Knowing When Your Small Business Needs Government Funding
Knowing when your small business needs government funding can mean the difference between success and failure. So before you apply for funding, or hold off on applying for government funding, stop and think. Do you need it?
When it comes to government funding, there is a difference between your small business needing the funding and wanting the funding, so be sure to first understand the two.
Government funding is often seen as free money, something that may not have to be paid back, so why not take advantage of it?
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The truth is that there is so much more to government funding than what meets the eye. For example:
There are many different types of government funding programs
- Government grants
- Government loans
- Tax breaks and tax credits
- Incentives
There are many different types of government grants
- Non-repayable government grants
- Partially repayable grants
- Conditionally repayable grants
- Partial contributors
There are many different types of government loans
- Interest-free government loans
- Low-interest government loans
- Government-guaranteed loans
Before you jump to the conclusion and say, “Yes, I want funding because it’s free money,” be sure to know the differences between each one of these funding program types.
As each funding agency in Canada has its own set of rules, criteria, and qualifications you must meet in order to get your small business funded, it is important to get to know the program or agency you are applying to, if you need the funding.
Government funding is not just free money that you can take and use as you wish. Instead, once government funding is provided, it is strictly and carefully monitored to ensure that you, as the business owner, are using the funds for the exact purpose you applied for.
For example:
Your funding application and business plan stated that you need $12,500 in funding to help pay for new equipment. The government agency verified your needs and provided the grant. A few months later, you buy one piece of equipment and use a portion of the funding to pay an employee. Technically, you have broken the rules of that funding agency, and the non-repayable grant now has to be paid back in full.
As you can see, funding can only be used for the exact purpose you apply for and is not always just free money.
Before you decide that government funding is right for you, it is important to know more about it.
How Can You Tell If Your Small Business Needs Funding?
To determine if your small business needs funding, whether from the government, business partners, private investors, banks, or any other source, you first need to know what you need to do with your business.
Do you need help hiring staff, paying wages, purchasing tools or equipment, investing in marketing and advertising, funding research and development, or improving cash flow?
If you answered yes to any of those, the next question to ask yourself is whether you have money available to fund these needs or if you definitely need to borrow.
If you need to borrow, break it down into the following questions:
- How much money do you need?
- Do you need all of it now, or can it be spread out over time?
- Is it easier to borrow from credit cards, savings, or banks, or do you need government funding?
- What happens if you cannot get funding?
If, in the end, you know that government funding is the only solution to help your small business, start your funding search and apply.
Once you have determined that you need government funding to help your small business succeed, remember that you will need a business plan. On average, it can take anywhere from two weeks to over six months to receive funding, if you are eligible and meet all program criteria.
Knowing that you need government funding and delaying the process will only hurt your business. Take a look at our Funding Database and see how our platform can help.