Canadian Government Funding Terminology for Small Business

Canadian government funding programs often use terminology that is difficult for applicants to understand. These terms may be uncommon, but they are significant and important to comprehend when it comes to developing competitive government funding applications. Applicants should have a basis to understand government funding programs, including the terminology used to talk about types of funding, who’s eligible, and what projects are being sought for financial support.

To help business leaders understand government funding language, this article’s simplified guide will explain many top terms.

These terms will assist applicants to read government funding program guides, develop improved applications, and better understand the Canadian government funding resources found throughout Mentor Works’ website. Use this terminology to expand your understanding of government funding programs, including those mentioned in our daily-updated blog, or those introduced during our free, educational government funding webinars.

Canadian Government Funding: Frequently Used Terms

Use one of the following terminology categories to learn more about government funding concepts:

Funding Program Terminology

Some commonly-used words to describe Canadian government funding programs include:

Allotment

An allotment is a portion of a budget appropriation that identifies the maximum amount authorized to be expended within a specified period.

Each government funding program is allotted a certain portion of federal, provincial, and territorial budgets to develop and execute the purpose of the program. When programs run out of funding or reach the end of their mandate, they then require a new allotment or mandate to resume program operation.

Application

Applications are the forms and supporting documentation required to apply for Canadian government funding programs. Applications ask questions that help government funding reviewers understand the core components of a project, as well as its potential benefits and risks.

Depending on the type of government funding program and size of funding request, applications can be quite different. Some government funding programs, especially those awarding millions of dollars in grants or repayable funding, require significantly more due diligence to ensure funding is targeted towards the most eligible applicants.

Call for Proposals

Intake periods offer a pre-defined period where funding proposals can be submitted. Some programs open for a few weeks or months at a time, which makes it even more critical to understand program intake periods to ensure that they align with business project timelines. If an applicant chooses to submit outside of the intake period, their proposal is likely to be denied or postponed.

Conditionally Repayable Grant

Conditionally repayable grants are contributions where the obligation to repay (partially or fully) is contingent upon the occurrence of certain events or conditions as per the terms of the Contribution Agreement.

For example, if a business is installing new equipment that is expected to reduce greenhouse gas (GHG) emissions, the government funding program may be conditionally repayable based on the amount of GHGs reduced. The company should assume it will need to repay this funding; however, depending on the amount of GHGs reduced, the government may choose to forgive part or all the repayment.

Continuous Intake of Applications

Continuous intake periods allow funding applicants to submit proposals at any time during the program’s lifespan. Application windows remain open until the program is either depleted or the program has expired.

Common programs that operate on a continuous intake of applications include the Canada-Ontario Job Grant (COJG), Southwestern Ontario Development Fund (SWODF), and the Industrial Research Assistance Program (IRAP).

Contribution

Government funding contributions are a type of transfer payment by government to an organization for specific purposes and costs per the terms of a Contribution Agreement. They vary in size depending on the program and project scope.

Contributions are often provided as a percentage of all eligible project costs. Many government funding programs provide cost-sharing assistance at the rate of 50%, suggesting that for every $1 that is invested by an organization, the government will also contribute $1.

Contribution Agreement

Contribution agreements are formalized, legal documents that stipulate the conditions of a government funding partnership. Through the submission of receipts, spending is monitored and reviewed to ensure that these conditions are met. Additional performance criteria can be included to allow for government clawback on funds should certain metrics not be achieved.

Fiscal Year

A fiscal year is an accounting period of 365 days that does not necessarily correspond to the calendar year beginning on January 1st. The fiscal year is the established period wherein an organization’s annual financial records commence and conclude.

The fiscal year of the provincial and federal governments runs April 1st to March 30th.

Grant

A type of transfer payment by the government that is not subject to audit and that is a contribution for which no repayment is required if the terms of the Contribution Agreement are adhered to.

In contrast to conditionally repayable funding, Canadian government grants assume that the full value of grant will be awarded to the business. If a business does not incur the expenses it projected at the time of application, total contributions can be scaled-back; however, businesses are essentially “approved” to incur the expenses and receive funds and are unlikely to have to repay any of the contribution if the project is completed.

Program

Government funding programs are the mechanisms for government bodies to award funding for strategic projects. Programs are awarded an allotment of government funding for specific desired outcomes, such as business innovation or economic development.

Programs are typically documented through program guides; these help prospective applicants learn about how much funding may be awarded, as well as the types of applicants, projects, and expenses supported.

Repayable Funding

Repayable funding must be repaid in full as per the terms of the Contribution Agreement, regardless of project outcomes. Generally, this funding is non-interest bearing and unsecured, which provides significant advantage to companies looking for an alternative to bank financing.

Government funding programs often clearly indicate the type of funding contribution provided, typically a grant (non-repayable funding) or repayable funding (government loans). Program documentation and contribution agreements provide a definitive source of information towards specific repayment terms, such as duration of payback period and interest rate (if any).

