Finding the right funding

As originally published in CAMM Magazine

Governments in Canada award an estimated $37 billion of funding each year to companies across the country. Could yours benefit from one of these subsidies?

When it comes to finding the right funding and grant programs for your company, it can be like navigating through a maze.

The funding landscape in Canada is vast and complex. The federal and provincial governments award over an estimated $37 billion each year to companies of all sizes across the country.

These government funding programs play a crucial role in helping companies grow their business through initiatives from purchasing new equipment all the way to expanding into new international markets. They can help companies pursue wish-list projects that might not otherwise happen. If the government is willing to subsidize a portion of the cost, say, for a piece of expensive machinery or to market your products abroad, why not apply? It helps to lower your overall costs and can also make the project or purchase that much more palatable.

The programs, though, vary widely and have different eligibility requirements, such as minimum revenue thresholds or number of employees. Repayable funding opportunities offer competitive interest loans, some at zero per cent, and many grants do not need to be repaid but they almost always require you to report on results.

Funding programs require you to establish a detailed plan, project cash inflows and outlays, and establish budgets and timelines well before starting the project. Most forward-looking funding programs also require government approval before any money can be spent. This is a major pain point for companies, emphasizing the need to consider government funding through every stage of your strategic planning initiatives.

In helping our clients navigate and maximize each funding opportunity, we typically categorize funding programs into five major categories: Innovation Development, Capital Growth, Workforce Advancement, Market Expansion, and Environmental Sustainability. For each of these categories, we have highlighted a few major programs below, although there are many more worth exploring.

KPMG’s Government Assistance Practice helps clients identify, match, and prioritize relevant government programs to support their business needs and develop their funding applications to improve the chances of receiving funds. The key is to ensure that each one of your applications stands out and meets the specific program requirements and goals.

The eligible expenditures in this category encompass new or improved product or process development, support with the commercialization of technology, and prototyping and testing products or services. There are numerous programs offered in this category, some of which are highlighted here.

The Strategic Innovation Fund (SIF), managed by Innovation, Science and Economic Development Canada (ISED), offers financial support to industrial- and technology-based companies with high growth potential to help them expand, innovate, and commercialize products, processes, and services. The program provides a minimum of $10 million per project with total costs of at least $20 million and has two broad components: business innovation and growth, and collaborations and networks. The former aims to support companies in R&D to test the commercial potential of new or disruptive technologies, develop and improve current products by implementing new technology, and using new technologies to reduce the environmental footprint of current production. The latter helps to advance industrial research and development (R&D) and technology development through collaboration between private sector, researchers, and non-profit organizations, and support large-scale, national innovation ecosystems.

The Industrial Research Assistance Program (IRAP) offers funding for technical or research-oriented projects to solve an internal innovation challenge, such as software implementation, productivity improvements, and production design or marketing projects. The federal government earlier this year announced its intention to move IRAP under the newly created Canada Innovation Corporation (CIC) umbrella to build a national-scale platform of business R&D support. The CIC will operate with an initial budget of $2.6 billion over four years. Over the transition period, no changes are expected to the delivery of IRAP services. But by moving into CIC, the government hopes to reduce duplication across federal programs.

The Scientific Research and Experimental Development (SR&ED) Program is the country’s largest tax incentive program for R&D development, providing more than $3billion in tax incentives to companies, partnerships, or individuals conducting scientific research or experimental development.

The eligible expenditures in this category cover, for example, project facility and infrastructure costs, equipment and machinery, one-time labour and materials, specialized expertise, permits and fees, and enterprise software integration.

The Advanced Manufacturing and Innovation Competitiveness (AMIC) Program is a new stream of the Regional Development Program (RDP) that’s focused on assisting small- and medium-sized companies located anywhere in Ontario. AMIC is a two-year, $40 million program to support advanced manufacturing businesses to invest in equipment, advanced technologies, and their workforce to improve their competitiveness and growth. The program requirements include a minimum of 10 employees, three or more years of financial statements, and a minimum of $500,000 in eligible project costs.

A popular program for companies is FedDev Ontario’s Business Scale-up and Productivity Stream (BSP) provides an interest-free, repayable loan from $500,000 up to a maximum of $10 million, or up to 35 per cent of eligible and supported project costs. This stream, one of three available through FedDev Ontario, helps companies adopt new innovative technologies to accelerate growth, and the development of and entry into new markets. In some cases, FedDev Ontario may make exceptions and fund more than the maximum.

Eligible expenditures in this category includes hiring for science, technology, engineering, and mathematics (STEM) positions, skills development, and training, and depending on the program, inclusion and diversity.

For example, the federal government’s Student Work Placement Program (SWPP) help companies hire post-secondary students across Canada for a work-term placement. The program provides a wage subsidy up to 50 per cent (a maximum of $5,000 per placement) in wage subsidies for each new student hired, or up to 70 per cent (to a maximum of $7,000 per placement) for students hired from under-represented groups, including first-year students, women in STEM, Indigenous students, persons with disabilities, visible minorities, and newcomers.

The Canada Job Grant (CJG), funded by the Government of Canada and delivered by provincial and territorial governments, subsidizes employee training. The program guidelines are different in each province. For instance, in Ontario, employers can receive up to $10,000 in government support per person for third-party training costs, although there are stipulations on how much employers will also need to contribute depending on the size of their employee base. But in Alberta, the government will contribute two-thirds of the cost to a maximum of $10,000 per trainee per fiscal year and if you are hiring and training an unemployed Albertan, up to 100 per cent of the training costs could be covered, up to $15,000 per trainee.

These types of programs provide support for international expansion activities and export marketing, such as trade shows or market research. For example, the federal government’s CanExport program offers small-and-medium-sized companies up to 50 per cent of the project costs to a maximum of $50,000 in non-repayable funding per project.

Eligible expenditures include improving buildings with increased insulation, or installing energy efficient windows and doors, lighting systems, heating, ventilation, and air conditioning (HVAC) equipment, or installing building automation systems.

The Save on Energy Retrofit Program in Ontario provides up to 50 per cent of eligible retrofit costs up to $1 million per application on projects that implement energy saving measures in lighting, HVAC, and equipment. The Save on Energy Industrial Energy Efficiency Program (IEEP) offers up to $5 million in financial incentives for each large, complex industrial energy-efficiency project accepted into the program, but as with all funding programs and grants, understanding the eligibility requirements will make or break your application.

A single project may qualify for support from multiple government incentive and funding programs. You may in fact be able to stack programs to assist with business growth and expansion, although be aware that some programs have stacking limitations.

There is no one size fits all. What works for one company might not suit another. Everything hinges on the eligibility requirements and an application that emphasizes why your project merits the funding by aligning with the program priorities.

Don’t let the vast array of programs out there discourage you. The goal should be maximizing your capital to get the biggest bang for your buck.

David Durst is a Partner and the National Service Line Leader, Tax Incentives Practice, KPMG in Canada. Rajev Pathmanathan is a Senior Manager heading KPMG ’s Government Assistance Practice.