Diia app grants: how to get financing for opening and developing a business

Last year, a state program was launched under which entrepreneurs can get financing for their own business — eRobota. This project provides grants to Ukrainians for starting a business, developing entrepreneurship, and training. As of March 2023, the government transferred almost $4.7 mln to entrepreneurs as part of the program. Their ideas were selected and are already working, thanks to the support of state funds.

Rubryka explains how to get funding, the nuances of this program, and the specifics of the grant.

What is the problem?

With the beginning of the war, keeping one's own business afloat became much more difficult. Many private entrepreneurs suffered significant losses even during the COVID-19 epidemic. A full-scale invasion dealt a new blow. After February 24, the process of closing businesses intensified: on average, 13,000 business entities were closed every month.

The dynamics of the creation of new enterprises lagged significantly behind. From March to August 2022, 63,406 new individual entrepreneurs were registered. At the same time, by mid-July, the number of closed enterprises exceeded the number of new ones. Only in August did the situation change positively: the number of new business entities amounted to 23,104, twice the number of closed businesses.

During the year of the war, the geography of the opening of new individual entrepreneurs looks like this:

Map shows the geography of newly registered individual entrepreneurs. Source: Instagram page startup_ukraine

This dynamic cannot be considered a clear sign of economic recovery and improvement of the business situation. Entrepreneurs still needed and need support, especially beginners. Uncertainty and the financial crisis, the need to help the front, the loss of former connections, suppliers, and customers, and a decrease in the population's purchasing power — these are Ukraine's today's realities. Undoubtedly, the state had to respond to these requests. The problem needed a solution.

What is the solution?

The government project eRobota provides grants to Ukrainians for starting their own business, developing an existing enterprise, and training. The project's main goal is to stimulate entrepreneurial activity and create new jobs. There are six grant programs within the framework of eRobota:

• micro-grants for creating own business (up to $6.7 thousand);
• grants for the development of a processing enterprise (up to $216.7 thousand);
• state funding for planting a garden (up to $10.8 thousand per hectare);
• funds for the development of greenhouse farming (up to $190 thousand);
• a grant for the implementation of a startup, including in the field of IT;
• funds for training in IT specialties.

You can apply for a grant for your business on the Diia portal, a Ukrainian digital governance app. Non-profit organizations, legal entities, and future entrepreneurs can apply, but subject to certain conditions. Entrepreneurs who conduct business in temporarily occupied territories or conduct economic activity on the territory of Russia cannot become participants in the program. Also, the potential participant must not have debts to the budget or a bankruptcy case initiated against him, a court decision on bringing them to criminal liability for corruption.

When filling out the online application on the Diia website, the program participant must attach their business plan to it. It must be written in accordance with the provided template form available on the website. Future entrepreneurs should strictly follow the template because a business plan can only be submitted once without the possibility of correcting errors.

Grant sizes vary depending on which program one chooses. It is possible to get from $1350 to $6700 for a business, while a grant for a processing enterprise can amount to up to $216.7 thousand.

In the direct sense, it is unnecessary to return funds to the state provided the grant requirements are met. This is not a loan in the traditional sense. However, the entrepreneur will still have certain obligations.

First, the grantee must not only use funds for their own business but also ensure the creation of jobs. Their number varies depending on the grant program:

• If you receive a micro-grant to establish your own business, you must create at least one workplace, carry out your activity for at least three years and pay taxes to the budget, particularly for the employment of workers. The entrepreneur returns the grant funds taken at the expense of taxes.
• The grantee will have the same obligations after receiving a grant for a processing enterprise, but the number of required workplaces is 25.
• If you take a grant for a garden, the enterprise must be in business for at least five years and also pay taxes. As for the number of permanent and seasonal employees, the details can be found at the link.
• And the fourth grant — for the development of greenhouse farming — provides for creating at least 14 jobs per 1 hectare of modular greenhouse area. Under the terms of the grant, the receiver will have to return the grant amount if the business creates less than 14 new jobs per 1 hectare of modular greenhouses, does not provide a modular greenhouse with a source of water intake and irrigation, will carry out the specified activity less than three years after the end of construction; will not pay taxes and fees.

To clearly understand the grantee's obligations, one should carefully familiarize themself with the conditions for receiving grants in the relevant program. All of them are listed on the portal.

The directions of expenses depend on which grant was taken. An entrepreneur who received a grant for a business (up to $6.7 thousand) has the right to spend this money on the purchase or leasing of equipment, the purchase of raw materials, and rent, provided that it does not exceed 25% of the total amount of the grant.

The possible areas of expenditure of the grant for processing production should be related to purchasing the main means of production (machines, technological equipment), their delivery, and introducing these means of production into operation.

If one received a greenhouse grant, one could use it to pay any bills related to the modular greenhouse construction project included in the estimate.

The grant for the garden can be spent on paying bills to suppliers (sellers) for the materials included in the estimate for the project implementation.

