Getting government funding for your business: everything you need to know about government grants and where to find them

There are many grants and other funding programs offered by various government organizations that can help your business fund projects to expand, develop, research, and much more. Yet there are also many misconceptions about what funding can be used for, how the application process works, and where these programs can be found.

This article will help you make sense of government funding and provide some resources and helpful tips on starting your businesses' funding research journey.

Prefer to listen instead of reading? Listen to our webinar on finding Government funding for small businesses on our YouTube Channel.

Canadian Business Government Funding 101

What is Government Funding?

Government funding refers to any grant, subsidy, loan, tax credit, or other financial assistance program offered by any Federal, Provincial, or Municipal government or government agency.

What are the types of funding available?

The type of funding provided may vary depending on what the goal of a particular program is, the available budget, and many other factors.

Some funding programs, such as grants, require you to apply in advance of starting a project. Other options, such as tax credits, work retroactively by providing refunds or covering already incurred expenses.

Note that the government does NOT provide operational funding. Businesses in need of such funding can look into raising capital through other streams, such as seeking new investors or applying for institutional loans. A strong and optimized financial and tax plan can also help lean out expenses and win back much needed financing. Finally, there are temporary programs available to help businesses struggling with the pandemic, some of which are listed at the end of this article.

Common government funding programs include:

• Government Grants - grants can be non-repayable, partially grants (meaning you provide part of the amount), or conditionally repayable (meaning you may have to repay if some conditions are met, e.g., your business starts making a profit). In all cases, funding is provided for a particular purpose, such as supporting business expansion or upskilling the workforce.
• Government Loans - low-interest or no-interest loans give businesses access to additional funding which may otherwise be inaccessible or too expensive. While loans may be somewhat less desirable than grants, they are also far more accessible and, when approached with a strong business and financial plan, can be an excellent source of funding.‍
• Tax Credits - tax credits reduce the amount of tax paid on taxable income. Refundable tax credits are paid even if there is no income tax payable, meaning you will receive the value of the credit as payment. Much like grants, tax credits are a way for the government to encourage businesses to behave a certain way, such as encouraging more investment into research and development.‍
• Temporary COVID incentives - over the past year, the Government of Canada and Provincial Governments have created various temporary relief programs to help businesses weather the pandemic. These programs are made to be accessible, meaning they do not reflect the oftentimes lengthy and involved application process of other funding options.

Note that while all these programs can be considered government funding, the application process for each category can be significantly different. For example, tax credits like the SR&ED Tax Credit involve a more complex application process than most grant programs.

Why does the government provide funding?

Each funding program is created to support a specific purpose, such as encouraging business owners in a particular province to expand, or investing in upskilling the workforce in some industry. Understanding this purpose is important, as it will help you make a more accurate determination of whether your business fits the program, and also help you create a stronger application.

What activities are eligible for funding?

Grant funding is available for many business activities, including:

• Scaling your business or expanding it into new markets.
• Hiring new employees or training and upskilling your current workforce.
• Conducting research & development.
• Tech adoption, including implementing new equipment, software, and other technologies.
• Purchasing equipment and building new operation facilities for the business.

Each grant will have its own set of criteria and operate differently. For example, some grants are renewable, while others are one-time only.

Is grant funding taxable?

Yes, grant or subsidy funding received from a government or government agency must be reported as income or as a reduction of an expense.

Does a business have to be incorporated to be eligible for grant funding?

While criteria may vary across programs, most government funding programs require that a business be incorporated to be eligible. For some programs, additional requirements, such as a minimum time passed from incorporation, may also apply. However, incorporating your business solely for this advantage may not be the right move - make sure you consider all the advantages and disadvantages of incorporation before making a decision.

The Application Process - Infographic

Where to find grant funding?

Searching for "small business grants" or "business funding" will often yield disappointingly few promising results from government websites. Instead of using these generic terms, try using more specific keywords. For example, if you are looking to fund hiring, try searching for "government hiring subsidies". Other keywords to look out for include: credits, rebates, subsidies, support, awards, contributions, shared costs, assistance, etc.

