Government Funding for Small Business
Government funding for small business; this is the ultimate question that we get from thousands of small business owners and startup entrepreneurs each month. What are the chances of “you” getting your small business funded?
Today, together, we will get that question answered once and for all.
Before we get started we have to understand what government funding for small business actually means.
So what does “government funding for small business” mean?
Small business funding provided by the government of Canada is a form of support offered by the government to help small businesses through monetary assistance (grants/loans, as well as through tax breaks, credits, support and guidance). The Canadian government provides this type of funding to entrepreneurs across Canada in order to help build a stronger economy and to create jobs for Canadians. The Canadian government has hundreds of agencies as we discuss here that hand out funding to small business owners, but the simple truth is, not everybody is eligible.
The government provides small business funding in all of the Canadian provinces and territories, from different agencies and for different industries as well as for various purposes.
Type of Funding Programs
- Equity Investments
- Grants, Contributions and Financial Assistance
- Loan Guarantees
- Loans and Cash Advances
- Tax Refunds and Credits
- Wage Subsidies
- Non-Financing Programs
Types of Industries That Could Be Funded
- Agriculture and Fishing
- Energy and Water
- Manufacturing and Engineering
- Transport, Warehousing and Distribution
- Construction and Property Services
- Biotechnology, Medical and Chemical
- Creative Services and Media
- Professional and Other Business Services
- Consumer Products, Personal Services, Retail and Wholesale
- Recreation, Culture and Tourism
- Hotels and Restaurants
- Information Technology and Telecommunication
- Mining
Funding Needs
- Commercialization
- To start or buy a business
- Buy or lease equipment or property
- Conduct R&D and to innovate
- Increase sales
- Export products or services
- Hire or train staff/employees
- Increase working capital
- Increase productivity
- Get a patent, license or apply a new technology
- Reduce pollution or improve energy efficiency
- Sell or close a business
Audiences Most Likely to Obtain Funding
- Youth
- Women
- Rural and Northern Residents
- Persons with Disabilities
- Immigrants
- Aboriginal
You can learn more about the different industries, funding needs and about government funding in general on the government website here.
Different Program Types
Grants, Contributions and Financial Assistance
What are grants, contributions and financial assistance programs? Well, most people right away think that this is free money, or money that does not have to be paid back. Most people think, this is a grant. However, they are not entirely wrong, but they are wrong if that is what you think.
First of all, grants are not given to everyone, despite thinking that you deserve it.
Grants come in many forms, and sizes and from many different agencies. You may be eligible to apply to a non repayable grant, a partial grant or contribution, conditional grant, etc.
A non repayable government grant is the type of grant that is rarely offered, but is available to qualified individuals. This type of grant could give you a funding amount that you can use towards your own small business and never have to pay it back. It is a gift, or a contribution. However it is monitored from start to finish, and deeply investigated by the government agency to ensure that the funding was used for the exact purpose you requested it for. If after investigation the evidence shows that the funding of the grant was not properly used, you may be required to pay it back.
A partial contribution grant is an excellent way to get funding from the government. The funding agency involved is able to provide you with a percentage of what you are looking for as long as you are able to provide the other percentage. For example: if your small business requires funding for new equipment in the amount of $25,000, a partial contribution grant may be able to provide you with $20,000 towards your requirement with the condition that you provide the other $5,000. Often, partial contributions do not need to be paid back, but like the non repayable government grants, they are deeply investigated and monitored by the funding agency.
We also have conditional grants. These are types of grants that are often provided to help small business owners obtain the funding needed for their various needs, however they have conditions attached. The conditions depend on the funding agency, the funding program, the amount and of course you as the business owner. These funding programs often come with a condition such as: pay back the amount of the grant after 90 days, or after 1 year, or after you have reached a certain milestone.
Loans and Cash Advances
Loans and cash advances are another form of government funding or financial support that the Canadian government has in store for small business owners. This form of funding is simple to understand. As a small business owner, you apply to various government funding programs that focus on your specific industry, or that focus on your specific need, and they provide you with a loan or a cash advance based on your requirements. The condition is that the money is repayable with an interest rate agreed upon.
Loan Guarantees
If you are a small business owner who has visited the banks multiple times and was not successful at securing funding due to inexperience, lack of business history, low to poor credit score, etc., you may be in luck. The Canadian government works with some of the most reputable banks and they offer guaranteed loans. This means that the government will co-sign on your loan application, which ensures the lender that they are more secure having the government back you should you not be able to make payments on the loan. The government agency takes on the risk while they act as your “mom or dad” and co-sign your loan.
Tax Refunds and Tax Credits
While this is not necessarily direct funding, entrepreneurs across Canada benefit greatly by obtaining tax refunds and tax credits towards various business activities. A lot of tax benefits are provided to small business owners such as the business energy rebates, paid work experience tax credits, co-operative education tax credits and more.
Wage Subsidies
Wage subsidies are another way you, a small business owner, can benefit from government assistance. The government of Canada has multiple agencies across Canada that provide entrepreneurs with wage subsidies when you hire employees. What this means is that the government is willing to cover a percentage of the wage you pay your employees depending on the conditions. By applying to these types of funding programs you are looking at decreasing the need for a high cash flow, as the government will be able to step in and pay that percentage you cannot.
Equity Investing
You have heard about Shark Tank, or Dragons Den, well the government has their own equity investing team. What this means is that the government of Canada offers various programs that are potential investment opportunities for your business on a long-term basis. These are not programs for one time funding, but they are focused on helping larger businesses obtain ongoing funding in exchange for equity in your business.
How Likely Are You to Obtain Government Funding for Your Small Business in Canada?
Very!
However, you do need to be able to meet certain criteria before you apply. As mentioned above, each funding program has its own criteria and requirements for who they accept into the programs, but let us look at the similarities between the mass programs and see what your chances are:
- Your Location
- Your Industry
- Your Funding Requirements