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Small Business Funding

Small business funding opportunities are sought after by businesses that cannot manage their financial situation independently. Business grants and loans make up the most prominent sources of business funds. The grants are not usually repayable, while the loans are always repayable.

Small business funding helps businesses to stay afloat, expand, or fuel their innovative ideas. This aid is provided by the Canadian government, Non-Governmental Organizations (NGOs), and many other companies. Acquiring any of these funds requires the establishment to fulfill its stated criteria.

Besides loans, many small Canadian businesses are unaware of other sources of funds. Therefore, this article aims to correct that by providing insight into the many sources of funds available to Canadian establishments.

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Sources of Small Business Funding

Although there are many sources for small business funding in Canada, they can be grouped into two:

  • Business Grants
  • Business Loans

Business Grants

Among the many sources of small business funding, grants are one of those that you might not need to pay back. Of course, some grants might require you to pay back a token, but their conditions are still better than a loan. In the end, you can say that business grants aren’t really free funds, but they’re still better than loans.

Compared to business loans, you can only get a business grant when your goals align with the provider’s goals. The providers, in this case, are usually non-profit organizations, the government, and other corporations.

Types of Business Grants

There are many ways of grouping the many business grants out there, but this one is based on the provider.

  • Government Grants
  • Corporate Business Grants
  • Non-Governmental Organisation (NGO) and Minority Grants

Besides these categories, the Canadian government grants that fund small businesses include:

  • Federal Government Grant
  • Provincial Government Grant
  • Government Grants for Women

A.  Government Grants

Government funding is usually directed towards small business owners, providing them with opportunities to grow and expand. Like all grants, government grants are not available to all businesses or business needs. This type of small business funding is only offered to those corporations that can help the government achieve its goals.

Canadian government grants can be divided into three categories based on their method of payment, which are:

  • Non-Repayable Grants: This is the best since you don’t need to pay back. A non-repayable government grant is usually given to a business with specific needs. When the funds are received, the establishment must use them for that purpose. Failure to do so might require the business to pay back the grant.
  • Conditionally Repayable Grants: This type of grant is also somewhat free since merchants need to fulfill certain conditions before they pay it back. Unlike loans, however, the conditions for paying back this grant are usually favourable.
  • Partial Contribution Grants: Unlike the conditionally repayable grants, this is another completely free grant since you don’t pay it back. Partial contribution grants are a scenario where the government and an organization pool their resources together to help the organization. While the grant still benefits the organization in the end, they need to already have part of the needed funds.

An example of a partial contribution grant would be a situation where the government aims to offer $10,000 to businesses. This $10,000 is offered to businesses that want to build commercial premises that cost $20,000. However, that business would need to provide the remaining $10,000 to be eligible for the grant.

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B.  Federal Government Grant

When the Canadian government gives out grants, theirs are centred on developments that’ll affect the entire country. Therefore, you’ll find out that most federal government grants are centred on small businesses creating innovative products.

The grants that the Canadian government offers usually fall into the following categories:

  • Research and Development Grants
  • Wage Assistance programs
  • Exportation Grants
  • Non-profit Grants

1.   Research and Development Grants   

This small business funding opportunity is for establishments that create various developmental products. Such developments can address issues in healthcare, climate change, eco-friendly transportation, eco-friendly plastic products, etc.

Some of the research and development grants that are available to merchants include:

Innovative Solutions Canada (ISC)

This governmental small business funding caters to start-ups, where the Canadian government acts as the product’s first customers. This federal stipend aims to support start-ups through their developmental phase.

The ISC supports organizations that can improve the commercialization of Canada through their products. Most times, the ISC also caters to corporations that under-represented groups like:

  • Women
  • Disabled individuals
  • The LGBTQ+

The ISC offers up to $150,000 to develop a good business idea. When the government approves the business’s proof of concept, they can provide up to $1 million to fund a prototype.

Canada Media Fund (CMF)

The Canada Media Fund experimental stream grant is for Canadian businesses making innovations in the media world. If the product of an establishment involves cutting-edge software applications or digital media creations, they qualify for the CMF. To win the CMF, a business has to be for-profit or a Canadian broadcasting corporation.

The CMF awards their grant winners lots of funds, but it can never be higher than 75% of their project’s cost. This 75% contribution is capped at $1.5 million.

