By Craig T. Kojima, Star-Bulletin
Frank Fukunaga, executive director and chief executive
of the High Technology Development Corp., stands in front
of the Manoa Innovation Center, which houses that state agency.

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Need money?
Government could
be your answer

Since '89, isle technology
companies have reaped $24.6 million
in state and federal money

by Jerry Tune
Star-Bulletin

Federal grants to Hawaii companies are a big source of money for research in such emerging fields as biotechnology and the Internet.

The Small Business Innovation Research Program provides funds for small technology companies. Ten of the federal government's largest agencies are part of this three-phase program, which totaled more than $1 billion nationally in 1998.

Phase I grants determine the feasibility of a new technology and are valued up to $100,000. Phase II contracts are a continuation of successful phase I efforts, and are valued up to $750,000. Phase III is the commercialization of the project and involves funding from the private sector or government funds outside the SBIR program.

The state provides matching money up to $25,000 during Phase I.

A 10-to-1 return

This program is administered by the state's High Technology Development Corp., based at 2800 Woodlawn Drive in Manoa.

Since 1989, 26 businesses have received more than $22.4 million in federal SBIR grants and more than $2.2 million in Hawaii SBIR grants.

"This represents a leveraged effort of more than 10 to one, or a $10 return in federal funding to Hawaii companies for every state dollar invested in SBIR," said Frank Fukinaga, the corporation's executive director and chief executive officer.

Other offerings

Other grant programs, meanwhile, help such ventures as diversified agriculture, training for veterans, and the fashion industry.

The Small Business Development Center has Rural Economic Transition Assistance-Hawaii grants to assist in the transition from sugar cane to diversified agriculture. The program, started in 1993, was funded with nearly $6 million. Most grants range from $50,000 to $200,000.

The federal Veterans Affairs Department provides up to $25,000 to "severely disabled" veterans who start a business. Ed Gavigan, manager of the VA vocational rehabilitation and counseling program, said most help is done through conventional vocational education and colleges.

"But for the most severely disabled veterans, the VA can provide 'start-up expenses' which may be as little as $5,000," Gavigan said. Since 1995, the VA has helped 50 veterans with expenses.

The state Department of Labor and Industrial Relations also has grant money through the employment-training fund to help small businesses.

Last year, the department funded training projects for about 2,500 clients from 100 employers. In addition, the employer-referral program funded training of 3,829 clients at various educational and training institutions.

The training fund also supports the Fashion Industry Training and Technology Center administered by the Hawaii Fashion Industry Association.

Direct grants from the private sector to small businesses are rare, but a system has developed that involves banks providing low-interest capitalization loans to nonprofit organizations which then lend out money to start-up businesses.

Micro-loans

Banks look to organizations that provide micro-loans (under $25,000) to businesses that otherwise could not get a bank loan. Banks normally require a three-year history of operations in order to get a loan.

The system works this way: Banks capitalize nonprofits that have been certified by the U.S. Treasury Department as "community development financial institutions."

The Treasury Department provides a small monetary reward to those banks who make the capitalization loans. A bank might lend money at 3 percent to the nonprofit, which in turn relends this money at 13 percent. The difference is used to cover operational costs of the nonprofit.

Through the program, banks help small businesses, meet the federal mandate for community reinvestment, and also make contacts with businesses that later can become customers.