FAQs: Investing in Business Innovation Small Business Loans Ontario
Administered by the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), Investing in Business Innovation (IBI) offers small business loans to assist high growth, innovative startups and early-stage businesses in commercializing new products, processes, and technologies. Southern Ontario businesses with private funding that require additional cash flow can use IBI to help accelerate late-stage development and early-stage commercialization activities.
IBI repayable government funding for small business provides 33% of eligible project expenses up to $1 million through their Early-Stage Businesses stream. Of the remaining 66% of project expenses, half must be provided by venture capital or angel network support, the other half can come from cash, bank loans, or other investment sources. Early-stage businesses who have already received private funding investments should consider seeking Investing in Business Innovation repayable funding to increase their cash flow and further accelerate their growth activities.
It is recommended that interested businesses review IBI’s program overview blog and eligibility criteria blog to have some of your questions answered and ensure that this loan is the right type of government funding for your early-stage business. Below, you can find the answers to our most frequently received questions.
Free Download: Compare FedDev Ontario Repayable Funding (Infographic): FedDev Ontario offers several 0% interest loan repayable funding programs. This infographic compares Investing in Business Innovation (IBI) and Investing in Business Growth & Productivity (IBGP) to assist business owners identify which program will provide the greatest benefit to their growth.
Investing in Business Innovation Ontario Small Business Funding
How much Ontario government funding could my small business receive?
Early-stage businesses in Ontario can receive up to 33% of their project costs to a maximum of $1 million in repayable funding from Investing in Business Innovation. Venture capitalist/angel investor capital must also be raised, which can total between 33% and 50% of a company’s project expenses.
This means that for a $500,000 research and development project, up to $165,000 would be covered under IBI, with a required contribution of $165,000 – $250,000 from angel investor or venture capitalist funding. The remaining balance of project funding must be paid by the business in cash contributions, since in-kind contributions are not accepted through Investing in Business Innovation repayable small business funding.
What projects are eligible under IBI?
Investing in Business Innovation will fund a wide range of projects, including:
- Early-stage commercialization of innovative products and processes;
- Business development projects (including high-performance team building, improving governance and investment readiness, and adopting best-practices for management);
- Late-stage product development (including market diversification and growth strategies, customer development, and market development); and
- Development and implementation of distribution strategies.
Eligibility Factors for Investing in Business Innovation Small Business Loans Ontario
Who is eligible for IBI small business loans?
There are specific eligibility criteria which outlines suitable applicants for IBI. These requirements specify that applicants must:
- Be headquartered in Ontario;
- Maintain between 1 and 50 employees;
- Have been in business between 1 and 3 years; and
- Secure private investments of at least 33%
Which types of expenses are eligible to receive Ontario government funding support?
A variety of eligible expenses may be claimed by small businesses through IBI. These costs include:
- Internal labour costs;
- Contractor and consultation fees;
- Capital costs (such as new equipment); and
- Non-capital costs (such as materials).
If my business is pre-revenue, is it still eligible for IBI government funding support?
Yes, pre-revenue businesses can still receive Investing in Business Innovation funding. In this situation, businesses must demonstrate projected cash flows for a two-year period (when the project will be ongoing) and show that they have the financial strength to repay the loan as result of a growing business.
Applying to Investing in Business Innovation and Receiving Funding from FedDev Ontario
What is the application process?
When applying to Investing in Business Innovation, the business will need to submit an application form (approximately 3 pages) in addition to a project/business proposal (15-20 pages). The project/business proposal requires several documents, including:
- Evidence of committed investment (venture capital investments)
- Term sheets;
- Capitalization Tables;
- Timing of new investments;
- Business model; and
- Financial projections.
After submitting these documents, the project application will be reviewed by FedDev Ontario based on the project’s expenses and expected results.
When can I start the project?
Projects can begin as soon as they have received FedDev Ontario’s acceptance into the IBI program. Depending on the size of the application and total amount of funding requested, applicants may assume a 90 day to 6-month turnaround for program acceptance. Please ensure that you are aware of these timelines and that the project’s start date can accommodate them.
Related Blog: How Long are Grant and Loan Approval Times? – Discover a variety of Canadian government funding programs and learn how far ahead to apply to receive maximum project funding.
When do I receive the Ontario government funding?
Businesses will submit paid invoices to their FedDev Ontario project officer on an ongoing basis, and will then be reimbursed for a portion of their total spend. Business applicants are required to submit their invoices at least twice per year, however these payments can occur monthly as needed to pay for ongoing expenses.
Can I apply again even if I’ve had an application rejected in the past?
Yes, businesses can reapply to the IBI program if they’ve been unsuccessful in obtaining FedDev Ontario funding in the past. Each project is approved based on its own merit, so if a previously unsuccessful application has new projects or results in greater job creation than previously reported, it may be successful this time.
What type of reporting is required after being approved for funding?
After program approval, businesses will need to remain in contact with FedDev Ontario to follow-up with various elements of the project. These follow-up reports include:
- A final project report (once all project outcomes have been realized);
- Submission of invoices to recover paid amounts;
- Periodic progress reports with FedDev Ontario’s project officers; and
- Project scope evaluations based on updated progress reports.
What is a typical repayment schedule for IBI repayable Ontario government funding?
FedDev Ontario provides 0% interest loans for the Investing in Business Innovation program. No interest is accrued on the loan at any time, however repayment must begin after the project is completed. Repayment of IBI small business loans generally start between 6 and 12 months of the project’s conclusion and can be amortized over 5-10 years, depending on a fair and achievable schedule which businesses can negotiate.
Learn More about IBI Ontario Government Loans
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