Government Programs

Government Funding Programs WHAT YOU NEED TO KNOW

There are a number of federal, provincial and regional government grant and credit programs that OKR will fund. When reviewing the various program descriptions below, please note that the percentages and ranges referenced are based on the current terms of the following Government Financing Programs at April 2019.

SR&ED

Scientific Research and Experimental Development

The SR&ED Program is a federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development ("R&D") in Canada.

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DMTC

BC Digital Media Tax Credit

Seven provinces offer an interactive DMTC Program or similar such program. The DMTC Program operates in a similar manner to the SR&ED Program and can be combined with SR&ED Program to maximize the application's access to government funding.

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CMF

Canada Media Fund ("CMF Program")

The CMF announced a program budget of $352 million in 2018-2019 to support the Canadian television and digital media industries.

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SR&ED

The SR&ED Program is administered by he CRA. Companies qualify by demonstrating they are conducting R&D; where the outcome is novel, unique and uncertain.

Generaly, a Canadian controlled private corporation ("CCPC") can earn a refundable Investment Tax Credit ("ITC") at the enhanced rate of 35% on qualified SR&ED expenditures, up to a maximum threshold of $3 million in Eligible Expenses. (An "Eligible Expense" is typically the salary of a scientific worker and a proxy currently set at 55% of his or her salary attributed to the SR&ED Program).
Source: http://www.cra-arc.gc.ca/txcrdt/sred-rsde/clmngsrd-end.html#N101C2

Additionally, Procinvial Governments offer SR&ED Credits on Eligible Expenses, normally ranging from 10% to 20%(2) with the net result that a typical CCPC involed in high technology development can have 60% of their salaries dedicated to R&D refunded (i.i., $0.60 of each $1 of Eligible Expenses). Companies accrue Eligible Expenses throughout their financial year and thereafter tipically take up to 6 months to file their tax return (which includes their claim for SR&ED Credits) and then a further 3-6 months to receive their refund, implying up to 12-months delay to receive a SR&ED Credit refund, thereby necessitating the need by CCPC's to borrow against future receipt of a SR&ED Credit refund.

The SR&ED Program provides more than $3 billion in tax incentives to over 20,000 claimants annually, making it the single largest federal program that supports business research and development in Canada.'

DMTC

A DMTC credit is calculated on eligible salary and wages incurred in the tax year and ranges from 10% to 40% depending on the province. Applicants must conduct development relevant to the interests of the province in which the DMTC credit is being applied for. For example, in British Columbia, the DMTC focuses on the following sectors(3):

  • Video games
  • Educational software
  • Entertainment products
  • Simulators

The BC Digital Media Tax Credit, which was scheduled to end August 31, 2018 is now extended five years to August 31, 2023.

The qualification process is similar to SR&ED except that companies need to demonstrate their applicability to the inductor sector of interest (i.e., one of the four areas of interest by British Columbia as above). The time period to receive the funding for DMTC credit’s is identical to SR&ED leading to a similar need for applicants to leverage the receipt of future credits.

(3) Source: http://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media

CMF

The CMF announced a program budget of $352 million in 2018-2019 to support the Canadian television and digital media industries through two streams of funding: (a) the "Convergent Stream", which supports the creation of convergent television and digital media content for consumption by Canadians anytime, anywhere; and (b) the "Experimental Stream", which encourages the development of innovative, interactive digital media content and software applications.

The CMF Program operates a multitude of funding programs over both Streams, some on a first come first served basis and others on an annual or bi-annual basis. Companies access the CMF Program through an open tender process by demonstrating their applicability on a competitive basis. 

The majority of the CMF Program funding takes the form of repayable contributions (under certain conditions) of up to 75% of the eligible costs. Under the CMF Program there is a timing delay between when a Borrower incurs and accrues the expenses, files the reimbursement claim and receives the funding from the Government, creating a bridge finance opportunity for the Partnership.

WINN

Western Innovation (WINN) Initiative

WINN is a $100 million federal initiative that offers repayable contributions for small and medium-sized enterprises ("SMEs") with operations in Western Canada to move their new and innovative technologies from the later stages of research and development to the marketplace.

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SDTC

Sustainable Development Technology Canada ("SDTC Program")

TheSDTC Program is designed to support the development and pre-commercial demonstration of clean technology solutions with the aim to increase each solution's changes of successfully making it to the marketplace.

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SIF

Strategic Innovation Fund ("SIF Program")

The SIF Program supports new high-quality business investment with a common set of terms and conditions that apply to all sectors and aims to consolidate and simplify existing business innovation programs.

