Government Business Grants for Canadian Startups
So you’ve just started your business and you’re looking for some extra funding to get you on track for success. We’ll admit right off the bat that this is pretty tricky for startups.
Here at Granted, we’re often asked by new businesses how they can get ‘non-dilutive funding’, which is any kind of fundraising that doesn’t require you to give up ownership of your company. The Canadian government tends to offer funding to small and mid-sized businesses because they see some sort of value in what the organizations are offering. As a taxpayer, you can probably understand why it’s hard for an early-stage startup to prove that it’s making a positive impact on the Canadian economy and creating more jobs. The good news is that there are still some funding opportunities for startups here in Canada.
Here at Granted, we’re often asked by new businesses how they can get ‘non-dilutive funding’, which is any kind of fundraising that doesn’t require you to give up ownership of your company. The Canadian government tends to offer funding to small and mid-sized businesses because they see some sort of value in what the organizations are offering. As a taxpayer, you can probably understand why it’s hard for an early-stage startup to prove that it’s making a positive impact on the Canadian economy and creating more jobs. The good news is that there are still some funding opportunities for startups here in Canada.
Generally, there are three things that the government considers when looking for grant applicants:
- How long the organization has been established (usually at least one year)
- How many people are employed within the organization
- How much the organization has made in annual revenue (usually at least $100,000)
Grant FAQs from Startups:
Do startups qualify for grants?
Yes, but there is a much bigger selection of grants for businesses that have been in operation for at least a year or two. It’s also important to note that grants are for funding specific activities, NOT ongoing operational costs. Furthermore, grants are reimbursements, so it’s very important to have good cash flow. In other words, you’ll need to ensure that you can pay for any expenses yourself before you see any money coming back.Are there grants that cover initial research and development?
No, but there are some funding programs like SR&ED or NRC IRAP that do assist with research and development (more on this later).Can I get grants to cover operational costs?
No. Government grants aren’t used for ongoing projects, so costs for equipment, land, or any other permanent operations won’t qualify for funding.Can I get grants for marketing activities?
Usually no, but you can use a hiring grant to employ a marketing professional or you can apply for a training grant and learn the marketing skills yourself. Some market expansion grants could potentially cover marketing costs, but these programs require your business to have been established for at least a year and to have generated enough revenue to qualify.Can I get retroactive funding for a project that’s already in progress?
Generally speaking, no. There are some very rare cases of grants that fund activities that have already happened, but most grant programs require you to be approved before you start any projects you want funded.Can I get a grant if I’m self-employed?
Technically yes, but they are very rare and usually aren’t designed specifically with sole proprietors in mind. Applying for grants is a time-consuming and arduous process even for a full team, so running your own business all by yourself AND spending hours of your time applying for government funding is going to be difficult to say the least. Also, the government will typically want to verify that sole proprietors have been running their business for at least two years before any funding is given. More FAQs here'Grantable' Activities*
*This is only a general overview; specific grants have varying requirements.
Hiring Grants
Hiring grants are probably the most useful funding opportunities for startups because they offer wage subsidies to help businesses offset the risk of hiring someone new. They’re also usually the first type of grant that startups qualify for.
The Canadian government provides hiring grants because their priority is to help the country’s ‘youth’ (15 – 30 years old) secure employment. They also want to create new jobs and decrease the unemployment rate.
How much funding is available?
- 50% – 75% wage subsidies
- Some grants provide a 100% wage subsidy, but these are rare and mostly in response to the COVID-19 pandemic.
What is typically eligible for funding?
- Wages for ‘youth’, especially students or recent graduates
- Entry-level positions
- Training for new hires
What is NOT eligible for funding?
- Wages for positions ranging from intermediate to senior
- Existing employees
- Salaries for long-term or permanent positions
- Contractors
- Recruitment costs
What do you need to qualify for hiring grants?
- Employees must be on payroll (make sure to have T4 slips)
- Employers must demonstrate they have the ability to train or mentor the new hire
Training Grants
Training grants are a bit harder to secure for startups, primarily because most programs require your business to be properly registered for at least one year. Funding for training opportunities also varies greatly depending on which province your business is situated in, so there may be grants available for startups in some provinces but not others. The government offers training grants because they want Canadian organizations to upskill and retain their employees.
How much funding is available?
- 60% – 100% of costs are covered for third party training opportunities
- Monetary value varies depending on program and province
What is typically eligible for funding?
