Small and medium enterprises (SMEs) are important to almost all economies in the world, but especially to those in developing countries because of their effect on employment and income distribution.
In Chile, SMEs are divided into segments: micro, small and medium enterprises. Companies considered micros are those with total sales of less than 2400 UF (1 UF = USD$ 43.46); small enterprises are those that invoice between 2,400 UF and 25,000 UF, while medium enterprises range from 25,000 UF to 100,000 UF. There is a definition for labor purposes, which measure them according to the number of employees: 1- 9 workers, 10 – 49 workers and 50 -199 workers.
Chile has set up programs in order to assist and encourage SMEs. Some of these programs have been well-documented and other programs to a lesser extent. One such program is ¨Start-Up Chile¨, a program that has received a fair amount of international press by giving entrepreneurs from across the world a 6 month working visa and USD$ 40,000 start up capital. http://www.startupchile.org
In this article, we will focus on a program that is less known: Corfo Seed Capital Program.
Applicants for Corfo seed capital can receive a subsidy of 75% of a projects total cost, for a maximum of CLP 40 million.
Seed capital can be used for diverse purposes, such as:
-Acquisition of relevant knowledge through: the hiring of experts, the purchase of databases, commissioning of market research, studies leading to certificates and quality standards, commercial validation research and industrial property;
-Development of prototypes including: market testing, regulatory certificates, and commercial validation;
-Activities related to the formalization of a legal entity and the registration of activities with the SII, such as notary and legal expenses, among others;
-Commercial prospecting: trade fairs, business conferences, visits to customers, among others;
-Development of supplier network: covers the entire range of activities for articulating and improving administration of work with all suppliers or a group of them,
-Property rental: with or without installations, adaptation or remodeling of infrastructure;
-Commercial packaging of products or services (packing designs, production of manuals, brand design, sample production, etc; and
Qualified companies must have officially initiated their activities at the Chilean Internal Revenue service (SII) no more than 24 months prior to their application, and their total sales cannot surpass CLP 100 million in the six months leading up to it.
As of February, the program was modified with the goal of achieving greater flexibility and efficiency in supporting Chile’s entrepreneurs. With this in mind, changes made to the Seed Capital program include the option for interested entrepreneurs to apply for the grant directly, where as before you were required to apply through a sponsoring entity; usually an incubator.
Other important changes include shifting the application process from rolling deadlines to a set application period (with hard deadlines), as well as establishing the requirement that each project submitted be reviewed by at least three expert evaluators, to guarantee the impartiality and objectivity of the selection process.
Corfo offers many different programs that can be benficial to a range of companies. Many of these programs are open to multinational companies that have a local Chilean entity. If you require assistance, please do not hesitate to contact our Santiago office.