Subsidies: Understanding the potential drawbacks
*This article was originally published on the website of Posse Nippon, the publisher of Small Business Japan, prior to the launch of Small Business Japan (October 2024). Articles published before September 2024 have been edited and transferred to this site.*
Subsidies can be a great way to fund your business, but it's important to understand the potential drawbacks before you apply. The application process can be complex and competitive, and even if you're successful, there are important factors to consider:
😕 High competition. Many businesses apply for subsidies, so securing one can be challenging.
😕 Extensive paperwork. Be prepared for a significant amount of paperwork and potentially extra processes (like those for the Tokyo Startup Subsidy) to be eligible.
😕 Limited duration. Subsidies have limited durations, ranging from six months to two years.
😕 Upfront costs: Subsidies often work on a reimbursement basis. You'll need to cover the costs upfront and then be reimbursed later, which can impact your cash flow.
😕 Tax implications: You'll be taxed on subsidy money, as it's considered income.
