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Diversify Your Business Financing with Government Grants

Updated: Feb 12

When it comes to financing for your business, there are a number of options available, from loans to family and friends to business incubators and more. Making sense of these options and deciding which ones are best for you and your organization is an essential component of running a successful business. Incorporating government grants into your business plan and financing strategy can help you secure non-repayable, non-dilutive funding while also demonstrating your business savvy to your other investors and financiers.

Business Financing with Government Grants

In this blog post, we’ll explain how to incorporate government grants into your overall financing strategy.

Non-Dilutive Funding: Grants and Loans

Non-dilutive financing options, including government grants and business loans, are sources of financing that do not require giving away partial ownership or control of your company. Non-dilutive funding can provide you with the capital you need to get your business off the ground or kickstart a new stage of growth.

Business Loans

Business loans are one of the most common ways to secure financing. Business loans are generally issued by banks and credit unions. In Canada, businesses can also access financing via the Business Development Bank of Canada (BDC), a Crown corporation that is wholly owned by the Government of Canada. Like other financial institutions, the BDC provides financing, advisory services and capital primarily to small- and medium-sized enterprises. To support the diversification of Canada’s entrepreneurial landscape, the BDC also provides special financing options specifically for Black, Indigenous, women, youth and Newcomer entrepreneurs. In order to qualify for a loan from the BDC, you must be either a Canadian Citizen or a permanent resident.

Interest rates, repayment terms and financial reporting terms will vary widely based on the financial institution you work with, the type of loan or project for which you are seeking funding, and the perceived stability and risk of your business. When applying for a business loan, you’ll need to have a strong business plan with financial statements and cash flow projections for the remainder of the fiscal year and the next fiscal year. You should also be prepared to make the case for why the lender should provide a loan to your business, emphasizing details such as your company’s management experience, history of operations, project plan, market analysis, and supporting documents.

Government Grant Funding

Like loans, grants are also non-dilutive sources of funding. Unlike loans, however, grants do not need to be repaid. This makes grant funding one of the best sources of financing for businesses and entrepreneurs. Grant financing is provided by all levels of government; generally, larger grant awards are issued by the federal government while municipalities and regions issue smaller amounts. You can even find out which companies have received federal government grant funding online.

Grants are often tied to the government’s priorities and policies. For example, in our review of the current 2023 Federal Budget, we noted that the Liberal-led Federal government has invested substantial funding to facilitate the green transformation in Canada by providing grant funding to support digital transformation, the adoption of sustainable technologies and practices, and innovations in green infrastructure.

Grants are issued for specific projects undertaken by an organization. While registered charities and not-for-profits may be able to access grants that support general operating costs, for-profit companies will have to be able to articulate a specific reason for requesting grant money. Because grant funding is issued based on projects as opposed to industries, many companies across sectors are eligible for grant funding. Grants are available for a wide range of projects, from hiring to skills training to capital expenditures and to research and development. Our blog post, What kinds of grants are available for my business? delves into the kind of project funding available.

Just like when applying for a business loan, it is vital that you have a well-developed business plan, a thoroughly thought-out cash flow forecast, and financial projections, as well as a strong justification for pursuing grant funding. Because grants are non-repayable, they are often highly competitive and subject to strict criteria. Grant funding also operates according to its own timelines, as various government programs have tight proposal windows. Working with a grant consultant can help you tailor your proposal and documents to fit the narrow funding criteria of grant programs and optimize your project for success. So how do you integrate grant funding into your overall financing strategy? Just like any other financing option, it is important to adopt a long-term view of your finances. Start by having a cash flow forecast for the next 12-24 months and a business plan that outlines key investments and projects that you will undertake. For example, if you are planning to upgrade your facilities in the next fiscal year with new equipment or expand your facilities, reach out to a grant consultant early to find out what kinds of capital grant funding will be available. If you’re a restaurant that needs to hire for the busy summer patio, a grant consultant can help you locate hiring funds early so you’re ready to go when school lets out.

When it comes to grant funding, it is important to be diligent and proactive in your search. Grant consultants can be an excellent resource, as their familiarity with various government grant cycles, program priorities, and timelines can help you adapt your business plan and strategy to maximize the amount of non-repayable funding you receive. At the same time, a seasoned government grant consultant can take on the nitty-gritty details involved, such as translating your business ideas into a grant proposal and liaising with program officers, allowing you to focus your energy on running your business.

To integrate government grant funding into your business financing strategy, read our recent blog post, How do I know if I am grant ready?, and get in touch with our team today!

Contact Froese Law to find out if your business is eligible!

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