This is a guest post by Sam Jenkins, Managing Partner at Punchcard Systems. At Punchcard, we build digital platforms and products (like this one) that transform how people live and work. In this article, we’ve assembled an overview of innovation-oriented funding for organizations looking to adapt to the current landscape.
Throughout Canada, the COVID-19 pandemic is interrupting every single organization’s ability to deliver value to customers. While the effect of this on both our national and global economies is unprecedented, it is more important now than ever before for organizations to be investing in transformation and innovation.
In “normal” times, the team at Punchcard often looks at these funding sources as ways to extend our ability to build digital platforms that will impact the way people work. In this time of crisis, just like with the wage subsidy programs, it is essential that we find and invest in opportunities that will help our organizations be stronger in the weeks, months, and years of recovery that we have ahead of us.
For an organization looking to invest in innovation, there are several types of funding: vouchers, grants, tax credits, and loans.
A voucher provides funding directly to a service provider on behalf of the applicant. A grant provides matching funding paid to the applicant. A tax credit is returned to the applicant upon submission of an organization’s corporate federal taxes. Unlike the previous three funding sources, a loan is repayable.
For Canadian organizations looking to invest in innovation during the crisis, the following list outlines some of the grant and support funding sources in the marketplace, and we have provided more details throughout this article:
|Program||Maximum Request Amount||Type|
|Alberta Innovates Micro Voucher||$10,000||Voucher|
|Youth Employment Program||$10,000||Grant|
|IRAP Small Technology Innovation Projects||$50,000||Grant|
|Futurepreneur + BDC||$60,000||Loan|
|Alberta Innovates Voucher||$100,000||Voucher|
|IRAP Mid-sized Technology Innovation Projects||$250,000||Grant|
|Scientific Research and Experimental Development||$2,000,000+||Tax Credit|
|Ontario Development Funds||$5,000,000||Grant & Loan|
|Sustainable Development Technology Canada||$3,000,000||Grant|
|Strategic Innovation Fund (SIF)||$10,000,000||Grant|
|Program||Maximum Request Amount||Type|
|Digital Technology Supercluster||Variable||Grant|
|NRC IRAP Innovation Assistance Program||To be announced||Grant|
Alberta Innovates provides matching and non-repayable grants for entrepreneurs or small- and medium-sized businesses looking to build high growth technology products and platforms.
The purpose of these programs is to support the costs of service providers in the development of potential products.
These programs don’t apply to all opportunities, but are generally for:
To be eligible, an organization must be:
There are two separate programs available to organizations, and generally are used sequentially:
|Micro-voucher Program||Voucher Program|
|Applicant Contribution Minimum||25%||25%|
|Service Provider Limit||1 service provider only||Up to 3 separate service providers|
|Completion Deadline||Within 12 months||Within 24 months|
Eligible expenses can include:
Futurepreneur, in partnership with Business Development Bank of Canada, provides collateral-free loans to entrepreneurs
To be eligible, the individuals owning more than 5% of the business must be:
|Maximum Loan Value||Interest Rate||Program Details|
|Futurepreneur Canada Financing||$20,000||CIBC’s prime rate + 3.75%||Interest-only payments for the first year.Principal repayments are made in equal monthly instalments together with interest, over the remaining four years.|
|BDC Financing||$40,000||BDC Floating Base Rate + 5%||Interest-only repayment in the first year.|
The National Research Council of Canada provides matching and non-repayable grants for businesses looking to build innovative, technology-driven products, services, or processes.
The Industrial Research Assistance Program, or IRAP, is managed by the National Research Council of Canada, and is the largest innovation assistance program targeted at small and medium-sized businesses.
The purpose of the fund is to help small and medium-sized businesses in Canada develop and commercialize technology-driven products and services. Effectively, the NRC is looking to invest in projects that will generate profits and employ a team while building a scalable product.
For-profit businesses with:
ICT digital, manufacturing, agriculture & food, energy & resources, construction, health & life sciences.