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WINN

WINN provides repayable contributions of up to 50% of total eligible costs for each project, to a maximum of $3.5 million per project and $7.5 million per company(5).. WINN operated from 2013-2019 and applications for the WINN initiative closed in November, 2017. While not sector specific, WINN is targeted at advanced technology companies such as Clean Technology, Clean Resources, Digital Technology, Advanced Manufacturing, Value-Added Agriculture, Health and Bio Sciences(6).

Borrowers apply for funding under the WINN initiative through an open tender process by demonstrating their qualifications with other applicants on a competitive basis. The WINN initiative will typically provide the funding through periodic reimbursements, based on the submission of claims for reimbursement and will release the approved portion of eligible project costs that have been incurred within 1-6 months of a claim being made.

(5) Source: https://www.mentorworks.ca/what-we-offer/government-funding/research-development/winn/
(6) Source: https://www.wd-deo.gc.ca/eng/19644.asp

SDTC

The SDTC Program has two open invitations for funding per year and typically supports 33% to 40% of eligible expenses on a milestone basis using a contribution agreement. Borrowers apply for funding under the SDTC Program through an open tender process by demonstrating their qualifications with other applicants on a competitive basis. Typically, 3-5 milestones or activity periods (sequential, non-overlapping time periods) are established for which funding will be provided under the SDTC Program. Funding for each milestone payment typically ranges between 1 and 6 months from the end of each milestone period.

(7) Source: https://www.sdtc.ca/en/about-sdtc/about-us

SIF

The SIF Program supports new high-quality business investment with a common set of terms and conditions that apply to all sectors and aims to consolidate and simplify existing business innovation programs, namely; Strategic Aerospace and Defence Initiative, Technology Demonstration Program, Automotive Innovation Fund and Automotive Supplier Innovation Program. (9) 

The SIF Program will be expanded to support high-growth sectors such as clean technology, information and communications technology and agri-food. To support SIF Program expansion, the Fall 2018 Economic Statement proposed an additional $800 million over the next five years.(10) 

The SIF Program is open to all industries and will support four streams of innovation activities: stream 1 is R&D and commercialization, stream 2 is growth and scale up, stream 3 is attraction of new investment and stream 4 is public-private collaborations developing and demonstrating new technologies. The first three streams require applicants to be for-profit, private corporations. The fourth could be an academic institution, network, research institute or a private company. 

The SIF Program offers financial contributions both repayable and non-repayable and can vary between 10-50% of project costs(11). As announced in the 2018 federal budget, the SIF will now focus its support on projects requesting at least $10 million in contributions. Applicants for funding are asked to submit a high-level overview or Statement of Interest of their project. If approved, applicants will be invited to complete a full, more detailed project application which will be reviewed for due diligence and a benefits/contribution assessment. The SIF Program covers non-recurring costs specifically related to the project, including: direct labor, overhead, subcontracts and consultants, direct materials and equipment and land and building costs. The amount and type of financial support will be allocated on a case-by-case basis and the Minister for Innovation, Science and Economic Development, Canada will exercise discretion on which projects to fund. The delay between project approval, executing the contribution agreement and receipt of funding is dependent on the project and Borrowers potentially have a need to finance future receipt of funds. 

 

(8)&(9) Source: https://www.canada.ca/en/innovation-science-economic-development/programs/strategic-innovation-fund.html
(10) Source: http://www.ic.gc.ca/eic/site/125.nsf/eng/home
(11) Source: https://www.canada.ca/en/innovation-science-economic-development/programs/strategic-innovation-fund/faqs.html#g5

IRAP

Industrial Research Assistance Program ("IRAP Program")

The National Research Council of Canada's ("NRC") IRAP Program works with over 11,000 SEMs each year. 

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SIDIT

Southern Interior Development Initiative Trust ("SIDIT Program")

In 2006, the Government of British Columbia enacted legislation to launch the Southern Interior Development Initiative Trust, a $50 million one-time allocation paid in the regional account.

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BCI

Build in Canada Innovation Program

Created to bolster innovation in Canada’s business sector, the BCI Program helps companies bridge the pre-commercialization gap by procuring and testing late stage innovative goods and services within the federal government(14).

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IRAP

The National Research Council of Canada's ("NRC") IRAP Program works with over 11,000 SEMs each year. Program grants come in the form of a salary contribution normally in the range of 50% to 80% of the successful company's eligible expenses and is intended to support Canadian companies conducting novel, innovative and risky development.

