What are small business grants?

Small business grants are a form of funding from government agencies, and other organizations (like accelerator programs and universities) to help with the various stages of your business’s development. Grants can range from a few hundred dollars to six-figure sums to help with buying new equipment, buffing up your online presence, hiring employees, or expanding your business overseas.

Unlike a small business loan, grants don’t need to be repaid and they are reported as taxable income. From that perspective, it’s basically free money!

Before you get too excited, there’s a catch: it’s free money with some strings attached. The application process requires a considerable amount of planning and effort, competition, and a high likelihood of rejection. If you’re accepted, you often have obligations to meet, such as attending courses, meeting regularly with a financial advisor, or writing a business plan.

Read more: 7 steps to starting a business in Canada

How small business grants in Canada work

Unlike winning the lottery, small business grants are given out selectively and intentionally. With the aid of grant funding, companies can help boost job growth, support under-represented demographics, or further innovation in specific industries or regions—and grant assessors are looking for the people who have the best chances of returning a value that exceeds the initial investment.

While every grant has different criteria, most applications include a set of questions about your company, which may include:

  • Founder and team bios
  • Initial description of your business
  • History of grant or other funding
  • Overview of your project and goals
  • Specific questions related to the purpose of the grant itself

As the reward value increases, so do the application criteria and the effort you have to put into the grant, with larger grants requiring anything from audited financial statements, feasibility studies and more.

Because grants try to fulfill a targeted purpose, companies in the growth phase of their business are in the best position to aggressively apply for grant opportunities. Generally, that means that they have been incorporated for at least a year, have hit a minimum revenue threshold (often it’s $100,000), have at least one full-time employee who isn’t the founder, and have a year’s cycle of documented financial history. While there are grants aimed toward early-stage businesses, these are more competitive and usually have less monetary value.

While grant applications can be labour-intensive and competitive, the benefits might make it worth it for you. Just imagine it: thousands of dollars on the books to prove your business model, buy new equipment, hire more personnel, or whatever else it is that you need to level up your company. Plus, there’s usually free mentorship and advice provided to help you perfect your elevator pitch, business plan and company goals—a totally underrated but remarkably useful exercise.

Read more: The pros and cons of incorporating a business in Canada

Drawbacks to small business grants

Free money, free learning resources and a chance to finesse your business plan—what’s not to love? But while the money is out there, there’s a lot to consider when it comes to deciding whether you want to go this route. Here are a few of them.

It’s a numbers game

There’s almost no guarantee of receiving a grant once you apply for it. Grant openings can garner thousands of applicants for a limited amount of money, and even perfectly suitable applicants can get edged out due to the sheer volume of applicants. That’s why you never want to hedge your bets on just one grant application.

Grant applications are time and resource-consuming

Because of the competitiveness of the grants and the unique criteria of each grant application, you may end up spending a lot of time and effort spent on an outcome that isn’t guaranteed.

Businesses that have an aggressive grant funding strategy often have to delegate a member of the team to keep track of grants and pull together application materials and bring in a grant writer to finesse the language.

It can take a long time to receive funding

When you factor in the hours to weeks it takes to file an application, multiple rounds of assessments, interviews with advisors, developing a project proposal, conducting audits and other application steps, plus consultations with the assessors, it could be months up to even a year before you finally see funding.

If you can make the funding amount in sales in the same amount of time or faster, grants might not be the best use of your team’s time and effort. Plus, you may be able to hit your desired target sooner.

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Grants may not cover all your necessary expenses

Many government grants cover only 40% to 50% of eligible costs, reimbursed through claims on a monthly or annual basis. Additionally, the grant assessors often want you to have already secured the rest of the funding yourself, either from personal contributions or other investment sources or other grant awards. Rarely will grants from government agencies cover 100% of the costs. So even while you’re applying for funding, you will also need to look for other investments.

It’s not over once you get the grant

Government grants come with strict financial reporting requirements that could last months or even years after the end of your project. Grants awarded by accelerator programs are often contingent on attending workshops and seminars. With either, you could be connected with an advisor, with whom you would be working on a one-on-one basis throughout the project length.

Again, this is great if you’re open to educational resources and networking opportunities – not so much if your plan was to take the money and run.

Read more: Small business ideas for Canadians

How can you find small business grants?

However, despite the drawbacks, grants are incredibly valuable in helping businesses grow. And though the idea of labouring over one grant application for hours or even weeks may seem daunting, it does get easier over time—and the more applications you file, the better you get at it, and the more your hit rate improves.

There are also tons of resources out there to help you find grant opportunities. The government of Canada has a handy Business Benefits Finder tool to help figure out what types of government grants you’re eligible for. You’ll also be able to find out what other grants are available through mailing lists and newsletters from FundicaFundingPortalCommunitech, and other portals.

Many grants are seasonally or annually recurring, so if you miss a deadline for a grant that’s perfect for you, make a note of when it’s open next so you don’t miss it when it comes back.

Read more: How to choose a business structure in Canada

The last word

Grant funding can really accelerate your business and help you hit your next goal. However, the application process can be long, arduous and time-consuming. If you’re looking for a guaranteed investment, this just isn’t it.

But if you have a targeted approach, an open mind and a willingness to collaborate, there’s a lot of levelling-up money for the grasping. To find out how to improve your odds and improve your application hit rate, we’ve compiled some small business grant writing tips with advice from experts.

Jessica Wei Freelance Contributor

Jessica Wei is a freelance contributor with Money.ca.


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