Government funding programs provide significant opportunities for Canadian businesses to leverage capital from the government to achieve their desired business goals.
Government funding programs typically take one of three forms in Canada:
- Loans; and
- Tax Incentives.
To learn more about the different types of government funding available in Canada, please refer to our Types of Government Funding slide deck for a comprehensive explanation.
Though funding programs vary in structure and allotment distribution, there are often common variables across all programs such as eligibility criteria.
Eligibility criteria refers to specific organizational measures or standards that are required by funding distributors to be eligible for funding from that specific program.
This article describes common eligibility criteria required to receive funding through government funding programs.
Does my business need to be Canadian?
To qualify for government funding in Canada your business does not necessarily need to be Canadian. However, your programs will require applicants to either be Canadian, have operations based out of Canada, or to partner with other Canadian organizations.
How Many Employees Do You Need to Be eligible for grants?
Many government funding programs require businesses have a minimum number of employees. This means that to be eligible an organization must have a minimum number of full time equivalent (FTE) workers on their payroll. The minimum number of employees required to apply for government funding programs in Canada is frequently set at 15 employees.
This minimum number of employees is required because many government funding initiatives are designed to support organizations in the category of small and medium-sized enterprises (SME). Small organizations have over 10 employees, while medium sized enterprises have over 100.
Therefore, by setting a minimum employee requirement for funding programs, associations can ensure they are only providing funds to businesses that fall under this umbrella.
Moreover, there can sometimes be a maximum number of employees allowed to be eligible for a funding program. This number is often set at 500 to ensure that organizations receiving funding are not large global corporations that don’t need as much government support to grow and expand their operations.
Are You Incorporated?
Government funding programs often require applicants to be an incorporated organization. Getting incorporated is not something that is required of business owners in Canada; however. it does have advantages.
Businesses do not have to incorporate, but incorporating has advantages. An incorporated company is a legal entity, independent of its owners. This makes it easier to enter contracts, incur debt, or get funding.
Advantages to incorporating your business are:
Fewer Barriers to Accessing Capital
Incorporated businesses have less trouble receiving loans from banks, experience lower tax rates, and are therefore better candidates for government grants and loans. This is because these organizations can raise capital by issuing shares and bonds to shareholders making them more reliable when assessing risk of repayment.
Your Organization Becomes a Separate Legal Entity
When organizations are incorporated, they legally become a separate entity. This means that the organization is no longer tied to an individual owner. Unincorporated organizations (sole proprietorships) are bound to a specific owner and stop existing when the owner passes away. Therefore, the government views incorporated organizations are less risky to give grants, loans, and tax credits because they operate separately and can function independently should something happen to the founder/owner.
What Is Your Average Annual Income?
Organizations applying for government funding are often required to have a minimum annual income. This means that to be eligible for these grants or loans, your business must have proof of an average annual gross revenue that exceeds the required minimum allotment.
Minimum annual income criteria vary by program. The purpose of requiring an annual minimum income is to ensure that organizations receiving money from the government have record of operating as a successful business for at least three years.
When government bodies consider providing funds to businesses for research and development, business expansion, and other businesses activities, they consider annual income to confirm that the recipients are highly capable organizations. This ensures that the funds are used in an efficient and effective manner, and contribute in a meaningful way to the Canadian economy.
How To position Your Startup for Government Funding
Although businesses applying for government funding programs will often be faced with specific eligibility criteria, not all programs will have these criteria. There are hundreds, if not thousands, of funding opportunities available to Canadian businesses of all sizes, in all industries, from coast to coast.
However, businesses that position themselves as corporations with three years of income and at least 15 employees will be eligible for more opportunities than their counterparts.
To position your business for success, please visit our Canadian startup resources page where you will find a variety of useful tools and resources to get your organization heading in the right direction.
Moreover, consider downloading the free Canadian startup funding checklist to see where your business currently stands and plan your next steps.
Mentor Works believes in connecting Canadian businesses with government funding news, resources, and opportunities to foster innovation, productivity improvements, and strong economic growth throughout Canada.