2.   Wage Assistance Programs

One factor that holds back many small businesses is the high cost of wages. As such, the government aims to help by providing incentives to businesses that hire more workers. Most Canadian wage assistance programs only cater to demographics that’ll benefit from it.

Some of the wage assistance programs in Canada include:

Canada Summer Jobs

This small business funding opportunity provides wage subsidies for businesses with 50 employees or less. This program aims to provide summer work for individuals aged 15 to 30.

Canada-Ontario Job Grant

This government stipend supports employers who seek to offer short-term training for their employees. The Canada-Ontario job grant is only available to businesses based and Licensed in Ontario. This grant covers two-thirds of the costs of training the employees or a maximum of $10,000.

3.   Exportation Grants

Although many establishments have been developing steadily in Canada, most face international business issues. So, the exportation grant offers financial aid to small businesses that want to export their products out of the country. Some of the exportation grants that are available to business owners include:

Canadian Digital Media Network Soft Landing Program

The Canadian Digital Media Network (CDMN) soft landing program offers merchants various opportunities to do business outside the country. CDMN applicants must be Canadian start-ups with a product that has generated at least $2500 in the past 12 months. This grant offers $4000, which is meant to help with transportation and accommodation.

CanExport

This grant helps small-business owners to obtain opportunities for international business with their products. Businesses that want a CanExport grant need a Canada Revenue Agency (CRA) business number with less than 500 full-time employees. They’ll also need to be incorporated companies with an annual revenue within a range of $100,000 to $100 million.

This grant offers applicants between $20,000 to $100,000, with less than $20,000 being offered in rare cases.

4.   Non-Profit Grants

Most non-profits are doing the government a favour with their activities in Canada. Without the presence of investors, however, many non-profits find it hard to stay afloat. As such, the government makes funding available to these non-profit establishments through many organizations.

Some of the available non-profit grants include:

Canada Council for the Arts Grant

This grant caters to the interest of art organizations and individual artists in Canada. Their funding programs are never fixed, but they’re run multiple times a year. From 2020 to 2021, the Canada Council for the Arts provided over $315.4 million to artists.

Canadian Institute of Health Research (CIHR) Grant

This government agency supports health research in Canada and has given up to $1 billion for this.

Provincial Government Grant

The provincial government grant is another opportunity for merchants to access small business funding. Unlike federal grants, however, provincial government grants focus on their locality. Since the needs of the provinces are different, their grants are also different.

If you want to access a provincial grant, you can only hope that your province offers one. Some of the provincial grants that business owners can consider are:

  • Quebec Small Business Grant
  • Alberta Small Business Grant
  • Manitoba Small Business Grant

C.  Government Grants for Women

Although women are given equal rights in Canada, there are far fewer women-led start-ups than there are for males. As such, the government is trying to initiate the development of women-founded companies by providing funds.

There are a few government grants that women can consider, such as:

1.   Women Entrepreneurship Fund

This program got initiated owing to Canada’s desire to double the number of women-owned businesses. Women-led and-owned businesses are eligible to apply, with $100,000 paid as non-repayable funds.

What Are The Types Of Businesses In Canada?

D.  Corporate Business Grants

Small businesses are one of Canada’s largest employers of labour. However, they can be limited in their capacity to take in workers due to inadequate funds. This led many large corporations to issue small business funding grants.

Corporate grants for small businesses include:

1.   FedEx Canada Small Business Grant

This grant is an annual contest organized by FedEx to award small businesses financial support. Establishments with 99 workers or less can apply for this grant if they’ve been in business for 6 months.

First-place winners receive $50,000 and other benefits, while second-place winners receive $20,000 alongside other benefits.

2.   Telus Business Solutions

This nationwide contest pits small business owners against themselves in a business pitch competition. All small business owners and Canadian start-ups are eligible for this stipend. First-place winners receive $100,000, while the four runners-up receive $10,000 each.

E.   Non-Governmental Organisation (NGO) and Minority Grants

This grant is only available to the minorities in the population and the LGBTQ+ community. Examples of this grant include:

1.   Community Support for Black Canadian Youths

This funding is offered to black Canadian business owners. However, the terms and conditions of this small business funding are never the same for every business.

2.   Canada’s LGBTW+ Chamber of Commerce (CGLCC) Youth Entrepreneur Program

This program empowers members of the LGBTQ+ community to open and grow their businesses. Business owners need to be between the ages of 18 to 39 to be eligible for the program.

