Defining your project
Whenever you approach a government funding agency, you need to have a specific project in mind. While the general viability of your business is considered, don’t expect government agencies to invest in you unless you have a well-defined project.
A well-defined project includes, but is not limited to:
- Length of project (e.g. 2 years)
- Resources required (capital, human, technological or other)
- SMART objectives/milestones
- Total cost
- Expected return (revenue, profit, job growth or other)
Be sure to do all the front-end work before approaching a government funder.
Without proper planning ahead of time, the application process will likely take 3-4x longer, which handicaps productivity and diminishes your ROI.
In fact, without having all of this planned out ahead of time, your project will likely be rejected.
Timing: When to apply for government grants
There are two major timing considerations when it comes to government grants:
- When to incur project expenses
- Government fiscal year
Let’s look at both considerations a little closer.
When to incur project expenses
Unlike tax credits, grants cannot be applied to expenses retroactively. In other words, they are designed to cover future expenses not yet incurred, rather than past expenses that have already been accounted for.
Depending on the funding body, you may be able to recover expenses recorded during the review process (time elapsed between the application date and the approval date).
Government Fiscal Year
The government, at all levels, follows an April 1 to March 31 fiscal year. Depending on the program, there is no application deadline, but for others, the sooner you apply, the higher the probability of being funded.
Lesson learned: Plan your projects so the start date is no more than 4-5 weeks after the new fiscal year begins.
Common eligibility criteria
If you’ve done your own research for government grants, it’s obvious that a one-size-fits-all model does not exist. Eligibility criteria differs from one program to the next, and it’s difficult to find a through-line.
Nevertheless, in our experience, we’ve identified four main categories of eligibility criteria, as well as the typical request from funders:
1. Size of company
Typical request: At least 1-3 full-time employees
2. Revenue, Assets, other financials
Typical request: In revenue, with 1-3 years of financial history
3. Ownership type
Typical request: A Canadian-controlled private corporation (CCPC).
Initiatives that are funded by government
So, you’ve planned a project and your company meets the eligibility criteria. What’s next? What is considered an eligible expense and what isn’t?
Here are some common categories of funding the government typically funds:
- Hiring: Salary liabilities associated with new full-time employees and COOP students.
- Training: Fees and salaries associated with skills development
- R&D: Salaries, materials, and sub-contracting fees associated with innovative scientific research or experimental development
- Collaborative Development: Consulting fees paid to highly specialized research facilities and universities
- Injection of cash flow for day-to-day operations
Export / Commercialization
- Marketing and travel fees associated with out-of-province or out-of-country trade shows
Conclusion: Calculate your ROI
Truthfully, there’s no such thing as “free” money. As with any other business activity, the effort required to find and secure funding inevitably incurs a cost. In this case, labor usually accounts for most of it. This is best measured by how much the company pays employees to find and secure funding opportunities, and then perform ongoing administrative (reporting) tasks required by the funder. External costs can be a mixture of consulting fees, application fees, and interest charges (on loans).
Moreover, many grants require the company to match the funding amount. For example, if Company XYZ gets approved for a $60 000 grant, they will typically have to supply $60 000 of their own capital as well.
Overall, you want to properly budget your resources when pursuing a grant, so you maximize your return upon approval.
HOW R&D PARTNERS CAN HELP
If you have questions or comments about claiming government funding, please do not hesitate to contact Sahar Ansary at 1-800-500-7733 for more information.