IRAP will cover up to 80% of internal labor and 75% of sub-contracted labour. The National Research Council will issue payments within 35 business days of receiving all required documents.
Eligible expenses can include:
|Maximum Application Value||Program Purpose|
|Small Technology Innovation Projects||$50,000||Funding research and development and/or commercialization of technology projects|
|Mid-sized Technology Innovation Projects||$250,000||Creating original software, developing new products, or engaged in other various internal R&D projects.|
|Innovation Assistance Program for COVID-19||To be announced||Supporting organizations unable to secure funding under the Canada Emergency Wage Subsidy and the Business Credit Availability Program|
The National Research Council of Canada provides matching and non-repayable grants for cover compensation for hiring young Canadians between the ages of 15-30.
To support small and medium-sized businesses in hiring young talent.
For-profit businesses with:
The candidate that is being placed through this program must:
The program will cover 50% of the salary/wage of a candidate, up to a maximum of $10,000.
The Scientific Research and Experimental Development (SR&ED) Program uses tax incentives to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada.
These tax incentives come in three forms:
The definition of “scientific research and experimental development” given in subsection 248(1) of the Income Tax Act can be summarized as: “…systematic investigation or search carried out in a field of science or technology by means of experiment or analysis… to advance scientific knowledge or to achieve technological advancement.”
There are three criteria that are used when determining whether an activity is applicable:
Examples of typically eligible activities include:
The application process occurs with the submission (or amendment) of your year-end tax documentation to the Canada Revenue Agency (CRA).
There are many types of proof for your claim, but it is important to show how your organization was using research, investigation, or discovery to advance science.
If you’re experimenting or prototyping, that’s SR&ED. If you’re trying different things to accomplish a task systematically, that’s SR&ED.
Your documentation should exemplify the technological uncertainties and the systematic investigation that was performed. In essence, the “how” and “why” of the development process is far more important to account for than the “what.”
The amount of your SR&ED claim will be dependent on the amount of research that was performed, and the amount of technological uncertainty that was involved in the project.
Canadian private corporations can earn SR&ED tax credits for 35% of eligible expenses up to the first $2 million. Beyond the $2 million, companies can receive credits of 20% of expenditures.
Public companies, partnerships, and trusts can earn 20% of qualified expenditures for research and experimentation performed inside Canada.
The calculation related to expenses and SR&ED is relatively complex, but at a high level, tax credits provided via this program can include:
It is recommended that you consult your CPA and finance professional when preparing your SR&ED activity.
The SDTC’s mandate is to fund projects that support Canadian small- and medium-sized enterprises (SMEs) advancing innovative technologies that are pre-commercial and have the potential to demonstrate significant and quantifiable environmental and economic benefits in one or more of the following areas: climate change, clean air, clean water and clean soil.
To be eligible for funding, applicants must:
With this program, the average contribution is $3,000,000, representing 33 to 40% of eligible project costs.
The following types of projects would not be accepted:
The purpose of this fund is to support businesses with funding to encourage economic development in certain parts of Ontario.
Organizations can apply these funds to:
These programs will provide loans of up to 15% of project costs, to a maximum of $5 million. These loans are provided interest-free for up to 4 years, and if the investment and job targets are achieved, up to 30% (to a maximum of $500,000) of the loan may be forgiven.
The Digital Technology Supercluster is leading the development of solutions to some of the biggest issues created by COVID-19. The COVID-19 Program is focused on unlocking solutions to protect the health and safety of all Canadians and our economy through the development, deployment, and scaling of digital technologies.
Through the COVID-19 Program, the Digital Technology Supercluster will invest up to $60 million to improving the health and safety of Canadians and Canada’s ability to address issues created by the COVID-19 outbreak, as well as building expertise and capacity to address and anticipate issues that may arise in future health crises.
If you have any questions about these programs, connect with your CPA, or if you’d like to explore ways to invest in innovation in your organization during the crisis using technology, contact the team at Punchcard Systems and we’d be happy to make introductions to our contacts at the above organizations.
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