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Business Loans

Business loans are one of Canada’s most popular sources of small business funding. Here, entrepreneurs borrow money from lenders that they have to pay back within a certain period, along with the added interest. Unlike business grants, business loans are much easier to qualify for.

Business Loans can be broadly divided into three:

  • Government Loans
  • Bank Loans
  • Alternative Loan Sources

Government Loans

Government loans are another easily obtainable source of small business capital. Compared to government grants, government loans are much easier to access.

Unlike traditional bank loans, government loans offer better interest rates. Some government funds also come with no interest at all, while others allow you to negotiate the condition of repayment.

Bank Loans

Commercial banks are one of the leading sources of business loans, offering some of the best loan conditions. However, their loans are not so easy to qualify for and involve lots of paperwork.

Some of the banks that offer business loans include:

1.   Royal Bank of Canada

Based in Ontario, the Royal Bank of Canada offers commercial loans of up to $10,000. The loan period can last up to 7 years, with an interest rate that depends on the borrowed amount. The business needs to be Canadian, have a viable business plan, and other conditions to acquire a loan from them.

2.   National Bank

Founded in 1859, National Bank is one of the most popular banks in Canada, ranked as the sixth largest. This commercial bank offers up to $1 million, with loan approvals occurring within 3 days. Businesses eligible for their loans must be based in Canada and possess other relevant business documents.

Alternative Sources for Small Business Funding

These are the other sources of small business funding entrepreneurs visit after being rejected by banks. Their loans are the easiest to qualify for and have lax requirements.

Some of these alternative loan sources are:

1.  Loans Canada

Loans Canada is a referral that directs organizations to the best providers of loans that’ll fit their situations. This platform does not underwrite or approve any loans.

Companies eligible for business loans on this platform must have been in business for 9 months. They must also prove monthly sales over $10,000 and a commercial lease.

2.  Sharpshooter Funding

Sharpshooter Funding is an Ontario-based lender that caters to the needs of small business owners. This lender offers up to $300,000 to small businesses with repayment periods that span years.

Small Business Funding Conclusion

Small business funding opportunities are abundant in Canada, with programs from the government, NGOs, and other organizations. The best source of funds is the grants, but they’re very competitive and very particular about the businesses they approve.

On the other hand, loans are much easier to acquire, but they’ll have to be paid back. There are many sources of grants and loans, and you’re free to choose whichever fits your business best. Just make sure you fulfill their requirements to increase your chances of getting the stipends.

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September 21, 2022
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FAQs about Small Business Funding

Can a Non-profit Organization Win the CMF Grant?

While the criteria required for the CMF states that only for-profit organizations can apply, non-profits can also apply. To do this, however, the non-profit organization must partner with a for-profit organization when presenting its innovation. This way, the CMF can consider their innovation.

What’s the Most Important Aspect in Qualifying for a Small Business Grant?

Although there are many criteria, the most critical aspect is aligning with the grant provider's goals. This sets a business apart from others that also meet the stipulated criteria.

What’s the Highest Amount a Business Can Get as a Grant?

The CMF grant provides one of the highest stipends at $1.5 million.

Can a Bank Offer a Loan to Start a Business?

Yes, many commercial banks offer secured loans to individuals who wish to start a business. However, the loan amount and interest rate differ from bank to bank.

What Happens When I Use a Grant for Something Else Instead of the Stipulated Purpose?

The business would have to pay back the grant in such a situation.

What Happens When I Don’t Pay Back a Loan?

The loan company either penalizes the business by increasing its interest or liquidating its collateral (selling it off).

Can Businesses Based in Other Countries Win Canadian Grants?

No, the foremost criterion of most Canadian grants is that the business should be based in Canada.

What Is the Fastest Source of Small Business Funding?

Alternative loan sources provide the fastest loan opportunities since fund approvals can occur within 3 days.

Can I Apply for the CanExport Grant If I Don’t Have a CRA Business Number?

Yes, businesses without CRA business numbers can apply for the CanExport grant. However, for an exception to be made, these businesses would need to register on First Nation reserve lands. They'll also need to submit a request for exemption to the director-general heading the CanExport program.

Do I Pay Tax on a Grant?

Yes, a grant is considered part of a business's income, so tax must be paid on it.

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