Zealand labour market
- one of the following:
- a long-term benefit dependent in receipt of government financial assistance
- someone who is at risk of long-term benefit dependency because they risk redundancy, have just been made redundant or can prove they will not need benefits if they are given the allowance
- a 15-17-year-old school leaver transitioning to work after receiving either a school leaving certificate or an Early Leaving Exemption
- someone who can prove they are in exceptional circumstances.
You are not eligible for the Enterprise Allowance if you:
- are currently bankrupt (someone declared by law to be unable to pay their debts)
- intend to use it to refinance an existing full-time business (however, those looking to take an existing casual or part-time business full-time are eligible)
- were previously self-employed and you intend to use the allowance to restart the failed business you previously operated. Applicants must declare if they were previously self-employed or have received the Enterprise Allowance before.
Couples, partnerships and groups
If both in a marriage, civil union or de facto couple partnership go into business together, and meet the requirements above and intend to work full-time, they can both be eligible for the Enterprise Allowance.
Individuals in the group or partnership going into business with each other must also meet the eligibility requirements and intend to work full-time. In all cases, the couple, partnership or group only have to submit one business plan. However, although it is not a requirement, Work and Income advises applicants to also submit a written partnership agreement stating individual financial contributions to the start-up and what each individual’s role, responsibility and liabilities are in the operation.
If a partnership or group dissolves, the recipients of the grant must inform Work and Income. In this situation, the Enterprise Allowance contract ceases to apply, and if an individual in the partnership or group wishes to carry on with the business, a new application must be made. Any further funds received are then offset against the support provided under the first Enterprise Allowance contract, so dissolving a partnership can’t be used to reset funding.
Will it affect my benefits?
The Enterprise Allowance can affect benefit arrangements differently, depending on the type of support you are already receiving. It is a mechanism for generating self-sufficiency and is ultimately provided to be a platform for financial independence. If you have concerns, discuss these with your Work and Income case manager before proceeding or go online to the Work and Income New Zealand website.
What are the requirements?
Financial requirements
To access the grant, you must be able to invest $1,000 of your own assets or cash in the business. This requirement is reduced to $500 for those applying for a pro rata subsidy (see next section below). However, as the Enterprise Allowance is designed to be last resort funding, all applicants must not have access to reasonable commercial finance for the entire sum required for their start-up business. If the majority of the finance is already secured from a lender, Work and Income will consider an allowance for the rest. Successful applicants must also have obtained quotes for goods/services they wish to purchase with the grant.
Business requirements
The Enterprise Allowance is only given to proposed businesses that will be permanent, ongoing concerns run on a full-time basis. Part-time businesses can be considered for a pro rata subsidy – in other words, a subsidy given in proportion to an exceptional circumstance – if you are aiming to start self-employment of between 15-30 hours per week and you are either:
- not tested for full-time work
- a recipient with a disability.
The proposed business must be based and operated in New Zealand, while the recipient of the allowance must also reside in New Zealand full-time.
Eligible business categories
The proposed business can be a:
- new business
- existing business the recipient wants to purchase
- existing casual or part-time business run by the recipient that is likely to allow them to be self-sufficient if it is expanded to a full-time operation.
However, only certain types of business pursuits are eligible. Work and Income broadly defines an eligible proposed business as being “legal, appropriate and acceptable to the wider community and Work and Income”. For further detail, here is the Work and Income list of inappropriate business categories.
Mid-project financial report
Each applicant has to research and develop their own business plan for submission to Work and Income. Those successful applicants who go on to receive the Enterprise Allowance must then report back to Work and Income halfway through the initial start-up phase with a written mid-project financial report. This report forms the basis for continued allowance support by proving the:
- business is still operating
- allowance funds are being used as intended.
It then becomes a pivotal document in judging any future requests for an allowance extension. The mid-point financial report must:
- be provided with access to the business’s cash records
- record productivity levels
- include actual cash flow
- compare performance to the business plan
- forecast cash flow for the next six months (at least)
- provide comment on the future viability of the business.
Before you apply
Going into business for yourself can provide you with financial independence, creative freedom and great satisfaction. However, it can be a tough road to follow, involving risks and responsibilities for yourself and anyone you employ, so you should make sure you are ready to be in business and your start-up idea is sound before going ahead.
Are you ready to be in business?
It’s a tough question that only you can answer, but the truth is being an entrepreneur (someone who takes on the risk of starting their own business) requires perseverance, determination, discipline and great passion for the business you are pursuing. Even then, you may require further training in areas such as marketing or small business finance before you completely feel up to the task.
To help you evaluate yourself, read Do you have what it takes to run your own business. It details the reality of running your own business, outlines areas you could upskill in and includes a test to help you in your decision.
Do you have a good idea for a business?
Before you start rushing to write your business plan, you need to know whether you have a good idea for a business in the first place. Otherwise, all your effort applying for the Enterprise Allowance will be a waste of time. What is a good start-up business idea? In a word, one that is VIABLE. A viable business idea is one which has great potential to be financially sustainable, to bring in much more money than will be spent establishing the operation and running it.
There are many factors, such as the size of your market and the strength of your competitors, which define the viability of your idea. Will your business idea work is a Business.govt.nz article that breaks down the significant areas you need to look at to gauge your start-up idea’s viability. It also goes on to detail the first steps of setting up your own business if your idea stands up to your viability testing, including writing a business plan.
Can you make your business credible?
The common factor for all successful businesses – whether they’re a global conglomerate or the local sole trader who’s been washing windows for 20 years – is that they all share credibility. They are trusted by consumers for their professionalism, expertise and dedication to service. If you do decide you have what it takes to start your own business - and your idea has passed viability testing with flying colours - your next aim shouldn’t just be to make money or be financially independent. It should be to generate credibility, because financial independence is a by-product of business credibility and consumer trust – not the other way around.
There are many ways to achieve credibility in the marketplace, whether your customer is an individual consumer or a large business. Click on the article titles below to investigate different techniques.
- Deliver great customer service
- Encourage word of mouth
- Build customer loyalty
- Encourage repeat clientele
- Tips when pitching for business
Applying: What is a business plan?
Work and Income requires applicants to research and write a business plan to prove the viability of their start-up idea. A business plan is the central document to any company and writing one is an absolute requirement for gaining investment in any field of business. It is a statement of intent in which you argue the case for your business idea, and a benchmark your actual progress will later be measured against once you are in business. A business plan needs to answer a host of critical questions, such as:
- what will make the business viable?
- what will its marketing strategy be?
- what is its potential for profit and growth?
- who are its competitors and what is its competitive advantage?
A start-up business plan can be structured and written in a numbers of ways. To find out more, read the Writing a business plan section of Business.govt.nz.
Other sources of assistance
There are a variety of grants small business owners can apply for to assist them in areas as diverse as exporting or energy efficiency, but as a beneficiary starting your own business you can also apply for access to the Business Training and Advice Grant. If you have applied for the Enterprise Allowance, but your own self-assessment leads you to believe you need to upskill in certain areas, this should be your first port of call. For more information, go online to the Work and Income New Zealand website.
Needless to say, you can access advice on every part of starting your business, including other items here in the sources of capital section, on Business.govt.nz. Don’t forget to also try out the various online tools and training provided to help you on your way to running a successful small business.
Information supplied by Business.govt.nz
