Welcome to Part 2 of our Small Business Financing in Canada series. Last week we covered crowdfunding. Another financing source which can help you launch, grow, and scale a business is government grants. Today, we’ll provide an overview of some of the options and important details to keep in mind as you begin your search for financing.
In Canada, we are fortunate to have a government that provides different financing options which are available to Canadian businesses. These options are provided by federal and provincial governments, so it’s important to research what’s available for your business depending on where you live.
Because grants are constantly changing depending on where the government feels there is a need for support, the goal of this post is to bring awareness to grants in general and ways to go about finding them.
Government Grants are a form of non-repayable funding. This means you don’t need to pay back the money! Besides being non-repayable, grants are useful in many ways. They can be used to cover or help cover, expenses towards a given project, or for hiring new staff. A few key factors related to grants are as follows:
Timing: Grants must be applied for and approved before the expense is incurred, they can not be applied retroactively.
Specific: Funding of grants are typically attributed to a specific project or the hiring of certain staff. There are many different grant programs available, each with their own unique requirements. It’s important to apply for the one that best suits your need.
Application process: The application process can sometimes be timely, as the use of funds needs to be reviewed and approved. This makes planning ahead very important when pursuing a government grant.
Payback: Grants are not required to be paid back however, they sometimes require a business report on the project for you to achieve certain objectives.
Begin your search for a government grant on their website: Government of Canada – Grants. You can also search by specific Grant Programs. Scan through the list to get an idea of the specific programs they are currently supporting. Use the ‘refine by’ filter on the side to get more specific about who you are or what you are looking for. For example, there are grants specifically for women in business. There is also a program in which you receive financing to invest in becoming more energy efficient as a business.
You can find provincial specific grants, contributions, and financial assistance here: Grants, Contributions and Financial Assistance
Repayable Funding & Loans
The Canadian Government also provides larger loans for certain types of projects. Depending on the program, loans can range from no-interest and low interest to interest rates competitive with financial institutions. Additionally, Government loans are typically longer term with some as long as 10 years.
Similar to government grants, the application for a government loan is required up front and cannot be applied retroactively. The application process is involved and time to approval can take as long as 6 months or more. It’s important to plan ahead and have contingency options if you are pursuing this type of financing.
As with grants, government loan programs have a specific purpose. They are typically aimed at projects with significant impact, such as creating 10+ jobs, commercializing innovative technologies, and other high impact activities. Business plans and supplementary documentation are required to apply.
Here is an extensive list of Government Loans and Cash Advances.
Tax Incentives & Refunds
Although not a direct form of financing, we wanted to include tax incentives and refunds under this category. Tax incentives are often overlooked but are a great way for businesses to save on costs. These are applied for during corporate tax filings, and there are often tax incentives for things such as scientific R&D, apprenticeships, digital media, and co-op programs.
As a small business owner, do your research and learn what provincial and federal tax credits are available for businesses in your area. It also helps to have a knowledgeable accountant.
Planning, applying and getting access to government funds take a lot of time and effort. It is an incredible resource that we in Canada are lucky to have. That being said, there may not be a government financing for your specific need, or you may not have the time and resources to apply and risk not getting funded. We here at Lending Loop understand that there can be a gap in financing options, so we’ve made it our mission to provide business owners like you a solution.
Continue reading Part 3: The Banks