Top funding options for technology, media and telecommunications businesses

Securing funding for technology, media and telecommunications (TMT) businesses can be a complex process, with several challenges unique to the sector. For businesses in this sector, accessing appropriate funding is crucial for expansion, innovation, and staying competitive. Various funding options are available, each with their own specific benefits and considerations. Understanding these key issues is essential for businesses to prepare effectively and improve their chances of obtaining the necessary funding.

This article outlines the typical sources of funding available to TMT businesses in Australia including grants, revenue-based financing, traditional loans, venture capital, and alternative funding sources.

Funding options available

Ensuring funding arrangements are fit for purpose enables TMT businesses to navigate market uncertainties, capitalise on emerging opportunities, and sustain long-term profitability. We have detailed the main options available.

Research & Development Funding

  • The R&D Tax Incentive is one of the most significant government support programs for TMT businesses engaged in innovative activities. It offers a tax offset for eligible R&D activities, encouraging companies to invest in research and development. This incentive can significantly reduce the cost of innovation and development.
  • R&D Debt funding can be obtained by securing debt against the value of a company’s anticipated research and development (R&D) tax credits. This type of financing allows companies to access cash before they actually receive the tax credit from the government, improving cash flow and enabling further investment in R&D activities or other business needs. The lender assesses the company's eligibility for the R&D tax credit and offers a loan based on a percentage of the expected claim. This type of financing is particularly useful for companies in innovation-driven sectors that incur significant R&D costs but need liquidity before receiving their tax rebate.

Government Grants & Programs

The Australian government offers several grants and incentives aimed at supporting innovation and growth in the TMT sector. These grants are often competitive and come with specific eligibility criteria, but they can provide valuable non-dilutive funding.

  • MVP (Minimum Viable Product) Ventures 2024-2025 - The MVP Ventures Program supports startups and innovative SMEs in the product lifecycle between early-stage research and mature investment opportunities, through grants (ranging from $25,000 to $50,000) to drive the commercialisation of highly innovative and new products. Applications close 5pm, Friday 28 February 2025 (or until funding is exhausted). 
  • Boosting Business Innovation Program - The Boosting Business Innovation Program (including TechVouchers) builds innovation partnerships between Publicly Funded Research Organisations and SMEs, with improved access to researchers, training, and facilities. The NSW Government has committed $11 million over four years to selected Publicly Funded Research Organisations (PFROs) to develop activities that enable better translation of world-class research into business performance. A third of the program’s funding is reserved for the TechVouchers Scheme. SMEs are encouraged to reach out directly to a participating Research Organisation to discuss the Program opportunities via the contacts below.

Revenue-Based Financing

Revenue-based financing (RBF) is an increasingly popular funding option for TMT businesses. It allows companies to raise capital by pledging a percentage of their future revenues rather than offering equity or taking on traditional debt. Key features of revenue-based financing include:

  • Flexible repayment - Repayments are tied to revenue, making them more manageable during periods of low income.
  • No equity dilution - RBF does not require giving up ownership stakes, allowing founders to retain control.
  • Growth-oriented - Ideal for businesses with strong revenue growth potential but lacking tangible assets for collateral.

Several specialised lenders and investment firms in Australia offer RBF, targeting high-growth TMT businesses with predictable revenue streams.

Traditional bank loans

Traditional bank loans remain a common source of funding for TMT businesses. These loans can be secured or unsecured, with terms and interest rates varying based on the business’s creditworthiness and collateral. Types of traditional loans include:

  • Term loans - Fixed amounts borrowed for a specific period, typically used for significant investments such as equipment or expansion.
  • Lines of credit - Flexible borrowing options allowing businesses to draw funds as needed, up to a predetermined limit.
  • Equipment financing - Loans specifically for purchasing equipment, often secured by the equipment itself.

While traditional loans offer stability and predictable repayment schedules, they may require significant collateral and have stringent approval criteria.

Peer-to-Peer (P2P) lending or crowd sourced funding

Both P2P lending and crowdfunding platforms involve connecting TMT businesses directly with individual lenders. These platforms offer a range of loan options with varying terms and interest rates, providing an alternative to traditional bank loans.

Benefits of P2P Lending:

  • Access to capital: - Easier access for businesses that may struggle to secure traditional bank loans.
  • Competitive rates - Potentially lower interest rates due to direct investor connections.
  • Transparency - Clear terms and conditions, often with quicker approval processes.

Popular P2P lending and crowd sourced funding platforms in Australia include SocietyOne, RateSetter, Birchal, and ThinCats.

Venture debt

Venture debt is a specialised form of debt financing tailored for high-growth startups and TMT businesses. It complements venture capital (VC) funding by providing additional funding without further equity dilution.

Advantages of venture debt:

  • Non-Dilutive - Provides growth capital without affecting ownership stakes.
  • Speed - Generally faster to obtain than equity financing.
  • Flexibility - Can be used for various purposes, including working capital, expansion, and acquisitions.

Venture debt lenders typically work alongside VC firms, assessing the business’s potential and existing investor support.

Venture capital

Venture capital (VC) is a form of equity financing where investors provide capital to startups and small businesses with high growth potential in exchange for equity, or ownership stakes. VC is a crucial funding source for many TMT businesses, especially those in the early stages of development. key aspects of venture capital are:

  • Equity dilution - VC funding involves giving up a portion of ownership, which can dilute existing shareholders.
  • Value-added support - Beyond capital, VC firms often provide strategic guidance, mentorship, and industry connections.
  • High growth potential - VC firms look for businesses with significant growth potential and scalable business models.

How BDO can help

Funding options for Technology, Media and Telecommunications businesses in Australia are diverse and cater to various needs and stages of business growth. From government grants and incentives to innovative revenue-based financing, traditional loans, venture capital, and alternative funding sources, TMT businesses can leverage these options to fuel their expansion and innovation. By carefully evaluating their funding needs and the terms of available options, businesses can secure the necessary capital to thrive in this competitive sector.

Our Growth Advisory team can assist in guiding you through the funding process in assessing the various funding options available. Preparation for finance and best practice is at the forefront of our service and value proposition.