- Textbooks, software and other required training materials
- Certification or examination fees
- Third-party training costs (e.g. First Aid, CPA certification, management, communication, etc.)
What is NOT eligible for funding?
- Coaching, mentoring or consultation
- Membership fees
- Trade shows or conferences
- In-house training
What do you need to qualify for training grants?
Qualifications vary depending on province, but generally:- Eligible businesses typically need to be established for at least one year
- Your business must be registered in accordance with provincial guidelines
- You must have a provincial business license
- You’ll usually have to contribute some percentage of training costs (you can sometimes get 100% of costs covered, but this is rare)
Market Expansion
There are several market expansion grants that many startups technically qualify for, but the types of activities that these grants fund probably aren’t what early-stage businesses are looking for. While expanding into a different country may not be high on a startup’s list of priorities, it is still highly recommended that you bookmark these grants for later because they are incredibly beneficial later down the line for organizations ready to take steps into new markets. The government’s motivation behind offering market expansion grants is to increase the visibility of Canadian products internationally, which, in turn, improves the Canadian economy.
How much funding is available?
- Up to 75% in reimbursements for a maximum of $100,000 per year ($75,000 per project)
What is typically eligible for funding?
- Trade shows
- Exhibitions
- Consultation
- Travel
- Legal fees
- Marketing fees specifically for the expansion project (NOT ongoing operations)
What is NOT eligible for funding?
- Ongoing salaries
- Equipment costs
- Buyouts
- Capital costs
- Moving the company to a country outside Canada
- Efforts resulting in competition within your province
- Anything involving ongoing operations
What do you need to qualify for market expansion grants?
- You must have a thorough business plan in place for any projects
- You must have a detailed market expansion budget to ensure proper cash flow
- Eligible businesses must meet the typical minimum revenue threshold of $100,000 from the previous fiscal year
- Applicants must be incorporated for-profit companies
Research and Development
Consulting for Research and Development (R&D) funding is not something we currently specialize in here at Granted, but we still have some useful resources for startups:
SR&ED
The Scientific Research and Experimental Development (SR&ED) Program is a federal tax incentive program designed to encourage Canadian businesses of all sizes, including startups, to conduct R&D projects in Canada.Benefits for businesses include:
- Tax deduction on eligible expenditures
- Income Tax Credits (ITCs) that can be applied towards income tax payable
NRC IRAP
The National Research Council (NRC) is the government of Canada’s largest research organization that supports industrial innovation and the advancement of knowledge and technology development. Their Industrial Research Assistance Program (IRAP) provides advice, connections, and funding to help Canadian businesses increase their innovation capacity and take ideas to market. Click here to learn more.General tips for startups interested in grant funding
Register your business properly
- Have a GST/HST number for your business
- Ensure your business is registered according to the guidelines of your province
Make sure you have the capacity, financially or otherwise
- Grants are paid through reimbursements, not upfront
- Make sure your startup already has some savings or retained earnings to pay for a percentage of the activities being funded
- You need good cash flow to support the projects being funded
- The government needs to ensure taxpayer dollars are being used properly, so you’ll need to send the them a plan for your proposed activities before approval
Don’t just look for grants when you need them
- Grants constantly come, go and change throughout the year
- Usually grant programs are open until filled, so by the time you hear about it from someone else, it’s probably be too late to apply
- Have your grant application prepared before the program opens
Conclusion
There are technically dozens of grants available for businesses just starting out, but many of these funding programs are not specifically designed for startups, which means you’re competing against organizations that have more experience, time and resources dedicated to applying for grants. That being said, grants aren’t the only way to fund your business. A common way for startups to acquire early-stage funding is through angel investors who provide financial backing for businesses in exchange for ownership equity in the company. Although there aren’t a whole lot of grants available for startups, the fact that you’re already taking the initiative to look into government funding sets you apart from the rest. With these tips in mind, you’re well equipped to take advantage of grant opportunities in the future. Once your company has one or two years of experience (take a look at our checklist to make sure you’re all set up), be sure to reach out to our team of Grant Angels. As expert consultants who have over 10 years of experience securing grants for small and mid-sized businesses, we take care of the entire application process for you, making sure you get the funding that is most beneficial for your company.Contact Us
Grants are difficult, but we got you! Don’t hesistate to reach out to us.
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