Combining SR&ED with Government Grants to Maximize Funding

by | Apr 23, 2025 | Government Funding, Grants, Innovation, SR&ED | 0 comments

When it comes to funding innovation in Canada, the SR&ED (Scientific Research & Experimental Development) Tax Credit program is one of the most generous programs available. But what many companies don’t realize is that SR&ED doesn’t have to stand alone—it can often be strategically combined with other grants, subsidies, and no interest loans to supercharge your R&D budget.

Stacked diagram showing SR&ED, grants, subsidies, and loans working together to support innovation funding in Canada.
Strategic layering of innovation funding sources including SR&ED, IRAP, wage subsidies, and regional no-interest loans.

In this blog, we’ll explore how businesses can layer SR&ED with other funding sources to maximize support for innovation, scale faster, and reduce capital constraints.

💡 Why Combine SR&ED with Government Grants?

Combining multiple funding sources can help you:

  • Extend your R&D budget
  • Accelerate project timelines
  • Hire more talent
  • De-risk innovation investments
  • Increase cash flow through non-dilutive capital

The key is planning—knowing what’s available, how they interact, and how to avoid claw backs or overlap issues.

🔗 Top Funding Programs to Stack with SR&ED

Here are a few funding streams that can complement your SR&ED claims:

1. Government Grants (e.g., IRAP, CanExport, Provincial programs)

  • IRAP (Industrial Research Assistance Program) is a popular federal grant that supports future R&D costs, including Canadian salaried employees and contractors. Unlike SR&ED, which is a retroactive tax credit focused on the scientific and technological challenges of a project, IRAP is forward-looking and often supports activities tied to commercialization and product development.
  • Companies use IRAP to fund upcoming project phases, while relying on SR&ED to recover costs related to backend development or technological experimentation that’s already been incurred.
  • Key Tip: When making the SR&ED tax credit claim, you will need to reduce SR&ED qualified expenditures by the amount of labour costs covered by the IRAP grant received in that fiscal year.

2. Wage Subsidies

  • Programs like MITACS, IRAP Youth Employment Program (YEP), or other regional youth employment subsidies can help fund technical intern roles.
  • Best Practice: Clearly separate subsidized roles from SR&ED-related salaries or apply partial allocations in your documentation.

3. Provincial Innovation Credits That Complement SR&ED

  • Many provinces offer other tax credits or additional funding for industry specific projects (e.g., support for interactive digital media (video game development) like the Ontario Innovation Digital Media Tax Credit, BC’s Interactive Digital Media Tax Credit).
  • These often stack with SR&ED and can be claimed in tandem. However, if costs qualify for both SR&ED and digital media tax credits, you must choose one tax credit under which to claim those costs—not both. Typically, you would select the credit with the higher tax rate.

4. No-Interest Loans from Federal Agencies (FedDev, ACOA, PrairiesCan)

In addition to grants and tax credits, several regional development agencies across Canada offer no-interest loans to support innovation, expansion, and commercialization activities.

Examples include:

  • FedDev Ontario (Southern Ontario) and FedNorth (Northern Ontario)
  • ACOA – Atlantic Canada Opportunities Agency
  • PrairiesCan (formerly Western Economic Diversification Canada)

These programs provide repayable contributions to help companies hire, purchase equipment, and scale innovation-related activities—often with no interest and flexible repayment terms.

💡 These loans no longer affect the SR&ED claim. Any costs covered by Federal Regional Agencies do not have to be deducted from SR&ED claims, even if they directly fund SR&ED-eligible expenses.

📊 How to Strategically Combine Programs

Here are a few tips to make your funding stack work smoothly:

  • Maintain meticulous cost tracking. Allocate expenditures clearly across different programs using project codes, time-tracking tools, or separate ledgers.
  • Time your applications. Many grants have fixed intakes or rolling deadlines, while SR&ED is claimed after the fiscal year ends. Plan early to align your project timeline.
  • Work with a consultant. A seasoned SR&ED or funding advisor can help you navigate overlapping rules, prepare defensible claims, and identify stacking opportunities you may not have considered.

📈 The Outcome: A Stronger, Smarter Funding Strategy

By combining SR&ED with other grants and financing tools, Canadian businesses can stretch every dollar invested in innovation. Whether you’re a startup looking to fund your first prototype, or a scaling tech company ramping up development, leveraging multiple programs can be the difference between slow growth and rapid acceleration.

🤝 How We Can Help

At RDP Associates, we work closely with businesses to optimize their SR&ED claims while also identifying additional funding programs. We’ve helped hundreds of clients build funding strategies that maximize non-dilutive capital, ensure CRA compliance, and keep R&D efforts moving forward.

Have questions about combining SR&ED with other funding sources?
Reach out to us — we’d be happy to chat.