The following piece was originally published in ITBusiness.ca
Many people are surprised to learn that Canada gives out more grants to businesses, small- and medium-sized businesses (SMBs) in particular, than most other countries. When we compare grant funding for businesses in Europe and the U.S., Canada not only provides more funding per program, but the types of programs are very broad, covering many industries. However, before considering individual grant programs, there are a few important aspects that businesses need to know about applying for grants.
1. You must obtain approval before you start the activity.
One of the most frequent questions we get is “I hired someone last month. Can I apply for a grant?” The answer is almost always no. You must receive written approval before that person starts work with your company, so you must allow sufficient time to prepare the grant application and have the government process it. This requires planning. If you anticipate that you will embark on a project in between three and four months’ time, then you can move ahead and apply for the related grant now. If you need to start the activity next week, the grant application will not be processed in time.
2. Grant programs can be a competition; the government will select the “winners”.
Virtually every grant program will see the number of applicants exceed available funding. At that point, the program will select those that are most promising in providing benefits to Canada as well as fulfilling the requirements of the program. To get an idea of who wins grants, take a look at recent media announcements. For example, Linamar was awarded $100 million by the Strategic Innovation Fund (SIF), with which, according to media reports, the company would create 1,500 jobs in Canada and protect another 8,000. Yes, the funding will be used to develop innovative manufacturing technologies, but the message underlining job creation carries a high degree of significance: when applying for a grant, the more jobs you can create (particularly skilled jobs), the better your chances of approval.
3. Simply applying and meeting the grant criteria does not guarantee funding.
As noted above, timing and funding limit present hurdles. Sometimes, the best time to apply is when the program is just announced. For example, when CanExport was first launched, the success rate was quite high. However, as funding pool depletes, it becomes much more competitive. On the other hand, SIF was flooded with applications when it opened in July of 2017 and is only now starting to approve funding.
Many companies that file for SR&ED tax credits do so each year and most have a very high success rate of receiving the financial benefits of the program. Depending on the specific grant program, the success rate of receiving a grant can range from very low (between 10 and 30 per cent) to more than 50 per cent. However, if you seek 100 per cent certainty, grants may not be the right option for you.
4. The decision to apply for a grant should be strategic.
A strategic use of grants means that, before applying, you should have decided on an initiative as the right thing to do for your business and have a decent idea of what the ROI will be. Applying for a grant will provide for additional funds to accelerate or expand the project and decrease the financial risk. A good way to develop a government funding strategy is to list out all the projects/hires/training that you are considering carrying out in between the next six or 12 months along with the budget for each. Then add in those grant programs that apply to those initiatives, as well as the funding provided against your budget. Then you will have a snapshot of the benefit of applying for grants that will help you prioritize your efforts. You can also get more sophisticated by adding the probability of receiving the grant; time commitment and timeline to complete.
To help you to understand your options, here is a list of some of the more popular grants that have the widest appeal, grouped by common subject area:
- Industrial Research Assistance Program (IRAP): This program offers to fund businesses that develop new products that involve a degree of technical risk. IRAP has an annual budget in excess of $200 million, and typical funding is in the range of $50K to $400K. In contrast to SR&ED, applicants to the IRAP program need to address a project’s benefits to Canada and make a business case that it will have a significant impact on the company’s growth.
- FedDev Investing in Business Innovation (IBI): This Ontario-based program funds an array of activities from applied research to marketing studies and has a budget of over $530 million to support not-for-profits, early-stage businesses, and angel networks. They offer funding to diversify regional economies and markets and support high-growth businesses.
- Canada Job Grant: This training grant is available to many types of companies, irrespective of industry, and funds external training for current or future employees. The program supports an array of training services from soft leadership skills to technical programming and covers over half the training costs, with the requirement that the trainee will benefit from his/her position at the company.
- NSERC Experience award: This unique internship program focuses on STEM collaboration between companies and universities, offering an undergraduate student with research experience complementary to his/her field of study. It funds up to $4500 per intern hired for a 6- to 16-week period. This is one of the few programs that allows companies to apply retroactively, within 8 weeks of hiring.
Accessing foreign markets:
- CanExport: This program provides assistance to small- to medium-sized companies to develop export opportunities in emerging international markets. CanExport has a five-year budget of $50 million and funding typically falls in the range of between $30 and $50K. With the exception of agriculture and food, this popular program is open to all industries.
- Going Global Innovation: This program is designed to promote Canada’s international innovation efforts by supporting companies to pursue collaborative commercialization technology with key players in foreign markets. The fund supports costs related to travel and formalizing the innovation partnership. It is open to all industries and offers a maximum contribution of $75K.
Green and cleantech grants:
Sustainable Development Technology Canada (SDTC): This large program supports innovative cleantech commercialization activities for risky but game-changing technologies and offers to coach entrepreneurs to maximize their path to success. The average contribution is between $2 and $4 million in funds disbursed over a five-year period, so there is an apparent focus on long-term success to advance technology development and demonstration.
There Are More
There are many more grants than what is listed here. The Federal government’s most recent inventory identifies 90 program streams across 20 different federal organizations that support business innovation. In addition to federal grants, there are also many provincial and regional programs.
When applying for grants, you need to address the question “why should the government invest in me?” The important thing here is not the profits you will make as a company, but the benefits you offer to Canada and Canadians. As noted above, the number one criteria for most grants is job creation. The government runs on taxes, especially payroll taxes that are withheld and remitted directly to the government on a regular basis. The more full-time staff you can hire as a result of the funding, the better your chances of receiving funding.
Other benefits to Canada would include the ability of a business to expand into foreign markets such as the EU (to support CETA) or overall building a sustainable business that protects jobs and grows.
Finally, applying for grants is not for every business. You need to carefully consider the time commitment, risks and the ultimate benefit to make an educated decision to move forward and apply. There are many companies who have concluded that grants are beneficial and have made them part of their business process to leverage cash flow. However, doing a bit of homework first to educate yourself on the processes involved and the likelihood of success would be well worth your time.
Contact us for a free assessment of what type of government funding is available for your business.