What Canadian Government Grants Don’t Fund — And Why It Matters for Your Business

When growing your business, Canadian government grants can be a powerful resource. But while many entrepreneurs dive into applications with big hopes, they often overlook one crucial detail: not everything is fundable. Understanding what isn’t eligible can save your team time, prevent costly missteps, and set you up for success with more strategic grant applications. 

While there are some exceptions, particularly for Indigenous-owned businesses, which may access funding for a broader range of activities, most grants follow strict eligibility criteria. Here’s what government grants in Canada typically do not fund, with real-world business scenarios to bring it all to life.

Capital Assets and Real Estate

The Rule: Most grants won’t pay for property purchases, renovations, or vehicles.

Example:
A Toronto-based food manufacturing company applies for funding to buy a new facility and delivery trucks under a regional expansion grant. While their business case is strong, the capital costs are ruled ineligible. The program funds hiring and market development, not hard assets.

Takeaway:
Instead, consider loans. If you’re buying something with collateral, like property or vehicles, lenders can often finance it by lending against the asset. Be sure to shop around for the best terms.

General Operating Costs and Past Debts

The Rule: Ongoing business expenses like rent, utilities, and overdue bills are not eligible.

Example:
A marketing agency recovering from COVID-19 debt applies for a grant to cover past payroll tax penalties. The application has been declined. Grants must fund forward-looking, project-based activities, not operational recovery.

Takeaway:
Grants are not bailouts. They’re investments in strategic growth initiatives.

Entertainment, Alcohol, and Hospitality

The Rule: Hosting a party? You’re on your own dime.

Example:
An events company in Montreal includes catering and bar costs for a product launch in its budget for a tourism marketing grant. These expenses are flagged and removed from eligible costs.

Takeaway:
If it looks like a party or feels like a perk, it probably won’t fly.

Fundraising, Awards, and Prizes

The Rule: Grants won’t pay to raise more money, or give it away.

Example:
A nonprofit in Calgary hosts a charity gala and applies for funding to cover prize giveaways and auction item expenses. These costs are classified as fundraising-related, which is out of scope.

Takeaway:
Public funding isn’t meant to fund fundraising.

Duplicated Funding or “Double Dipping”

The Rule: You can’t stack multiple government grants to cover the same cost.

Example:
A cleantech company secures a federal wage subsidy and applies for a provincial grant to cover the same intern’s salary. The second application is denied due to duplication of funding.

Takeaway:
Grants are often “stackable,” but not for the same line item. Track your budgets carefully.

Private Gain Without Public Benefit

The Rule: Public money must serve a broader purpose, not just personal or private benefit.

Example:
An entrepreneur in Halifax requests a grant to build a private vacation rental marketed as a “rural tourism pilot.” The project benefits the individual more than the sector or region.

Takeaway:
Grants must demonstrate a public or economic return; personal ventures don’t qualify.

Sensitive or Restricted Activities

The Rule: Government funds won’t support activities linked to national security risks or illegal ventures.

Example:
A cybersecurity firm with international ownership applies for R&D funding involving sensitive AI systems. The application is flagged for further review under Canada’s national security guidelines and ultimately not funded.

Takeaway:
Transparency, compliance, and ethical considerations are critical when government dollars are on the table.

Final Thoughts

Getting funding is not just about knowing what to ask for; it’s also about knowing what not to ask for. By understanding these everyday ineligible expenses, businesses can submit stronger, more focused applications that align with public priorities and program mandates.

When in doubt, read the program guidelines or ask for expert help. At Granted, we help clients align their goals with the right funding programs and avoid missteps that lead to rejection.

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