Gaining Financial Support

The Canadian manufacturing industry has experienced market variance in recent months. This has the industry’s small and medium enterprises (SMEs) in Ontario and across Canada wondering how they will manage to set aside funds to develop and grow their businesses.

In light of difficulties in the sector, some of Canada’s most successful companies are looking to Canadian government funding programs to help give them a much-needed edge over their competition.

Both provincial and federal grant and loan programs are available to help fund large-scale expansion projects, capital equipment, and R&D, among others.

Canada is actively competing with other advanced nations for innovation across all industries, and government bodies have responded by offering support through programs such as the Industrial Research Assistance Program (IRAP), Natural Sciences and Engineering Research Council (NSERC), and Mitacs.

These funding organizations have been allotted hundreds of millions of dollars from the Canadian federal government to aid SMEs. Projects being funded include the adoption of new technology; research programs that aim to solve technological problems; and partnerships that foster important relationships between the private sector and cutting-edge R&D institutions, including universities and colleges.

IRAP Explained

IRAP typically offers funding between $50,000 and $130,000 to innovative SMEs, depending on the nature of the project. Businesses can break down a large project into separate “phases” for funding, even if the project already has been started and some outstanding activities have not yet been completed.

IRAP also offers grants between $50,000 and $100,000 to support, for example, product development (design, engineering, piloting, precommercialization), process improvement (analysis, redesign, automation), and online market presence/ web analytics.

Typical IRAP Projects:

• Project Length: 4 to 8 months.
• Required Spend: $65,000 to $130,000 combined payroll and vendor/consulting costs.

IRAP grants of more than $100,000 support projects that have a high degree of technical challenge and risk or uncertainty, such as product development projects requiring iterative development and testing. The objective of the project should focus on resolving these challenges, however.

• Project Length: 6 to 12 months.
• Required Spend: $130,000 to $250,000 (or more) combined payroll and vendor/consulting costs.

SMEs that have qualified for Scientific Research and Experimental Development (SR&ED) tax credits are generally eligible for IRAP funding.

NSERC Explained

The NSERC Engage program funds short-term research or development projects aimed at addressing a specific problem and can be extended up to six months.

Typical NSERC Projects:

• Amount: Up to $25,000 from NSERC (no cash required from company) directly to the postsecondary partner in order to support the project.
• Timeline: Rolling applications, no deadlines, and 4- to 6-week turnaround on approvals. Projects typically are in the 4- to 6-month range.
• Eligibility: Company must operate from a Canadian base. Eligible collaborations include focused projects with specific short-term objectives with an academic researcher from a Canadian university. There is no limit on how many Engage grants that a company can hold.

Another program under the NSERC banner is the NSERC Collaborative Research and Development (CRD) grant, which is for longer-term R&D projects usually following an NSERC Engage project. It involves the same faculty partners for projects up to five years long to solve a larger R&D issue.

• Amount: Up to 65 percent of a project’s expenses can be covered through this NSERC grant funding, including 70 percent payroll and 50 percent Canadian third-party contractors.
• Timeline: Rolling applications, no deadlines, 1- to 5-year projects.
• Eligibility: Company must operate from a Canadian base. Intellectual property (IP) ownership to be agreed on by both partners.

In addition to NSERC Engage and CRD programs, Mitacs Accelerate and Mitacs Elevate link researchers from postsecondary institutions with the private sector.

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) offers two interestfree loan programs to support largescale expansion efforts.

The Investing in Business Innovation (IBI) program offers loans of up to one-third of an eligible project’s costs to a maximum of $1 million. Investing in Business Growth and Productivity (IBGP) makes available up to $20 million per project, or 25 percent of project costs. IBGP and IBI also provide funding through nonrepayable grants to not-for-profit organizations. IBI also has a third funding stream especially for Angel Networks (projects including retired entrepreneurs).

IBI for Early-Stage Businesses Funding

IBI funds activities related to latestage development and early-stage commercialization of innovative, unique products and processes, including business development; latestage product development geared toward market diversification and growth; customer and market development; development and implementation of marketing; and distribution strategies via a no-interest loan.

• Timeline: Open now, continuous intake.
• Eligibility: Canadian-incorporated companies with headquarters in southern Ontario with fewer than 50 full-time-equivalent employees with a sustainable business model.

IBGP Funding for Business Expansion

IBGP supports projects that help established SMEs expand, diversify, adopt innovations, accelerate growth, and create jobs through no interest loans.

• Timeline: Open now, continuous intake.
• Eligibility: SMEs incorporated and located in southern Ontario with 15 to 1,000 employees.

Ontario Provincial Funding for Focused Expansion

Government bodies have not forgotten smaller firms by promising to renew a popular and very competitive funding program that offsets the costs of capital for manufacturing SMEs in Ontario that export.

The CME SMART Prosperity Now funding is for capital expenditures in Ontario. In order to qualify for grant funding through CME SMART, the project must focus primarily on improving operational efficiency, waste reduction, or improvement of global expansion efforts. Successful projects include quality improvements, lean manufacturing, lean design, IT best practices, energy efficiency, penetration of new domestic and international markets, and environmental reduction programs.

Funds requested for capital equipment must be used within the facility that made the application.

• Timeline: Funding expected to launch in Q2 2014.
• Eligibility: Companies must be incorporated for two years, have 15 to 1,000 employees, and have a manufacturing operation in southern Ontario.

Opportunities for Small Businesses

Although economic forecasts do not predict many jobs will be added to the sector in 2014, the aging workforce predicament makes talent acquisition and succession planning important considerations, even (and some may argue more important) for firms that do not envision growth in their immediate future.

To lighten the financial burden, employers can access hiring programs that offer between $7,000 and $20,000 in government grants for hiring recent graduates.

www.mentorworks.ca