Being a start-up in today’s economy is a difficult endeavor. Many new businesses start their operations with limited funding, resources, and support. Starting a business this way requires patience and hard work. Even then, many business owners have opportunities to take on new projects but are restricted due to limited capital.
This scenario has many business owners asking, “Do Canadian government funding programs support start-ups?”
This article will look at the basics of government funding in Canada, what opportunities are available for start-ups, and next steps.
Understanding the Basics of Government Funding in Canada
Government funding programs vary across the nation and depend heavily on sector, business activity, and region. Although many sectors make up the Canadian economy, particularly strong sectors are more likely to receive funding opportunities since they contribute significantly to national markets. Some key sectors in Canada are:
- Food & Beverage;
- Manufacturing; and
- Technology & Software, and more.
These sectors receive frequent support in the form of grants, loans, and tax credits which are leveraged for common business activities. The four major business activities that receive government funding support are:
- Research and development;
- Business expansion;
- Capital and technology adoption; and
- Hiring and training.
Watch this video to learn more about the four funding buckets.
What Government Funding Is Available to Canadian Start-ups?
There are many government funding opportunities available across the various levels of Canadian government; however, most programs have eligibility criteria that can make it difficult for start-ups to apply successfully. The basic minimum eligibility criteria for Canadian programs includes a minimum of 15 full time-equivalent employees (FTEs), at least three years as an incorporated organization and minimum annual income which may vary between programs. To learn more about these minimal eligibility criteria, why they exist, and what you can do about it, read a comprehensive review here.
Top Programs to Be Aware of For Start-Ups
Although securing larger grants and loans for Canadian start-ups can be challenging, there are funding opportunities available for smaller businesses to get the ball rolling. Both tax credits and loan programs offer promising opportunities for Canadian start-ups. Below, we highlight a couple programs to consider.
The Scientific Research and Experimental Development Tax Credit
Incentives for business-led research and development projects are provided by the Scientific Research and Experimental Development (SR&ED) tax credit of the Canadian federal government. SR&ED is the largest single-source for Canadian government funding for R&D. Over 20,000 businesses receive tax incentives each year under the program, totaling more than $3 billion.
Eligible expenses under the Scientific Research and Experimental Development (SR&ED) program include:
- Eligible salaries and overhead to a maximum of 69%;
- Costs of contractors can reach 36%; and
- Consumption of materials is up to 45%.
A combination of federal and provincial funds is available under the government’s Scientific Research and Experimental Development program (SR&ED). A wide range of Canadian businesses are eligible for SR&ED since it is one of the largest tax incentives.
On qualified SR&ED expenditures, individuals and trusts can earn a 15% nonrefundable Investment Tax Credit (ITC). This makes SR&ED one of the best funding opportunities for Canadian start-ups looking to fund their research and development projects.
Watch this video to learn more about the Scientific Research and Experimental Development tax credit.
Business Development Canada (BDC)
You can get financing and advisory services from the Business Development Bank of Canada (BDC). In addition to financing businesses across Canada, they will help you build the foundation for growth. You can request a business loan or advisory services via the BDC contact form.
Founded over two decades ago, Futurpreneur Canada supports Canada’s young entrepreneurs. The organization provides aspiring business owners aged 18-39 with financing of up to $60,000 ($20,000 plus $40,000 from BDC), mentoring, and support tools. For more information, please contact email@example.com.
Learn How Start-ups Can Position Themselves for Government Funding
Ontario Small Business Enterprise Centres (SBEC) can be useful for start-ups based out of Ontario that are looking for support. Over $2 million in training and financial support provided by the Ontario provincial government to small businesses through the Small Business Enterprise Centres.
To help early-stage companies understand basic eligibility requirements and develop a roadmap to obtaining larger, more robust government grants and loans, we created the Startup Funding Checklist.
Most Canadian government funding programs are designed for established businesses. Therefore, startups must establish a solid foundation to qualify for future funding. Our Startup Funding Checklist helps early-stage businesses prepare for future government funding opportunities.
The Mentor Works team tailors our approach to ensure our network of clients never miss out on a Canadian government funding opportunity. We are dedicated to simplifying the government funding process and delighting our Canadian businesses along the way.