According to the Deputy Minister of Economy of Ukraine, Tetiana Berezhna, the government earmarked UAH 1.8 billion for the Own Business micro-grant program in 2023, which is more than 7,000 micro-grants for business start-ups and development.'

"We expect that the recipients of these funds will create many jobs. And this will positively affect the labor market. We have good results of this program for the past year — 3,300 entrepreneurs received micro-grants, which will create more than 8,000 jobs," Berezhna said on the air of the Ukrainian telethon.

Does it really work?

Rubryka spoke with entrepreneurs already receiving funding under the eRobota project. Some already had a business, and for some, this grant became a starting point for establishing their own business.

Yevhen Rakita is a captain of the Armed Forces of Ukraine. Until February 24, he developed his own business in Poltava — he made boxes from corrugated cardboard and had a Nova Poshta postal service franchise. On February 24, Rakita and his team actively participated in volunteering — helping the front, displaced people and organizing the transportation of humanitarian goods from Western Ukraine and Europe. Later he joined the ranks of the Armed Forces of Ukraine and is now approaching the victory of Ukraine.

Photo: Yevhen Rakita's archive

Before the full-scale invasion, Rakita had the idea of opening his own corrugated cardboard production in Poltava. His company purchased corrugated cardboard for manufacturing boxes from other suppliers without a full production cycle. The entrepreneur aimed to organize his own production, thereby reducing its cost and controlling the quality of materials.

Photo: Yevhen Rakita's archive

Rakita wrote the business plan two years ago. He says that a full-scale war began at the decisive stage of negotiations with investors. The pause did not last long, and the entrepreneur learned about the possibility of receiving a grant from the state and decided to apply for this project. His idea went through the grant program for the development of processing enterprises.

"I was in the first batch of entrepreneurs who applied in August 2022. I reworked the existing business plan a little and submitted it. And already in September, I discovered I won 8 million hryvnias," says Rakita.

Photo: Yevhen Rakita's archive

Military service forced Rakita to leave his directorship, but even while at the front, he followed the realization of his idea and the implementation of the grant. Currently, the corrugated cardboard production line is still being assembled in another country — this is a long process, but it is already launched. Grant funds have already been used.

According to Rakita, such grants for entrepreneurs are much less risky than loans. "The state simply provides an opportunity to use money," says the entrepreneur.

Rakita says that a business plan is one of the most critical components of a grant application. Therefore, entrepreneurs should carefully and responsibly calculate their future project.

As, probably, for many people, opening their own business was a dream for Oles Luchny. According to him, he initially did not plan to open a coffee shop. The idea came already in the process of writing a business plan.

"I didn't have much experience in the business. I thought I should choose something where I would make the least mistakes. I considered options for a bakery, a barbershop, and some production. And then I thought: 'What could be easier than making coffee and treating people?' It seemed easy to me then. In fact, you need to know so much to brew a simple espresso well."

Today, the Bili Vusa coffee shop operates on the territory of the Kyiv railway station in the city of Poltava. Once there was a branch of Ukrposhta postal service there, but now it is a modern, spacious room filled with Arabica aromas and visitors' bustle.

Photo: Oles Luchny's archive

Photo: Oles Luchny's archive

Luchny says he is already negotiating a lease to open another establishment. In addition, the entrepreneur plans to make certain improvements to the first coffee shop — he would like to make his coffee shop more authentically Poltava-style. Now he involves Poltava manufacturers of craft goods in cooperation and is negotiating with Poltava artists to place their paintings in his establishment.

Luchny already had experience in marketing and writing business plans, which, of course, helped him. The entrepreneur advises budding entrepreneurs not to be shy in their questions.

"I would advise not to be shy and take the maximum amount of the grant. I, for example, thought that if I asked for less, I would definitely be given money. But in fact, it does not affect the jury's decision at all. For example, I won 243 thousand, but it was possible to have all 250. The second very important thing is to weigh your strengths, skills, and abilities. For example, the project I planned at first was several times smaller than the one I opened in the end," the entrepreneur shares.

Rubryka has already told the story of Hanna Molodykh, an  IDP woman from Rubizhne, the Luhansk region, who opened a business for sewing plus size women's clothing, Faina Lady. Before the full-scale invasion, the entrepreneur already had her production in the Luhansk region and successfully worked with the team.

In the spring of 2022, she left everything and moved to the city of Kremenchuk, the Poltava region. In a new place, the company is resuming its work. Hanna also won the micro-grant program for creating her own business.

"I received this grant and started all over again. Although, it is not from scratch, of course. The experience you have will stay with you. No one will take it away. Moreover, it is easier to start over — I am no longer the blind kitten I was in 2018. I got the sense to move forward," says Molodykh.

Even more useful solutions!

From April 10, a new direction of the entrepreneur financing program will start — a grant program for veterans to create or develop their own business.

Applications for grants can be submitted from April 10 through the Diia portal.

↓Read also

Ukrainian service, food, and alcohol conquer European markets

Ukrainian farmers face another planting season filled with mines and market challenges – but also hope to reap wartime solutions