It is a common misconception that small businesses and start-ups are ineligible for grant funding. In fact, many grant programs in Canada are specifically designed for small- to-medium-sized businesses, a category defined as having fewer than 500 employees.
According to Innovation, Science and Economic Development Canada, 99.7% of all businesses in Canada are small- to medium-sized businesses. Funding for start-ups and small businesses can range from a few thousand dollars for hiring and training grants up to $10 million for technology-driven research, development and innovation projects. Additionally, there are some grant programs that are specifically designed to support start-ups and entrepreneurs by providing non-repayable funding along with mentorship, networking opportunities, resources and more.
How can you set up your start-up or small business to optimize your chances of receiving grant funding?
1. Register your business
Registering your business is the first step you need to take to qualify for most business grants. While you can choose to register as a sole proprietor, most grants will ask to see incorporation documents, so to optimize your competitiveness, it's a good idea to register as a corporation, partnership or other business structure.
Where you register your business address can also impact your grant eligibility. Some grant programs are geographically specific, while others are nationwide. Additionally, some provinces have more generous grant funding programs for small businesses than others.
2. Develop a strategic business plan
In most cases, grants fund projects, not businesses. However, grants targeting start-ups will take a holistic view of your business, including proof of concept, a clear revenue model, and the potential of your business to grow and create jobs.
In both instances, developing a focused and concise business plan is key to both identifying projects eligible for grant funding and to communicating your business objectives and capacity to prospective grant funders. A strategic plan will ideally demonstrate your understanding of the market in which you operate, include realistic financial projections such as revenue forecasts and expenses, and detail specific strategies to grow your business.
From there, working with an experienced grant consultant can help you identify specific projects that are most likely to be competitive for grant funding. This can give your business a boost and free up cash flow for ongoing operations or other projects.
3. Set up your business bank account
Some grants for start-ups, such as the Starter Company Plus Program, require a separate business bank account to qualify for the grant. Setting up a business bank account is one way to ensure your personal funds and business funds aren't combined, while also providing a clearer way to track revenues and expenses associated with your business.
Furthermore, a business bank account can make it easier to track your financial activity over time. This can help you monitor your finances and improve your ability to budget and forecast revenues and expenditures.
4. Ensure your business is up to date
If your line of business is a regulated industry, it is crucial to ensure that relevant certifications and licenses are up to date. Additionally, if your business has fallen behind on its tax filings or owes money to the government, that may impact your eligibility for some government grants.
5. Ensure you have the funds to cover your portion of the project expenses
Many grants for start-ups and small businesses cover up to 75% of the total project costs; it is expected that the applicant will provide the remaining 25%, either through the applicant's own funds, loans, or other sources of cash.
To be competitive for grant funding, you must be able to demonstrate that you can cover at least 25% of the total project costs. Additionally, in some cases, grant funds are only repaid after the expense is incurred. This type of grant funding is called a contribution and requires that the business cover the costs of the project upfront before being reimbursed. Ensure you understand which type of funding model the grant program uses before applying to ensure you have sufficient cash flow to fund the project.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.