Business Restructuring Subsidy 12th Round: Over-investment Projects are Difficult to Get Selected

(1) Introduction

On April 23, 2024, the resumption of public applications for the Business Restructuring Subsidy was announced.
This subsidy aims to support the business restructuring of operators affected by the COVID-19 pandemic.

While the selection rate was around 50% for each round up to the 10th application, it halved to approximately 25% in the 11th application as a result.
The background is that an administrative review was conducted, and to prevent the inducement of over-investment, screening for businesses with increasing bankruptcy cases, such as fried chicken shops and hair removal salons, has been tightened making selection difficult.
For such businesses, no matter how well the business plan is written, it is currently difficult to get selected is the reality.

Therefore, in this article, for the 12th round of the Business Restructuring Subsidy, we will organize the past application status and the changes in the situation in the 11th application, and in particular, clarify the businesses that are considered difficult to be selected.

By doing this, we hope to help business operators and advisors save practical costs spent on creating business plans and web application work for projects with extremely low chances of selection, and focus on existing businesses or other more effective business restructuring.

Personally, I believe that even among over-investment cases, there are many that can lead to successful businesses by thoroughly pursuing differentiation elements.
However, considering the background of being pointed out in the administrative review, it is extremely unlikely that businesses that were identified as over-investment in the 11th application and had very few selections will be selected in large numbers in the 12th round.

Explaining this background, I will provide a concrete explanation below.

(2) Background of the Business Restructuring Subsidy Administrative Review

The Business Restructuring Subsidy is a subsidy to respond to changes in the economic society in the post-COVID and with-COVID era by supporting the business restructuring of small and medium-sized enterprises, etc., and to promote the structural transformation of the Japanese economy. However, given the current situation where its role as a COVID-19 countermeasure is coming to an end, has the role of the system ended? If it is to be implemented, a "fundamental business restructuring of the system itself" is necessary, it received harsh criticism in the administrative review conducted in the autumn of 2023.

(3) The 11th round had a selection rate of approximately 25%

As for past selection rates, the 1st round had a sluggish selection rate, but after that, it remained stable at around 50%.
However, as a result of the administrative review, the selection rate dropped significantly during the 11th application, becoming a narrow gate of about 25%, or 1 in 4 companies.

And for the 12th application, I predict a selection rate of about 30% to 35%.

(4) Response of the Small and Medium Enterprise Agency based on the administrative review, and over-investment projects

Based on the administrative review, the Small and Medium Enterprise Agency announced future countermeasures, and that influence is strongly reflected in the 12th public application guidelines (document screening items).

From such responses by the Small and Medium Enterprise Agency, it is expected that the selection rate will vary greatly depending on the business content applied for in the 12th application.
Therefore, I have conducted an analysis by business type, application amount, industry, and business content below.

(5) (1) Analysis by business type (application category)

Which business type (application category) is easier to be selected?

Investment projects in medium- to long-term growth areas, such as the environment, tend to be more easily adopted. On the other hand, the Industrial Structure Conversion Category (projects undertaken by SMEs in industries or business types facing structural issues such as domestic market contraction) has a slightly lower adoption rate.
However, overall, it can be said that there is no significant difference.

■ Adoption Rates by Business Category for the 11th Round

(6) ② Analysis by Amount

What application amounts are more or less likely to be adopted?

Basically, there is a tendency for larger application amounts to have higher adoption rates.
While it is possible to invest on the scale of several million yen, considering the purpose of "bold business restructuring" and the various practical costs involved in applying for subsidies, an investment of 10 million yen or more is desirable.

■ Distribution by Application Amount for the 11th Round

(7) ③ Analysis by Industry

Which industries are more or less likely to be adopted?

■ Number of Applications and Adoptions for the 11th Round

In the 11th round of applications, there were approximately 9,200 applications, and about 2,400 were adopted.
For example, in the manufacturing industry, there were applications accounting for 19.7% of the approximately 9,200 total applications, but of the approximately 2,400 total projects actually adopted, 30.9% were adopted as manufacturing.It can be seen that the manufacturing industry is more advantageous compared to other industries.

■ (Reference) Number of Applications and Adoptions for the 1st to 10th Rounds

(8) ④ Analysis by Business

Finally, we will analyze specifically which businesses are difficult to be adopted.

(Reference) Materials from the Fiscal System Council, Fiscal System Subcommittee

[Specific Analysis]
Specifically, we analyzed the past selection rates of projects highly likely to be flagged for excessive investment. We have organized the number of past selections based on several keywords.
For such projects, you can see quantitatively that selection is difficult.

(*Analysis Process)
Extracted from past selection results based on whether each keyword was included in the "Business Plan Name." Please note that other factors were not considered.

[Countermeasures]
Given this background, first, please be sure to check whether the business you are newly implementing using the Business Restructuring Subsidyhas any possibility of falling under the category of an excessive investment project.
If it falls under the category of an excessive investment project, the possibility of selection may be extremely low, so please consider receiving consulting from an advisor andthoroughly consider in advance whether or not to apply.

(9) Summary

The Business Restructuring Subsidy is a subsidy that supports the business restructuring of operators affected by the COVID-19 pandemic, but in the 11th application round, following points raised in an administrative review, the screening process was tightened to prevent the inducement of excessive investment.

As a result, the selection rate for businesses such as fried chicken shops and salons has dropped significantly.

In this article, we have organized the past application status of the Business Restructuring Subsidy and the changes in the 11th application round, and analyzed the ease or difficulty of selection from the perspectives of business type (application category), industry, and business type.

For the 12th application round, business operators need to carefully assess the possibility of selection by comparing it with the content of the new business they are implementing.
If you are applying in a business field where there is a high possibility of being flagged for excessive investment,more thorough preparation and differentiation from competitors than ever before will be required.

Please be sure tohave an advisor on your side who is well-versed in the points to consider for selection. We hope this article will be of help to business operators and advisors who are about to apply for the subsidy.

We hope this serves as a reference for your business management.

If you would like to know more or have a consultation, please contact us viaX (Twitter)or by email (takahiro.fujita@fujitacpa-office.com)~.