No matter how strong your business starts, you may reach a point where you need to expand, and you don't quite have the capital.
Whether it's money to hire new staff, invest in marketing endeavours, or even expand your shop, growing your business can be expensive. If you don't have the cash on hand, small business grants might be the answer.
Standard government small business loans or capital from banks, angel investors, and venture capital firms are often the first stop to fund your new business. However, if you're willing to invest the time, you may be able to apply for several Canadian small business grants.
Keep in mind that small business grants aren't free money but they don't typically require repayment, either — they're mainly varying amounts of early-stage small business funding awarded to entrepreneurs seeking to start or cultivate projects for specific purposes.
In other words, grant funding is a source of capital for small businesses that don't require you to give up a stake in your company or accumulate new debt.
Here are a few things to consider before you apply for a grant.
Pros and cons of small business grants
Before diving into the world of small business grants, ask yourself: Is this the right choice for my business? To help you decide, here are some pros and cons of applying for a small business grant.
- Different qualifying criteria. While applying for a loan from a bank or the government requires you to prove you can pay it back reliably, small business grants might have different qualifying criteria. For example, you might need to demonstrate that you generated a certain number of sales thanks to the funding provided, or that you hired a certain number of employees.
- No repayment. Many small business grants don't have to be repaid, which means they're essentially free money. While some strings might be attached, not having to repay the money is a tremendous advantage.
- Targeted development. Many small business grants are only available for specific business needs (like marketing or research and development), meaning these grants might allow you to target an under-optimized area of your business.
- Restrictive. Unlike loans, small business grants are usually aimed at a specific section of your business. You'll need detailed approval of your plans for the grant money, along with proof that the money was spent on those things.
- Time-consuming. Grants often require you to complete an application. In some cases, you'll also need to provide a proposal, including sales projections.
- Long processing times. Small business grants are popular, and the organizations that process them might be understaffed, leading to delays in processing.
- Follow-up required. Small business grants are often tied to outcomes, so you may need to follow up with the organization to demonstrate the impact of their funding.
How much money can I receive from a small business grant?
Small business grants vary in size and complexity. Some grants can be smaller, such as the funds offered by the Canadian Trade Commissioner Service in partnership with the National Research Council of Canada Industrial Research Assistance Program. This program, called CanExport SMEs, helps businesses increase their international sales. The program provides grants ranging from $10,000 to $50,000.
Other grants, like those offered by Sustainable Development Technology Canada, support pre-commercial projects that help fight climate change. They have an average contribution of $3 million, with funds disbursed in five years or less.
What do small business grants cover?
When you apply for a small business grant, you don't have unlimited freedom to spend the money however you see fit. Instead, these grants are usually tied to specific types of spending. Here are some examples of the different kinds of funding available:
- Research and development
- Exporting grants
- Non-profit and local government grants
- Hiring incentives and wage assistance
- Marketing activities
Where to find small business grants in Canada
A huge variety of small business grants are available from the federal and provincial governments, as well as through non-profit organizations. That said, finding them can be like a needle in a haystack, especially if you aren't sure what you're looking for. A great place to start is this federal database of grants.
Here are some additional resources to expand your search:
Your provincial government
Each province has its own set of small business grants to foster business in the area. For example, Ontario's small business grant resource is Ontario Business Grants — a dedicated website to help business owners find grants. British Columbia has created a searchable database of grants.
Sometimes, provinces or regions band together to create a government group dedicated to helping small businesses. One example is the Atlantic Canada Opportunities Agency (ACOA). The ACOA's Business Development Program (BDP) funds entrepreneurs starting up, expanding, or modernizing their businesses. The program supports small to medium-sized enterprises (SMEs) and cooperatives and provides access to capital through interest-free repayable assistance. The BDP also provides non-repayable financial aid to non-profit organizations supporting Atlantic businesses.
Grants for women, minorities, and LGBTQ entrepreneurs
In addition, there are many grants that women and minority-owned small businesses and LGBTQ entrepreneurs can access. Here are a few examples:
How to apply for a small business grant in Canada
The process to apply for a small business grant in Canada may include an application and a formally written proposal. The application will ask basic questions about your business, including how many employees you have and how long you've been in business. You may also need to include financial statements and a written proposal outlining your plans for funding.
Once you submit your application, the processing time depends on the grant and the organization that offers it. After you receive funding, the grant might also require you to report on the results. For example, if you use the CanExport SMEs program to build a new website to attract international clients, you may need to report whether the website performed as expected.
Are small business grants worthwhile?
Small business grants can be a great alternative to funding your business through investors, personal debt, a business loan, or business credit. The grants can range from $10,000 to millions and cover many projects, from hiring employees to marketing to research and development. That said, applying for a small business grant can be arduous and time-consuming, so it's important to weigh the pros and cons before you decide whether a small business grant is right for your company.
Still unsure? Read more about the different ways to fund your business.