This process was designed to help grow the business of SMEs in Canada – help small and medium sized businesses not just with R&D efforts, but with market research or process changes that will help benefit and grow your company.

What does this mean for you?

Quite simply, if you are a small or medium sized business, and are only doing a project that requires a maximum contribution of $50,000 from NRC-IRAP then the NRC-IRAP has created a streamlined process to get you your funding FAST.

So what kind of projects are acceptable for the accelerated review process?

• R&D projects that are limited in scope and nature
• Lean manufacturing/productivity studies
• Prototype engineering
• Development of business plans
• Branding creation and enhancements
• Market research studies

There are of course a lot of other types of projects acceptable for the review process, but this is just a small selection to give you an idea of the great variety there is that is applicable. You can get more information about this new funding process here.

Lines of credit have almost completely dried up in this recession, and it’s harder than ever for businesses to fund their new development projects.  Ontario’s Advanced Manufacturing Investment Strategy (AMIS) is a great venue for Ontario manufacturers to pursue. What’s more, AMIS is available to companies from all manufacturing sectors in Ontario. The $500 million dollar provincial program focuses on:

• industrial R&D
• design/prototyping/engineering
• new/ advanced products/materials
• advanced manufacturing processes
• robotics/software development
• waste reduction
• energy conservation

AMIS, when granting a loan, can provide up to 30% of the total eligible costs of a project (up to a limit of $10M). This funding is given in the form of a repayable loan. The loan is interest free and principal free for up to five years, providing the company receiving it meets job and investment targets mutually agreed upon between the company and the province. After that period, the repayment rate is the province’s cost of borrowing, plus an additional 1%.

To be eligible, projects must create and/or retain at least 50 jobs. Alternatively, the projects must invest $10 million over the 5 year period. The costs eligible for the loan (excluding ongoing costs of production or operations) include:

• research and development
• equipment and machinery
• materials
• construction/facility improvements
• training
• overhead
• labour (one time only)

The terms for the loan are negotiated individually. After completing the application process, most companies receive word of the province’s decision within a relatively speedy 45 calendar days. This sometimes may take longer for the more complicated applications. The Minister of Finance, along with the Minister of Economic Development, approve or deny applications based on the guidelines of the AMIS Assessment Committee.

What’s more, for those manufacturers who regularly claim for SR&ED, receiving an AMIS loan has no impact on SR&ED eligibility. The AMIS loan is not affected if a business has already received an SR&ED return or income tax credits.  Companies that have received AMIS funding often include extra cash procured by SR&ED towards their projects. In fact, any business that has received SR&ED credits is more likely to be meeting the AMIS eligibility requirements.

For more information about AMIS, visit http://www.ontariocanada.com/ontcan/en/progserv_amis_en.jsp

On a positive note, there are a few bright spots for Ontario’s diverse technology sector. Most importantly, to our readers, are the changes to the Ontario Innovation Tax Credit (OITC), a tax relief measure for businesses to encourage technological development and new innovations.

Dalton McGuinty and Ontario Finance Minister Dwight Duncan (right), in Toronto on Thursday.

Ontario Innovation Tax Credit

The OITC is a 10% return for small to medium sized enterprises who perform qualifying SR&ED activities (Scientific Research & Experimental Development) in Ontario. The new budget proposes to extend the taxable income phase-out range from the current $400,000 – $700,000 to $500,000 – $800,000.  This measure will parallel the changes and enhancements to the Federal Investment Tax Credit for SR&ED claims, proposed in the 2009 Federal budget.

Sustaining and Promoting Research and New Technology

Ontario’s technological advancements require continuous support.  The new provincial budget is proposing more than $110 million in additional tax relief for 2009 and 2010, and $715 million in investments supporting partnerships in innovation, encouraging businesses to develop their new products, services, and processes.

