Archive for the ‘business financing’ Category

Waterloo and Toronto, February 15, 2012 - North Innovation Fund (NIF), a privately-held alternative financing firm providing ongoing SR&ED accrual loans to early stage Canadian companies in a variety of technology-based sectors, today announced the launch of its first Fund.

The Fund was created to identify high growth and innovative companies that are in need of non-dilutive growth capital to accelerate their transition from early stage to commercialization.  NIF’s objective is to play a role in Canada’s ecosystem through ongoing SR&ED accrual debt financing. The SR&ED program, a federal tax incentive program that encourages research and development activities in Canada, has long been the primary source of funding for early stage companies in Canada.

According to Thompson Reuters Canada, between 2000 and 2010, venture capital investment decreased by more than 80 percent from approximately $5.9 billion to $1.1 billion. During the same period, the number of companies receiving venture capital decreased by more than 64 per cent from 1007 to only 357 during that same period.

“We have identified an important gap in the early stage capital markets ecosystem. There needs to be more non-equity (i.e., non-dilutive) funding sources to bridge the funding gap.  The SR&ED program in Canada works and provides much needed funding to early stage companies – the only problem I see, is the fact that they have to wait over 12 months to receive their cash”, explained James Ro, Managing Director of North Innovation Fund.  “We want to play a role in helping Canadian technology companies reach their next level of growth by financing ongoing SR&ED accruals in advance so that they can use the proceeds to hire more staff, fund working capital needs and execute their growth plan”.

For more information regarding North Innovation Fund and to contact the Fund regarding SR&ED financing or SRED financing opportunities, please visit www.northinnovationfund.com.

According to 2011 year-end figures from the Canadian Venture Capital and Private Equity Association, a four-year high of $1.5 billion from VC was disbursed to Canadian startups last year.  Although this was the highest level since 2008, this was far short of the $2.1 billion invested in 2007.

New funds for VC hit $1 billion in 2011, up only 2% from 2010, which pales to the 32% jump in the United States from 2010.  High-tech startups have had to look for alternative sources of funding in the past few years, due to limited VC supply.  With limited growth capital available, startups have had to rely on government funding programs, such as SR&ED, and the financing of SR&ED accruals to generate internal cashflow.

Canada’s fastest-growing tech firms include:

1.  Accedian Networks (St. Larent, Que.; 50,136%)

2. RTI Cryogenics Inc. (Cambridge, Ont.; 46,278%)

3. Avigilon (Vancouver; 38,796%)

4. NexJ Systems Inc. (Toronto; 29,161%)

5. Real Matters (Markham, Ont.; 28,265%)

6. Arise Technologies Corp. (Waterloo, Ont.; 10,017%)

7. Clevest Solutions Inc. (Richmond, B.C.; 7,976%)

8. Dominion Voting Systems Corp. (Toronto; 3,539%)

9. Acquisio (Saint-Lambert, Que.; 2,622%)

10. GuestLogix Inc. (Toronto; 2,322%)

According to the Globe and Mail, Atlantic Canada has immense entrepreneurial opportunities and has shown recent growth in entrepreneurial financing.  Halifax alone has more than 1,200 financial services firms with 14,000 employees.  Atlantic Canada has a huge advantage in shipments to Europe because of its year-round deep-water ports that are closer to Europe than any other port in North America.  So it’s interesting to note that only 7% of SMEs in Canada are situated in Atlantic Canada. 

What is the problem? Too much red tape and the roadblocks created by banks present obstacles to entrepreneurs. Homegrown suggestions for increasing access to money in Atlantic Canada include changing financial policies and programs for loans (to have them built on trust). Entrepreneurs with no collateral, no steady employment, and no verifiable credit history are the ones left behind in Atlantic Canada.

How else can we help to promote the economy in Atlantic Canada?

The Industrial Research Assistance Program that the National Research Council of Canada has (NRC-IRAP) has long been of assistance to companies in Canada who need funding for research purposes. About a month ago, NRC-IRAP announced a new review process: the Small Project Accelerated Review Process.

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