Government funding programs present significant opportunities for Canadian businesses to leverage capital provided from the government to achieve their desired business activities.
Government funding programs typically take one of three forms in Canada:
- Grants;
- Loans; and
- Tax Incentives.
To learn more about the different types of government funding available in Canada, please refer to our Types of Government Funding slide deck for a more comprehensive review.
Though these programs vary in structure and allotment distribution, there are often common variables across all funding types that can be found in eligibility criteria.
First, eligibility criteria refers to specific organizational measures or standards that are required by funding distributors to be eligible for funding from that specific program.
This article will address common eligibility criteria found as conditions to being approved for funding through government funding programs.
How Many Employees Do You Need to Be Eligible for Grants?
The first eligibility criteria that many government funding programs require is a minimum number of employees. This means that to be eligible an organization must have a minimum number of full time equivalent (FTE) workers on their payroll. The minimum number of employees required to be approved for government funding programs in Canada is frequently set at 4-15+ employees.
This minimum number of employees is required because many government funding initiatives are designed to support small and medium-sized enterprises (SME). Therefore, while some industries such as software and tech can qualify with just 4 employees, other industries still require a minimum of 10 to 15 employees.
Moreover, there can sometimes be a maximum number of employees to be eligible for a funding program. This number is often set at approximately 500 to ensure that large global corporations that typically don’t need as much government support to grow and expand their operations are excluded from funding programs.
Are You Incorporated?
Second, government funding programs often require applicants to be an incorporated organization. Getting incorporated is not something that is required of business owners in Canada; however, it does have its own advantages.
Businesses do not have to incorporate, but incorporating has advantages. An incorporated company is a legal entity and is independent of its members. This makes it easier to enter contracts, incur debt, or get funding.
The Province of British Columbia
Advantages to incorporating your business are:
Fewer Barriers to Accessing Capital
By becoming an incorporated organization, businesses can more easily receive loans from banks, and benefit from lower tax rates. Incorporated businesses are therefore better candidates for being provided with government grants and loans, because these organizations can raise capital by issuing shares and bonds to shareholders making them more reliable when assessing risk of repayment.
Become a Separate Legal Entity
When organizations are incorporated they become a separate entity from the owner or founder. This means that the organization is no longer tied to an individual, as organizations that are not incorporated (e.g., sole proprietorships) stop existing when the business owner passes away. Therefore, it is less risky to give grants, loans, and tax credits to incorporated organizations in the eyes of the government because they operate separately and can function independently should something happen to the founder/owner.
What is Your Average Annual Income?
Finally, it is often required that organizations applying for government funding have a minimum annual income. This means that to be eligible for these grants or loans, your business must provide proof of an average annual net revenue that exceeds the required minimum allotment.
Minimum annual income criteria often vary. The purpose of requiring an annual minimum income is to ensure that organizations receiving money from the government have record of operating as a successful business for at least two years.
Whenever government bodies consider delegating funds to businesses for research and development, business expansion, and more businesses activities, they consider whether the recipients are capable organizations. This form of accountability ensures that the funds businesses receive are used in an efficient and effective manner and contribute in a meaningful way to the Canadian economy.
How to Position your Startup for Government Funding
Although businesses applying for government funding programs will be faced with the eligibility criteria, remember that not all programs will have these criteria. There are hundreds, if not thousands, of funding opportunities available to Canadian businesses of all sizes, in all industries, from coast to coast.
However, businesses that position themselves as corporations with two years of income and 4-15+ employees (depending on specific industries) or more will find themselves eligible for more opportunities than their counterparts.
To position your business for success, please visit our Canadian start-up resources page to find a variety of useful tools and resources to get your organization heading in the right direction.
Moreover, consider downloading our free Canadian start-up funding checklist to see where your business currently stands and what next steps may be best.
Mentor Works believes in connecting Canadian businesses with government funding news, resources, and opportunities to foster innovation, productivity improvements, and strong economic growth throughout Canada.