As an aspiring or current small business owner, you need all the funding you can get, especially if you’re just starting out. For most, this means taking on debt, paying interest and/or giving away a portion of your business. The good news is that Canada has a wealth of grants and programs that support small businesses. However, all financial activities that take place in a business must be reported in some way to the CRA.
That’s why is always best to consult an accredited business accountant in Toronto before making a decision that can heavily impact your businesses finances, potentially for years to come. Looking at your numbers, reading the fine print that comes with all subsidies and knowing the tax laws is the only way to accurately predict how a grant, loan, subsidy, tax deferral, etc., will impact your business in the near- and long-term future.
What is a Small Business Grant?
A small business grant is money awarded to businesses as startup capital, or to fund other initiatives. They’re offered by the federal, provincial and municipal governments, private corporations, NGOs, NPOs and other organizations and are usually industry-specific.
In addition to promoting and supporting small business growth in Canada, grants are also awarded to incentivize businesses to work on solutions to address societal concerns like creating environmentally-friendly or low-cost alternatives to existing products or services. Examples of what grants are given for include:
- R&D on innovative products and services.
- Business expansion.
- Relocating a business.
- Buying and leasing property and equipment.
- Hiring and training new employees.
- Making your business more productive, efficient, safer or ecofriendly.
There are also grants created to promote entrepreneurship among historically disenfranchised Canadians such as women, Indigenous Canadians and people of colour.
Government grants also come in the form of tax credits, free consultations and other services businesses otherwise pay for.
Government Grants to Help Struggling Businesses Navigate COVID-19
COVID-19 had and will continue to have a devastating effect on small businesses – especially customer-facing, non-essential services.
As of this writing, there are still grants, subsidies and tax breaks available for impacted businesses, however, they have started to phase out as Canada moves towards a permanent re-opening.
Check the Federal and Provincial websites for the latest information on financial support for Canadian businesses in the wake of COVID-19. It’s likely that some of these programs will be extended and new ones added as needed.
How to Find a Grant that’s Right for Your Business
There are far too many small business grants available in Canada to keep track of, and new ones are constantly being created while others disappear or are changed.
A good place to start if you’re looking for government grants and support is on the Government of Canada’s Business Grants and Financing page and Ontario’s Small Business Access page. For example, if you click the Grants, contributions and other financial assistance link on the Government of Canada page, you can filter available government grants by province, assistance type, industry and several other criteria to narrow down your search.
Many online services aggregate Canadian small business grants into searchable databases and charge a fee for consultations, applications and other related services.
Applying for Small Business Grants
Being awarded a small business grant is no small feat. They are highly competitive, the rules for eligibility are usually very strict, the application process is long and requires lots of information, details, and documentation about your business and you only get one chance to submit your application correctly before the deadline.
So if you are looking for a grant, it’s imperative that you only apply for those you definitely qualify for because of the massive amount of time and energy required to submit an application. Some organizations require applicants to submit a pre-application statement for this reason. Alternatively, you can contact the agency offering the grant and ask if you qualify.
There are professional grant writers for hire who write grant applications for a living. They know the type of language to use in an application, what to say, the specific documentation needed and how to frame your business to give you the best possible chance for success. But there are no guarantees and you have to pay them whether you receive the grant or not.
Small Business Grants, Subsidies and Taxes
Government grants and subsidies are usually either awarded to businesses experiencing an income deficiency or to relieve a business of some of its expenses. As such, grants and subsidies from a government or government agency are generally either reported as income or as a reduction of an expense. Farmers, for example, often have to apply for subsidies if they experience a drought. That subsidy must be added to their total annual income for that tax year.
However, if you’re one of the many businesses that participates in an apprenticeship or training program such as the Canada-Ontario Job Grant, which provides funding to train new employees, you would generally deduct it from the wage expense you claim on your tax returns.
Government funding that supports you in purchasing capital property is not added to your net income. However, for depreciable property, you subtract the capital cost of the property by the amount of the grant or subsidy you received. For other capital property, you must reduce the adjusted cost base respectively.
It’s best to consult an accountant before doing your taxes as it’s not always clear how grants and other financial supports should be reported – especially those from NGOs, private corporations, non-profits and other organizations. As accounting professionals that provide corporate tax services, filing tax returns is one of our many areas of expertise. Reach out to us if you have questions about how a specific grant, loan, subsidy or tax deferral will impact your return.
We are business and finance specialists providing full-service business support that includes professionally-accredited business consulting, payroll services and organizing business finances for optimal returns. Partner with us and realize your business’s full potential.