A great starting point for your research are government agencies that compile lists of loans and other financing:

• Innovation Canada Business Benefit Finder
• Government of Canada Federal Funding Finder

Each province also has its own page linking to active support programs for businesses. The Government of Canada has a great page that compiles the links and key information for each province. You can also use the links below to access the business support page for your province:

• Alberta Small Business Resources
• British Columbia Loans and Grants
• Manitoba Tax Credits and Programs
• Newfoundland and Labrador - Support for Business
• Northwest Territories Funding programs list
• Nova Scotia - What about funding?
• Nunavut Economic Development Funding Guide
• Ontario Available Funding Opportunities
• Prince Edward Island & PEI Start-up Support programs
• Quebec - Support for businesses in Quebec page
• Saskatchewan Business Support Hub
• Yukon - Funding and Supports for business

Tips on getting funding

• Research before applying! Make sure you understand the purpose of the program, what the assessment criteria are, and any other considerations before submitting an application. It is a good idea to create a spreadsheet or other document to compile all the information and deadlines in an easy to access format. This information will also make the application writing process easier later on.
• Have a business plan - developing a clear and complete business plan will make researching and applying for grants a lot easier, and increase your likelihood of receiving funding. A solid plan will have clearly-defined objectives, deliverables, monitoring mechanisms, and reporting protocols. With a good plan in place, finding suitable programs and writing strong grant applications will be a lot easier.
• Make sure your business is eligible - read through the program's rules, requirements, application process, and fine print to make sure your business is qualified to apply for the grant, otherwise all your hard work will be misplaced. Remember you can always get in touch with the funder to learn more about the program's criteria or get help with any other details.‍
• Adhere to deadlines and application requirements - you do not want your application rejected or delayed because of missing documents or missed deadlines. It may be a good idea to get some expert help, especially when things are busy. A quick google search will direct you to many organizations specialized in helping businesses apply for grants. Many of them also offer a free first consultation.
• Keep trying - if at first you don't succeed, keep at it and don't give up. Review you documents, business plan, and any feedback you received, and keep looking for other programs that better suit your situation. Broaden your searching criteria by looking at more than just the most lucrative, non-repayable grants; many other funding options are more accessible but could prove equally as valuable.

You got funding - what's next?

For most programs, there will be monitoring and reporting processes outlined that you must adhere to. This may include periodic submission of financial information related to the project being funded, such as submitting funding expenditure reports. Make sure you are aware of these requirements and are able to provide the required information to prevent any mistakes that could possibly result in the loss of funding.

In addition, some programs may have post-completion requirements. For example, research grants may require you to publish the research results upon project completion. Other grants may have optional project success sharing requirements.

Make the most out of your new grant funding with expert financial planning and consulting - get in touch today to learn how YAC can help you optimize your business taxes and finances.

COVID-19 Temporary Programs

The Government of Canada has created multiple temporary relief programs to help businesses manage the pandemic. Note that the main purpose of these programs is to provide relief and support to struggling businesses, rather than encourage development or growth. As such, these programs are much easier to apply to, and the application timeline is typically much shorter; the above information may not apply to these programs.

CEWS - Canada Emergency Wage Subsidy

Eligible employers may be eligible for a subsidy covering a part of their employee wage expenses.

CERS - Canada Emergency Rent Subsidy

Eligible business and non-profit tenants may be eligible for a subsidy covering a part of their commercial rent or property expenses.

CEBA - Canada Emergency Business Account

Small business and non-profit interest-free loans of up to $60,0000 available to eligible businesses.

RRRF - Regional Relief & Recovery Fund

Relief funding provided by the Government of Canada to local regional development agencies to support affected businesses.

HASCAP loan guarantee

Loan guarantee program providing small and medium-sized businesses access to fixed-rate loans through their financial institutions.