As a small business owner in Canada, you may be considering government funding options for your business.
The Government of Canada funds small business owners across the country through a variety of program types, including government grants, government loans, tax breaks, and tax credits.
Each funding program type has its own advantages, and it is important to understand which programs your business may be eligible for before making a decision.
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Government Grants vs. Government Loans
The two most popular types of funding programs are government grants and government loans.
These programs are popular because they are: 1) highly desired, and 2) the most accessible.
However, government grants are not always the best option when you need capital quickly. It is important to consider all available funding types.
Depending on your situation, both government grants and government loans come with their own unique advantages and disadvantages.
Government Grants
Government grants are often considered “free money” for small businesses. In most cases, grants do not need to be repaid—as long as funds are used according to program guidelines.
Types of government grants include:
- Non-repayable government grants
- Partial contribution government grants
- One-time and renewable government grants
In some cases, conditionally repayable government grants may also be available.
Speak to a CanadaStartups.org funding expert to better understand the different types of government grant programs, how they work, and what may be available for your business.
The Advantages of Government Grants
The main advantage is simple: free money for your business to cover approved startup or expansion costs. If used properly, grant funds do not need to be repaid.
The Disadvantages of Government Grants
The biggest disadvantage is the application process.
Government grants are highly competitive. Thousands of businesses may apply for the same program.
As competition increases, approval wait times also increase—making grants less suitable for businesses that need fast access to funds.
Another drawback is that not all grant programs fund all activities. Many grants focus on specific purposes, such as hiring, training, or environmental initiatives. If your needs do not match the grant’s guidelines, you may not be eligible.
Government Loans
The second most popular type of government funding is government loans.
Types of government loans include:
- No-interest government loans
- Low-interest government loans
- Conditionally repayable government loans
- Government-guaranteed loans
Each loan type has advantages and disadvantages. To learn more, speak with the CanadaStartups funding experts.
The Advantages of Government Loans
Government loans are often easier to apply for and obtain than government grants. They generally have:
- Higher approval rates
- Better interest rates than banks
- More flexible repayment options
- Negotiable terms
Some loan programs even offer low-to-no interest or deferred payments for months (or years).
The Disadvantages of Government Loans
The main disadvantage is that you assume the financial risk.
Much like a bank loan, you are responsible for repayment—even if the business does not succeed.
The Verdict
If your small business needs funding, choosing between a government grant and a government loan often comes down to eligibility.
In most cases, businesses do not get to choose. You are either eligible or not eligible for a grant program based on your business activities.
If you are not eligible for the specific activities that grants fund, your only option may be government loans.
That said:
- Government grants are the best option—if you qualify.
- Government loans are easier to access, faster to get approved, and less competitive.
If you need help deciding whether a government grant or loan is best for your business, speak with an expert. Canada Start