In order to be considered for possible IRAP funding, the basic eligibility criteria are(12):

  • a small and medium-sized enterprise in Canada, incorporated and profit-oriented;
  • have 500 or fewer full-time equivalent employees; and
  • have the objective to grow and generate profits through development and commercialization of innovative, technology-driven new or improved products, services, or processes in Canada.


Borrowers apply to the IRAP Program through filing an application through an Industrial Technology Advisor. Upon an application being approved, Borrowers will file claims as approved expenses are incurred and then wait for the reimbursement of the expenses on an established percentage basis. The delay between a claim and receipt of funding under the IRAP Program can be anywhere between 1 and 6 months. 

 

(12) Source: http://www.nrc-cnrc.gc.ca/eng/irap/services/financial_assistance.html

SIDIT

In 2006, the Government of British Columbia enacted legislation to launch the Southern Interior Development Initiative Trust, a $50 million one-time allocation paid in the regional account. The mission is to support long term strategic investments in economic development projects that will have lasting and measurable benefits within a specific geographical location.

The SIDIT Program targets funding toward investment in self-sustaining projects that support ten themes. 
The SIDIT Program provides two broad types of funding:

  • Loans/equity financing for business ventures; and
  • Grant Funding for programs and projects.

The following areas are mandated as the primary targets for funding support:

  • Agriculture
  • Economic Development
  • Energy
  • Forestry
  • Mining
  • Olympic Opportunities
  • Pine Beetle Recovery
  • Small business
  • Tourism
  • Transportation


SIDIT has developed strategic goals to target its funding programs. Goals that will lead to increased commercial activity; preserve jobs, attract new capital, contribute to the diversification of the economy, and have a positive Regional impact(13). 

 

(13) Source: https://sidit-bc.ca/application/files/8615/2209/6947/SIDIT_Strategic_Plan_approved_March_22_2018.pdf

BCI

The BCI Program uses an annual open tender program with two streams (components), one supporting enabling technologies, the environment, safety and security (the “Standard Component”) and a further stream supporting the military such as command and support, cyber-security, protecting the soldier, artic and maritime security, in-service support and training systems (the “Military Component”). The maximum funding available for an innovation is $500,000 for the Standard Component and $1,000,000 for the Military Component per proposal(15).

Borrowers access the BCI Program through an open tender process by demonstrating their qualifications on a competitive basis with other BCI Program applicants. A milestone payment scheme for funding is defined in the contract (each a “BCIP Contract”) between the Borrower and the federal government. Payment methods are either made in a single advance, upon completion of all work and deliveries required under the BCIP Contract, multiple advances upon completion of each delivery required under the BCIP Contract or by progress advances which are tied to measurable progress under the terms of the BCIP Contract. It is typical to have a delay of between three and six months from the submission of an invoice to receipt of payment under the BCI Program.

(14) Source: https://buyandsell.gc.ca/initiatives-and-programs/build-in-canada-innovation-program-bcip/overview-of-bcip
(15) Source: https://buyandsell.gc.ca/initiatives-and-programs/build-in-canada-innovation-program-bcip/frequently-asked-questions-for-bcip

GST, HST and PST

Federal Goods and Services Tax (“GST”), Harmonized Sales Tax (“HST”) and Provincial Sales Tax (“PST”).

 The Partnership will also provide Loans to Borrowers with respect to rebates under federal Goods and Sales Tax, Harmonized Sales Tax and Provincial Sales Tax programs (“GST/HST/PST Programs”).

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CPTC

Canadian Film or Video Production Tax Credit

The Canadian film and television production industry is supported by federal, provincial and territorial governments where domestic and international producers can claim refundable tax credits to help offset the cost of production in Canadian locations.

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Western Economic Diversification Canada (“WD”)

The WD is a Canadian federal department with a 2018/19 planned spending of $208 million over 5 years(19).

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Federal Goods and Services Tax (“GST”), Harmonized Sales Tax (“HST”) and Provincial Sales Tax (“PST”)

Businesses throughout Canada frequently find themselves with a federal or provincial government sales tax refund due, either on a quarterly or annual basis. Examples include where a company pursues an asset purchase program for business or development purposes or indeed contract delivery.

In such a case, the company calculates their net tax for each GST/HST reporting period and reports this on their GST/HST return. To do so, they calculate:

  • the sales tax collected or that became collectible by the company on taxable supplies made during the reporting period; and
  • the sales tax paid and payable on the business purchases and expenses for which they are able to claim an ITC.


The net result may be a refund due to the claiming company. For organizations with an annual filing date, purchasing equipment early in their financial year results in a significant sales tax refund due, which remains un-claimable for the balance of the year. Similarly, even quarterly filing companies can have a sales tax refund outstanding for several months.

