For tech businesses investing in research and development, a wide array of R&D funding programs are available at a provincial and federal level and through private sources.
From the Scientific Research & Experimental Development program, or SR&ED, available for general R&D to more specified programs, such as Ontario’s Critical Minerals Innovation Fund, there is a combination of grants, tax credits, and loans available to organizations who are involved with qualifying research.
As a tech start-up, you may be eligible for R&D funding. Here are the steps to get research and development funding in Canada.
Write an R&D Proposal
R&D comes with many costs. Especially in healthcare, industrial, and technology, R&D expenses are high and trying to self-fund is typically not an option. If you’re going to seek R&D funding, you’re going to need a written proposal that outlines the hypothesis, activities, and proposed results. This is very similar to a business plan.
You can use this document to seek help from venture capitalists, prospective business partners, private lenders, and financial institutions. It will also help to clarify to those that don’t know what your R&D project is all about.
Why Private Lenders and Loans Are a Bad Idea
R&D is high-risk. There is no guarantee you will get the result you expect. This is precisely why funding R&D through private lenders or financial institutions is not smart. Funding is best when it’s coming from government programs wherein the criteria is not success but rather whether the project itself fits the definition of R&D.
While there may be a temptation to go through an angel investor, venture capitalist, or to apply to the bank for a loan, these aren’t smart paths to take, especially when there is so much R&D funding available out there through other means.
Document All R&D Activities
When you seek out R&D funding, there will be a criterion for the project and the application. An organization should ensure they are documenting any R&D activities, monitoring who’s working on it, daily progress, analyses and results, and more.
Filling out an application for R&D funding, you will be asked to provide support to your claims, and if there is an audit of your application, you will be required to provide more supporting documentation. This is why it’s so important to document everything.
Apply to the SR&ED Tax Credits Program
SR&ED offers a mix of tax incentives to help cover the costs of R&D projects, including salaries and wages, overhead costs, equipment and materials, and third-party contracts. You may be eligible to receive investment tax credits or ITCs and can carry these tax credits to future and/or past years.
The SR&ED program has billions of dollars of funding available and is given to thousands of organizations annually. This can greatly reduce your tax burden and reimburse you for past projects with no top limit to SR&ED funding.
If you’ve invested in an R&D project, consider the benefits of SR&ED. Firms like G6 Consulting can help you prepare for the application process. These experts will guide you through the SR&ED program.
Other Federal R&D Funding Programs
While SR&ED is, by far, the largest source of R&D funding in Canada, you may be leaving money on the table, so to speak, by not looking at other potential sources of funding. The Industrial Research Assistance Program, or IRAP, offers up to $10 million per application for R&D to cover up to 80% of project costs.
The SD Tech Fund covers up to 40% of project costs on R&D clean technology projects that are tied to improving the quality of water, soil, or air quality. Do your research. Especially once provincial funding programs are factored in, dozens of initiatives with business funding are available.
Look for a Partner (Business or Post-Secondary)
Another way to fund R&D is to look for a partner. You may partner with another business to co-fund your R&D with the understanding of sharing the IP that comes from it. You may partner with the government to sell parts of your innovation to a government partner.
Many organizations partner with post-secondary institutions, i.e. local universities, to tap into some of Canada’s best R&D talent and to receive additional R&D funding, such as the Alliance Grants, which may cover up to $1 million in annual expenses.
Use Canada’s Business Benefits Finder
The government of Canada’s website has a Business Benefits Finder tool that will glimpse what programs and services are available to you, not only for R&D but for other business activities.
If you want to ensure you aren’t missing out on any R&D funding at a provincial or federal level, using this tool takes five minutes and can provide a preview of what’s out there. That said, it may not be a complete list. Additional investigations may be needed to determine the full scope of what you may want to apply for research funding.