These new investments are in addition to the $3 billion already to be provided by the Ministry of Research and Innovation.  They will include:

• $300 million in capital funds over six years for research infrastructure, to leverage funding from the Canada Foundation for Innovation

• $100 million in extra operating funds over four years for research in the biomedical field. This funding, as well as aforementioned funds for the research infrastructure, will be delivered via the Ontario Research Fund.

• $250 million over five years for a new Emerging Technologies Fund that will put focus on clean technologies and clean energy, health and life sciences, and information and communication technologies (including digital media).

• $10 million over three years to the Colleges Ontario Network for Industry Innovation, to assist small to medium sized enterprises with applied research, technology and commercialization.

Quote for March 27th, 2009:

“The most terrifying words in the English langauge are: I’m from the government and I’m here to help.”
- Ronald Reagan

More than 117,000 Canadians filed for bankruptcy over the period of twelve months ending January 2009. This denotes an increase of 15.8 % from the previous year. Nationally, the number of Canadians who filed for EI increased to more than 500,000 for January, according to Statistics Canada. Our unemployed Canadians filing for financial help is now 23% higher than it was in February of 2008.

Both the rapidly increasing bankruptcies and EI claims are signs of escalating troubles faced by Canadian citizens as the recession here deepens. And it’s not just individuals facing worry, but businesses as well.

In January of this year, 567 firms pulled the plug on their operations and filed for bankruptcy. Ontario manufacturing bankruptcies also rose 24%. Business insolvencies rose severely in Quebec, where the recession is strongly hitting the province’s industrial sector. 250 companies closed their doors in January, up from 202 closures in December of 2008.

How can individuals cope with job loss? Apply for EI as quickly as possible. The process takes time to be finalized, so the sooner you do, the less you’ll have to dip into savings. If faced with having to pay high prices for prescription medication after losing benefits, programs such as Ontario’s Trillium Drug Program can help cover these expenses.

Businesses can look at cost cutting where feasible, look for opportunities to expand their services to stable or growing sectors, and seek financing from federal and provincial funding programs (such as SR&ED or SMART). Companies on the brink of bankruptcy can look at Turnarounds and seek assistance from an experienced professional.

Source: Statistics Canada

For several industries, there is little to no chance of a significant sales increase in the near future. With businesses grasping at straws to stay afloat in this downturn, it is more critical than ever to find a way to increase revenue.

Canada is internationally heralded as a leader in R&D funding for domestic-owned small to medium sized enterprises. The SR&ED program (Scientific Research & Experimental Development) is one avenue that businesses, especially manufacturers, can pursue to improve their bottom line. The goal of the federal SR&ED program is to encourage experimentation and technological advancements within Canadian companies, and this is of particular benefit in the recovery of our economy.

“Companies need to sit back and assess their individual circumstances. It’s time for a second look at the SR&ED process, whether you’ve claimed previously or not.” says Ajay Sinha, VP Operations with Northbridge Consultants. “That old adage is true – knowledge is power. In regards to capitalizing on the benefits of SR&ED, it is worthwhile to seek assistance from a reputable SR&ED consultant.” Sinha is reminding clients that the CRA has hired more auditing staff and made many revisions to the T661 and filing process. He emphasizes that navigating the maze of technicalities correctly is imperative to maximize the size of your claim, and increase the rate of approval to enlarge the dollar amount of returns or tax credits. “It’s a sink or swim situation.”

Sinha mentions that “For those who have had a negative experience or have been disappointed with the results, it is often due to qualifying activities that have been overlooked, and thus not claimed for, resulting in a much smaller return, or in some cases, rejection of the claim.”

Many companies use their SR&ED returns of offset incurred development costs. Alternatively, funds can be invested in new equipment and materials, new hires, or even facility expansion. Sinha adds “We also teach our clients how to track their future eligible activities to make documentation for claims easier and more substantial. This promotes repeated success with the program in the future. The extra resources to put towards the advancement of technology also give Canadians that edge above competitors internationally.”