CPTC

The Canadian Film or Video Production Tax Credit (CPTC) is jointly administered by the Canadian Audio-Visual Certification Office (“CAVCO”) and the Canada Revenue Agency. Companies qualify by demonstrating the production of a “Canadian film or video production” certified by CAVCO. CPTC provides eligible production with a fully refundable tax credit, available at a rate of 25 per cent of the qualified labour expenditure (16).

For International Film or Video Production companies, the Film or Video Production Tax Credit (PSTC) is a tax credit at a rate of 16 percent of the qualified Canadian labour expenses. The purpose of which is to enhance Canada as a location of choice for film or video productions employing Canadians (17).

Additionally, all provinces and territories (except for Prince Edward Island) provide tax credits, for example the British Columbia Film and Television Tax Credit(18) offer tax incentives with a basic refundable credit of 35% of qualified provincial labour expenditures with additional regional, distance location, training, digital animation, visual effects and postproduction (DAVE) tax credits. The BC Film and Television Tax Credit has also been extended to include eligible scriptwriting expenditure equal to 35%. Depending on the province/territory, producers can access combined federal and provincial tax credits ranging from 30 % to 70 % of eligible labour.

(16) http://www.cra-arc.gc.ca/tx/nnrsdnts/flm/ftc-cip/menu-eng.html
(17) http://www.cra-arc.gc.ca/tx/nnrsdnts/flm/pstc-cisp/menu-eng.html
(18) http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/prv/bc/flm-eng.html


Companies can accrue labour expenditure throughout their financial year with claims up to 36 months after their year-end with then a further two to four months for the refund to be issued, therefore necessitating the need to borrow against future receipt of a credit refund.

The Partnership shall not be limited with respect to the amount of funds advanced with respect to CPTC or PSTC based Loans until the date which is the earlier of the Partnership having $10,000,000 in AUM or 12 months after the initial Closing under this Offering, after which date the Partnership will not lend more than 25% of its AUM with respect to CPTC or PSTC based Loans.

WD

WD’s core responsibility is to work towards achieving three departmental results: businesses that are innovative and growing in Western Canada; Communities that are economically diversified in Western Canada and businesses that invest in the development and commercialization of innovative technologies in Western Canada. WD’s business development and innovation initiatives include the Western Innovation (WINN) Initiative, Western Canada Business Service Network (WCBSN) and the Western Diversification Program (WDP). The WINN initiative and WDP offer funding in the form of repayable contributions for small business enterprises and not-for-profit organizations respectively, with a call for proposals on an annual basis. WD will reimburse costs after applicants have paid for them with claims for reimbursements submitted every quarter. As with other Government Financing Programs, there is frequently a delay between accruing and/or filing a reimbursement claim and receipt of payment from WD resulting in the need for Borrowers to finance future receipt of WD funding.

(19) Source: https://www.canada.ca/en/western-economic-diversification/news/2018/09/government-of-canada-announces-new-funding-and-engagement-plan-for-western-canada-growth-strategy.html

ISC

Indigenous Services Canada (“ISC”) 

In August 2017, the Prime Minister announced the dissolution of Indigenous and Northern Affairs Canada (INAC) and a plan to create two new departments; Indigenous Services Canada (“ISC”) and Crown-Indigenous Relations and Northern Affairs Canada (“CIRNAC”)(20).

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CIIP

Canadian International Innovation Program

CIIP is a funded program offered by Global Affairs Canada. It promotes collaborative industrial research and development projects with a high potential for commercialization between Canada and partner countries.

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BDC

Business Development Bank of Canada

BDC is a federal Corporation owned by the Government of Canada supporting 56,000 entrepreneurs with $31B in capital committed to small and medium-sized businesses (29).

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Indigenous Services Canada (“ISC”)

Budget 2018 renews the Government of Canada's commitment to building a new relationship with Indigenous peoples and builds on significant investments of $11.8 billion in the previous two budgets, with further steps towards reconciliation by investing in priority areas identified by First Nations, Inuit and Métis Nation partners, specifically for families, health care and job opportunities(21).

(21) https://www.aadnc-aandc.gc.ca/eng/1520368281802/1520368298215



Budget 2018 proposes to invest an additional $5 billion(22) over five years to ensure that Indigenous children and families have an equal chance to succeed in life, to build the capacity of Indigenous governments, and to accelerate self-determination and self-government agreements with Indigenous Peoples based on the recognition and implementation of rights.

