Canada: Business Subsidies In Ontario: An Overview

In Ontario, both the federal and provincial governments make financial support available to eligible businesses under a variety of programs. Often these programs provide direct subsidies in the form of grants, loans, loan guarantees and equity investments. From a policy perspective, some of the programs are aimed at regions, such as Northern Ontario, or specific sectors, such as agriculture, digital media, clean technology and health sciences. The more broadly based programs are generally focused on job creation.

Owners and managers of businesses, particularly small and medium sized enterprises (SMEs), naturally look for sources of cash to finance growth. This is particularly the case in the current economic environment, where venture capital and bank loans are hard to come by, especially for SMEs and start-ups. To assist those owners and managers, we have compiled a list of direct business support programs which are available from the governments of Canada and Ontario to qualifying businesses in Ontario. The list consists of a total of 96 programs, available in the following categories:

To access the list, click here.

The programs identified offer grants, loans, loan guarantees, equity investments or (in some cases) tax refunds in differing amounts and subject to various eligibility criteria and conditions. The list excludes indirect financial support programs which utilize tax credits, tax exemptions, export guarantees, etc. and also excludes programs offered by local municipal governments. While the list is comprehensive, it may not be exhaustive, since the array of direct financial support programs is so large and diverse. The list only covers subsidies for private businesses, and excludes programs for municipalities, universities, schools, hospitals, etc.

On February 15, 2012, the Commission on the Reform of Ontario's Public Services (Drummond Commission) concluded that "Ontario's hodgepodge of direct and indirect programs is fragmented and lacks clear and coherent objectives." The Commission found that in 2011 the Ontario government spent over $1.3 billion in direct business subsidies through 44 programs across 9 ministries. This did not include another $2.3 billion of indirect support to businesses through tax credits and lower corporate income tax rates for small businesses and manufacturing income. The Commission argued that all business subsidies, both direct and indirect, are generally inefficient because they can distort normal business decisions and risk analysis, and that the lack of reliable data on outcomes makes it difficult to evaluate program costs and effectiveness. The Commission recommended that the provincial government wind down all of its direct business support programs and pool the funds into a single envelope to fund programs which focus on productivity growth in the private sector, rather than job creation.

Will that happen? Time will tell. As a matter of public policy, it is hard to argue with the Commission's recommendations to revamp and refocus all of the province's existing direct business support programs. But until that happens, owners and managers of Ontario-based businesses which qualify for the current programs will, and should, continue to utilize those programs. It is our hope that the list we have compiled will assist them to identify applicable programs and assess their eligibility.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2012 McMillan LLP