The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
Government Financing for Businesses in Canada
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There are many things to consider when starting a business. Financing is one of them. Depending on the kind of business you’re in, you will likely need a start-up fund upwards of 100,000$. If you have enough capital or friends and investors with that capital, this might not be a problem. However, for the average aspiring business owner in Canada, this isn’t the case. The Canadian government knows how important small businesses are to the economy, and has created a multitude of programs to assist potential business owners in acquiring enough funds to start their business.
What Kind of Financial Assistance Does the Government Provide for Businesses in Canada?
The numerous government financing and funding programs and agencies are managed by local, regional, provincial and federal departments. This means that financial institutions, non-profit organizations and chartered banks all work together with the government to provide Canada’s business owners with the support and capital they need to run successful companies. Most of these funding programs are split up into categories based on region and industry. Depending on who you are and where you come from you might be eligible for young or Aboriginal entrepreneur funding or specific provincial funding. Government funding is available all over Canada, no matter what province you live in, what industry you’re a part of or what type of capital you need.
Each type of business financing falls under one of the following categories, each of which will be explored in further detail:
- Financing programs
- Loans and Capital investments
- Wage subsidies
How to Apply For Government Financing?
If you visit the Canadian government’s business financing site, you’ll be prompted with a fill-in-the-blank section to describe the nature of your search for financing. It will ask you the industry you’re in, if you’re a profit or not-for-profit business, how many employees you have, how much funding you require, why you require the funding, what your main business goal is, and more. All of this information helps them narrow down the kinds of programs you’re best suited to apply for.
After you fill in all the necessary information, there will be a variety of programs displayed on the webpage. Let’s look at a few of them, by category:
Loans and Capital Investments
This type of financing will offer government loans and investments. The amount of money lent varies, but the constant between each one is that the business owner needs to pay back the loan, usually with interest.
Black Entrepreneurship Program – National Ecosystem Fund
Created to address the inequity faced by black entrepreneurs, the Black Entrepreneurship Program- National Ecosystem Fund, provides access to the following:
- Funding and capital
- Financial planning services
- Business training
The program is still in its infancy, and more details will be made available soon.
Black Entrepreneurship Program – Black Entrepreneurship Loan Fund
Similar to the program described above, the Black Entrepreneurship Loan Fund was created to address inequality faced by black business owners. The main difference is that this program was specifically created to help black business owners affected by the COVID-19 pandemic, which heightened that inequity. This program offers:
- Loans between $25,000 and $250,000
BDC Small Business Loan
The Business Development Bank of Canada (BDC) is the only bank in the country completely dedicated to Canadian entrepreneurs. Their small business loan offers:
- Loan of up to $100,000 for
- Canadian-based businesses; with
- Revenue for at least 24 months;
- Good credit history
- Owners that have reached the age of majority in the province or territory where they live.
- Canadian-based businesses; with
Canada Small Business Financing Program
This program is unique in the way that the government shares financial risk with the lender. This type of financing offers:
- A loan of up to $1,000,000
Businesses might be eligible if they:
- Are a for-profit small business
- Have gross annual revenues of $10,000,000 or less
The business owner presents their business plan to a lender, and the lender, usually a financial institution, is responsible for approving the business loan.
Note: Agricultural businesses are not eligible for this type of government financing.
Southern Ontario Fund for Investment in Innovation
Supporting small and medium-sized enterprises (SMEs) in rural communities, this loan offers:
- $150,000 to $500,000 in financing for:
- Late-stage commercialization
- New product or service development
- New applications or markets
- Development or implementation of new processes or technologies
Grants are the best kind of financing because you don’t have to pay them back. Although the Canadian government website does not let you peruse government financing based on whether or not you have to pay the money back, you can see whether or not a financing program is a grant or not by checking if it’s “repayable” or “non-repayable.” More information can be found on Canada’s government website.
The Canadian government offers wage subsidy programs to assist business owners who are having trouble paying their employees. Let’s take a look at some of them:
Canada Emergency Wage Subsidy
Offered to businesses with evidential loss of business due to the COVID-19 pandemic, CEWS offers businesses funding to rehire employees. This subsidy is designed to keep businesses afloat by allowing them to prevent further job loss and continue to operate as usual.
National Research Council of Canada (NRC) Innovation and Research Apprenticeship Program
This program offers businesses a maximum of $30,000 in funding to hire young talent, often students or post-grad individuals, to help with innovation in the company. The IRAP is also a part of Canada’s wider Youth Employment and Skills Strategy, aimed at helping young Canadians learn new skills and find employment.
This program offers a minimum of $15,000 to help businesses connect with academic individuals, including faculty and students, to help with complex research endeavours.
Small businesses in Canada are eligible for a variety of tax credits. While this does not translate to direct funding, tax credits can still offer businesses a bit of relief when tax season comes. Here are a few tax credits offered to businesses in Canada:
- Scientific Research and Experimental Development Tax Incentive Program
- Small Business Tax Credit
- Co-operative Education Tax Credit
- Ontario Business Research Institute Tax Credit
- Apprenticeship Job Creation Tax Credit
Federal financing for small businesses comes in a variety of different sources, much like more traditional business financing. Obtaining funding for your business in Canada can be tricky. However, with a government that values small business growth and innovation, there are many options to acquire government financing to help start or grow your business.
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