Stacking Programs

Stacking involves accessing multiple sources of Canadian government funding to cover a single project. This is a legitimate use of multiple funders to cover eligible costs on one project.

For example, a manufacturer might access NRC-IRAP funding to support the internal salary and third-party consulting costs for an automation implementation, and then apply for funding through another program to cover the costs of training employees on the new system.

Transfer Payment

A transfer payment is a transfer, usually of money, from a government to an individual, organization or other government for which the government making the transfer does not receive any goods or services directly in return, does not expect to be repaid in the future, or expect any financial return. It includes grants, contributions, and all other transfer payments made by government.

Transfer payments are commonly triggered when an application is approved, and during specific project milestones including when a project is fully complete.

Tax Credits and Incentives

Tax credits and incentives require that a business incurs expenses and claims them during the submission of taxes. Depending on the project and tax incentive, businesses may claim these funds in a variety of ways. To ensure the proper submission of expenses and reporting, a business’ accounting/financial department should review tax incentives on an individual basis.

Applicant Terminology

Some commonly-used words to describe Canadian government funding applicants include:

CRA Number or Business Number

The Business Number is a unique identifier the Canada Revenue Agency (CRA) assigns businesses as a tax ID. It is a nine-digit code that is used when dealing with federal, provincial, or local governments. The Business Number (BN) may change if the business is sold or if its legal structure changes.

The CRA/BN number is required for some government funding applications, including the Canada-Ontario Job Grant (COJG). These company identifiers are used as part of the government’s due diligence process to ensure that funding recipients are in good financial standing, can pay for projects, and can repay funding (if applicable to the program).

Incorporation

Most Canadian government funding programs require that applicants are federally or provincially incorporated. While some programs only require incorporation at the time of application, others ensure that all funding recipients have been incorporated for 2-3 years or longer.

This is another component of the governments’ due diligence processes. Funding applicants generally need to be well-established and have a track record of financial stability to be considered for government funding programs.

Project Terminology

Some commonly-used words to describe Canadian government funding projects include:

Benefits/Project Outcomes

Expected project benefits refers to the desired result of a project, expressed as either a public or private benefit. Public benefits are commonly represented in terms of job creation and economic development/diversification.

Alternately, private benefits relate to the intended outcomes that favour funding applicants. These could include increases to productivity, innovation, and exports. Benefits are usually tied back to increased competitiveness and sustainability.

Activity

Activities are the smallest unit of work in projects. They are usually grouped together to create milestones, which are still fragments of the overall project. Each activity can have multiple expenses, some of which are eligible for funding, while other activities may be deemed ineligible.

Activities have four characteristics:

  1. Definite duration;
  2. Logical relationships with other activities in the project;
  3. Resource consumption; and
  4. An associated cost.

Milestone

Milestones are tools used in project management to mark specific points along a project timeline. These points may signal anchors such as a project start and end date, a need for external review or input and budget checks, among others. In many instances, milestones do not impact project duration. Instead, they focus on major progress points that must be reached to achieve success.

Transfer payments from the government are often tied to the completion of project milestones. A well-documented project plan will help strengthen the chance of receiving funding, and it can also help ensure funding is delivered in a timely manner throughout the project.

Non-Recurring Expense

Non-recurring expenses are one-time costs tied to a particular strategic project and are not normally incurred through normal business operations. An example of non-recurring expenses are capital investments into infrastructure or equipment. Recurring costs are usually ineligible to receive funding support.

Building a project budget that only includes non-recurring expenses (if warranted by the program) is one method applicants can use to increase the chances of receiving funding. Maintaining a clean project budget with only non-recurring expenses makes it easier for application review committees to make sense of the project and award funding; this makes for a more competitive project.

Project

Projects are a sum of all activities performed to capitalize on a specific market opportunity. Government funding programs seek to fund projects that can provide significant benefits to both the applicant and the province or country.

Projects should be planned with clear objectives and milestones to help guide those performing related activities. Exceptional project management is a significant benefit when applying for Canadian government funding.

Learn More About Canadian Government Funding

These concepts are just a few of the principles that are used in government funding. If your business is considering government grants and loans to optimize project financing, it’s worth continuing the exploration process and uncovering the specific programs best suited for you to apply to.

To learn more about government funding programs to support your business’ upcoming projects, please register for a Canadian government funding webinar.

Canadian Small Business Grants and Loans

Posted: April 16, 2018 by Jeff Shepherd. Updated: April 16, 2018 by Jeff Shepherd

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Jeff Shepherd holds an Honours Bachelor of Business Administration at the University of Guelph. He is passionate about Canadian business, economics, and politics. As Marketing Coordinator for Mentor Works, Jeff educates business leaders about proactive funding strategies.

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