For businesses and companies in need of more funding for a big project or endeavour, the Canadian government offers grants and loans to offset costs and progress them to the next phase. Our SR&ED consultants can help you navigate through your application and accomplish your goals.
CI Solutions is made up of a team of IT grant consultants who are determined to help you secure more funding for your project. To help you understand the process better, we’ll define what business loans and grants are and the differences between them. We’ll also explain why grants hold more value for businesses than loans and are a better funding option overall.
A government business loan is a sum of money provided by the government and its related agencies. These types of loans differ from those at financial institutions like banks or credit unions but essentially serve the same purpose. Loans provide temporary funding to small businesses with the expectation that it’ll be paid back over time, plus added interest. In this case, the funding can be used to start or expand new companies, pay employee wages, fund marketing campaigns, buy new equipment, or purchase office space.
Government business loans can take around five to ten years to pay off fully. The government operates under its own funding schemes and its agencies will often team up with banks to provide the funding to you. From here, the money can take on two forms.
The first type of funding is the common one-time loan where a specific amount is received by the borrower, who will have to repay it either through installments or a specified deadline. The second is an open-ended line of credit fixed to a maximum amount. This is a pre-approved loan that can be repeatedly collected up to a certain amount, then repaid before the agreed due date.
Loans are classified as secured and unsecured. With a secured loan, the borrower will be required to surrender some sort of collateral property if the loan is unpaid. Unsecured loans don’t require collateral, but they are given out less often and are of low value. It’s important to keep in mind that Canadian government loans are typically given out for larger and more complex projects than business grants.
Loans have their upsides and downsides, but government business grants are much more flexible and can benefit your project or business better.
A government business grant is essentially a free sum of money that is given to small businesses to fund specific business functions, much like a loan. Unlike those, however, grants don’t have to be repaid. While there are many benefits to a business grant, they are not easy to obtain. Small businesses have to meet very specific criteria in order to be eligible for a grant. They’re responsible for using the money for specific reasons and must follow stipulations set by the government.
During your application process, you can work with our SR&ED consultants to obtain, fill, and submit important paperwork the government needs. You’ll also need the right levels of knowledge, interest, and capability in a selected field to be eligible for grants. Even after the application is filed, there is usually a shortlisting process to determine the eventual recipient.
Although securing a grant isn’t guaranteed, they are a more ideal funding option than loans because you don’t have to repay them. To improve your chances of securing more funding, you can work with specialized consultants to help you prepare the right documentation.
With that said, it’s important to distinguish the differences between loans and grants.
The difference between loans and grants is that the latter doesn’t have to be repaid like the former. It’s highly suggested that if your project or business can’t afford to repay the loans, securing a grant is your better alternative.
Small businesses, in particular, need to also consider how fast they need funding to start their project. Because of their stringent process and connection to government agencies, grants are often approved slower and the money will need some time to disperse. Loans, on the other hand, can be distributed much faster once all terms have been agreed upon.
It is up to you whether you believe a business loan or grant will be most beneficial for your business. However, we strongly believe grants have the most upside because of the absence of debt and payment deadlines. By taking the time to put in the work, gather your research, and demonstrate professional integrity, your chances of securing more government grant funding will improve.
If you need reliable assistance and knowledge on SR&ED funding, work with one of our consultants today to secure more funding for your big projects.