(22) https://www.budget.gc.ca/2018/docs/plan/chap-03-en.html



As a new department ISC has five key priority areas(23):

  • Improving health outcomes
  • Quality education
  • Children and families together
  • Reliable infrastructure
  • New fiscal relationship

(23) https://www.sac-isc.gc.ca/eng/1523808248312/1523808295687



The 2018-2019 national funding agreement models have been updated to reflect the creation of ISC and in preparation for the dissolution of INAC and the eventual creation of CIRNAC. In December 2017, it was announced that the Government of Canada is proposing to work with First Nations financial institutions and the Assembly of First Nations on the creation of 10-year grants. Participating communities would commit to report to their own members on their priorities and targets and on a common set of outcomes outlined in an accountability framework. More information regarding the criteria will be provided once available(24).

(24) https://www.aadnc-aandc.gc.ca/eng/1513085804120/1513085821537#se

Canadian International Innovation Program (CIIP)

The CIIP is a “seed fund” meaning that various other public and private partnerships and encouraged to contribute their expertise and funds. Partner countries are: Brazil, China, India, Israel and South Korea(27).

(27)https://www.tradecommissioner.gc.ca/funding-financement/ciip-pcii/index.aspx



CIIP is targeted to small or medium size company (SME) with less than 500 employees, who is incorporated in Canada and engaged in developing technology for a new product process or service for civilian use (non-military). The Industrial research and development projects eligible are: technology adaptation, technology validation and technology co-development.

Through CIIP, Canadian companies can access up to 50% of eligible project costs to a maximum of $600,000 in funding for research projects (28). Access to the funding is by open Requests for Proposals (RFPs) or to apply for a research grant, register online via IRAPs online CIIP portal. The Canadian government grants are received after project milestones are achieved.

(28) https://www.mentorworks.ca/blog/government-funding/canadian-international-innovation-program-overview/

Business Development Bank of Canada (BDC)

BDC is a federal Corporation owned by the Government of Canada supporting 56,000 entrepreneurs with $31B in capital committed to small and medium-sized businesses (29). Its mandate is to help create and develop Canadian businesses through financing, growth and transition capital, venture capital and advisory services.

BDC contributes to advancing the Government of Canada’s priorities. In fiscal 2018, in response to the federal budget, BDC launched two major initiatives to help position Canada as a nation of innovators—the Cleantech Scale Up Initiative and the Venture Capital Catalyst Initiative (VCCI). 

BDC provided $6.8B in loans over the last fiscal year and is expected to increase to $7.2B in fiscal 2019 (29)). Cleantech Practice will deploy $700M in debt and equity transactions to help build globally competitive Canadian cleantech firms and a commercially sustainable cleantech industry and VCCI will make $400M available over three years to increase late-stage venture capital to Canadian entrepreneurs. With private sector incentives, VCCI should deliver over $1.5 billion to the ecosystem.(30) 

Following the federal government’s 2018 budget, BDC set a new lending target of $1.4 billion for women entrepreneurs by the end of fiscal year 2021. Entrepreneurs’ capacity to innovate and scale up is the cornerstone of Canada’s prosperity. With over $3 billion under management, BDC Capital, the investment arm of BDC, serves as a strategic partner for Canada’s most innovative businesses. BDC are the largest and most active VC investor in the country with 700 innovative tech-focused businesses, employing over 30,000 Canadians. 

In May 2017, BDC committed to authorizing $280 million to support companies in Atlantic Canada pursuing growth opportunities in the information and communication technology (ICT), agri-food, ocean technology and tourism industries. During fiscal 2018, entrepreneurs in the region received over $140 million in financing to grow their business. 

In January 2019, the Government of Canada has made available $50 million to increase the availability of late-stage venture capital to the clean technology sector in Canada through the new Clean Technology Stream of the Venture Capital Catalyst Initiative (VCCI Stream 3). The Government of Canada intends to make up to three investments in the $5 million to $25 million range, not exceeding the total $50 million portfolio. As with the previous streams of VCCI, investments will be delivered through the Business Development Bank of Canada (BDC). 

For evaluation and selection, VCCI uses a transparent and competitive process, informed by the recommendations of the VCCI election committee. Candidates selected will enter into negotiations with lead investors, including BDC on behalf of Government of Canada for negotiations on a final term sheet (3). As with any government Financing programs there is frequently a delay between funding agreements and receipt of funds and Borrowers frequently have a need to finance future receipt of funding. 

Clients can apply for financing loans up to $100k online and authorization takes under three minutes. 

 

(29) https://www.bdc.ca/EN/Documents/annualreport/bdc-annual-report-2018.pdf
(30) https://www.bdc.ca/EN/Documents/doc_corpo/corporate_plan_summary.pdf