Each year, the Canadian government funds small businesses all across the country in the form of grants. This funding comes from local governments (like your city), provincial governments (like your province), and the federal government.
The funds come in the form of government grants, government loans, tax breaks and/or tax credits.
These funds are given to entrepreneurs like you, starting or expanding a business.
Why, you ask?
Well, funds are given by the government agencies to help make the economy better, to create more jobs, and to enable a better overall experience.
In simpler terms, you take on the funds, which helps you make money, to grow, you have to hire staff, you pay taxes, and everyone is happy.
So let’s ensure you are fully aware of how to use Canadian Grants to cover your business expenses, so you get maximum benefit.
To do so, we have to discuss:
- The differnt types of government funding
- Pros and cons of each
- Knowing what you need
Types of government funding for business use
The Canadian government offers multiple types of government funding that a business can apply for. Not all are for everyone, so pay close attention!
The 3 key types of government funding options:
- Government grants
- Government loans
- Tax Breaks and Tax Credits
Review over 1,500 government funding options for your Canadian small business in the Funding Database.
So what are they?
Government Grants ❤️
Grants are ideal and preferred by all!
Government grants are generally seen as free money options. Money that does not need to be paid back - also referred to as “non-repayable grants”.
So, imagine, free money that the government gives you, to use for your business, for free! Sign me up!!
These grants are generally given by funding agencies to help small business owners advance their businesses. Often, the grants are part of a greater picture that the government is trying to push, like funding the agriculture industry, or “go green”, or specific focuses like improving the employment rate in a certain province.
In doing so, you, the business owner, benefit from this free money!
💡A government grant tip: While grants are free money, they still have to be used only for what they have been approved for, and nothing else!
Government Loans
Loans are quite popular, especially when they are government-backed!
For one, a government loan is always better than a bank loan. The reason is, better rates (because a bank is trying to make money off of you), better terms and conditions.
Think of government loans as a parent, giving you a hand with starting your business. They give you the money, but they expect you to make it work. They give you the time and the flexibility, but ideally, you are a good son or daughter and eventually will pay it back.
There are many differnt types of government loans, like low interest, no interest, conditionally repayable…etc All have differnt benefits to you as a business owner.
If you need funds to start a business, consider government loans!
Tax Breaks and Tax Credits
Tax breaks and tax credits are often the missed options. They are there, but not many people really care about them. Those who do, they got it figured out in my opinion.
Tax money, be it a break or a credit, is free money - basically a grant.
The catch, however, is that to be eligible, you have to have already spent money on your business in order to qualify for some sort of tax break or credit.
The Best Government Funding Combination
It’s super easy to gravitate to only grants when applying for government funding for your business, but as you will see in the pros and cons below, it’s not ideal.
A good formula, or a combination of funding types, often works best.
Loans are easiest to obtain - simply because there are many available, plus they will give you maximum funding.
Grants, the free money - are considered supplemental funds. These are intended to give you a boost, or a hand with a certain expense!
Tax breaks and credits, come last - a recoup of the money spent.
So, Loans + Grants + Tax Credits = Maxiumum Benefit 💰
Pros and Cons of Government Funding Types
It’s always nice to hear “you’ve been approved”, - but, is it something you should jump to right away and sign?
Let’s see the pros and cons of each of those types - not only if you’re approved, but if you’re a small business considering funding in general.
▶️ Government Grants:
See all available grants via the Funding Database.
- Pro: It’s free money you don’t have to pay back
- Pro: It often does not require a credit check (so those with bad credit can apply)
- Pro: Funding comes from many sources, for a variety of purposes
- Con: Grants are much more competitive and often harder to obtain
- Con: The application process is more specific and may require more documentation
- Con: Approval time may be longer!
- Con: Limitations on the amounts of funding and how the funds can be used
💡After a review of the pros and cons, applying for grants should be considered, as it can land you some significant funding to start or expand your business, with no repayment requirements!
▶️ Government Loans:
- Pro: Government loans have lower interest rates compared to banks
- Pro: These loans have better terms and conditions (like repayment terms)
- Pro: Easier and faster approval rates!
- Con: The funds are owed and repayable!
- Con: Personal guarantees or collateral may be required.
- Con: Credit will be considered.
💡Loans, just like grants, have some good and some bad - but starting or expanding a business, you need to take action, and the benefits outweigh the negatives when you are in need of funds - as long as you use it wisely!
▶️ Tax Breaks and Tax Credits:
- Pro: The funds obtained can reduce your taxes owed
- Pro: Obtained funds lower your operating costs end of year
- Pro: You can claim it each year!
- Con: Benefits can only come after you’ve already spent the money
- Con: Complex rules and not everyone is eligible
- Con: You can only do it at end of tax year.
💡Tax breaks and tax credits are a significant source of funding for those businesses that are already spending money, or have multiple expenses that may be eligible. These are part of the equation, so absolutely apply to all you can.
Your Funding Needs and Next Steps
Funding via government sources should always be considered.
No matter if it’s a grant, a government loan, or a tax break, the pros of obtaining funding via these funding types can significantly help your business in Canada succeed.
Take a minute to see Grants in Canada for 2026 and how you can get funding for your small business.
You will need a solid business plan, financial statements, and a PitchDeck presentation. This will all help you outline the differnt types of expenses you may want to cover with the added government funding.
If you need a hand figuring out how to use Canadian grants to cover your business expenses, working with a Canada Startups expert can always be useful.