Posts Tagged ‘IRAP’

Non-dilutive Financing Strategies for AgriTech Projects

It is envisioned that by 2025, Canada will be a leader in Agricultural technology, recognized globally as a reliable and competitive supplier of safe, sustainable, high-quality agri-food products.

In order to successfully realize this vision, significant obstacles must be overcome in relation to increasing demand for clean and sustainable farming practices as well as increasing food supply for anticipated population growth of up to 9 billion by 2050. To find solutions to these obstacles, modern agricultural operations are leveraging cutting edge technologies such as precision agriculture, remote monitoring of crops and livestock, machine learning techniques, agricultural robots, and IoT-based smart farming systems with cloud-based data analytics.

Canadian companies developing agritech solutions can turn to a variety of non-dilutive funding options such as grants, tax credits, and SR&ED financing to support their projects at various stages of growth, from R&D to commercialization and export.

Research and Development

  • SR&ED tax credits

The Scientific Research and Experimental Development (SR&ED) program is one of the most lucrative sources of non-dilutive funding, providing an average of over $3 billion to Canadian companies each year.

Qualified Canadian Controlled Private Corporations (CCPCs) can receive up to 35% back of eligible expenditures incurred in the development of new or improved products or processes. Foreign-owned or public corporations can qualify for a 15% tax credit on eligible expenditures.

Most Canadian provinces offer additional tax credits on qualified SR&ED expenditures. Depending on the province, SR&ED claimants can earn additional provincial SR&ED tax credits. Read more about provincial tax credits to find out your province’s rate of return.

  • SR&ED Financing

The SR&ED tax credit program is critical for the viability of Canadian companies. However, it often takes over one year to receive the funding, which can be critical, particularly for early stage companiesSR&ED financing helps to alleviate existing cash flow issues in the form of accrual debt financing. Thereby, companies can obtain advanced funding to gain access to the SR&ED cash refund up to six months before filing. This enables early stage companies to bridge the funding gap and extend the runaway until the next funding round.

  • CAP

The Canadian Agricultural Partnership (CAP) is a five-year, $3 billion, federal-provincial-territorial agreement launched on April 1, 2018, that will replace Growing Forward 2 (GF2). CAP provides cost-sharing funding for processors and other agri-related businesses.

Provincial programs under the partnership are tailored to meet regional needs through various streams. Federal programs under this partnership include AgriScience and AgriInnovate, which are focused on enhancing competitiveness through R&D and adoption of innovative products/practices, with an emphasis on sustainable and clean growth in the agricultural sector.

  • RII

Other government funding sources may be specific to provinces, such as the FedDev Rural Innovation Initiative (RII). SMEs operating in rural Southern Ontario within priority sectors could receive a non-repayable grant to cover up to 50% of eligible project costs for a maximum of $100,000 through the FedDev RII Regional stream. Priority sectors include advanced manufacturing, clean technology, digital industries, food processing, and Agtech. The current application intake started on May 21, 2019, with project activities to be completed by December 31, 2020.

Commercialization

The Industrial Research Assistance Program (IRAP) supports companies that are investing in new technology projects that lead to new products, processes, or services in Canada, with an emphasis on commercialization. IRAP will cover labor and subcontractor costs. 

Applicants are allowed to apply to both IRAP and SR&ED as expenditures are not double-claimed.

Export

CanExport is a government funding program that provides funding to Canadian small and medium-sized enterprises (SMEs) to support new export market development.

Previously, the CanExport program excluded the agriculture and food processing sectors, since companies in these industries were already eligible for export funding through the AgriMarketing program. However, as of August 22, 2019, the program will also be expanded to include supporting companies from Canada’s agriculture, agri-food and agri-products industry, including fish and seafood. CanExport’s funding limit for SMEs will also increase to $75,000 to cover up to 75% of eligible expenses.

Eligible subsectors

Agri-tech subsectors that are eligible for the above non-dilutive funding include, but are not limited to:

  • Precision agriculture            
  • Agricultural machinery and robotics              
  • Agricultural biotechnology
  • AI-based Agritech and predictive analytics      
  • IoT-based smart farming, remote sensing, and advanced monitoring
  • Foodtech and supply chain management including food safety and traceability
  • WasteTech
  • Sustainable/alternative protein development and culturing
  • Irrigation and water management systems
  • Aquaculture

Agri-tech is poised to revolutionize food production and export practices by providing new opportunities and innovative solutions to imminent challenges such as climate change and food security. With increasing prioritization of the agri-food industry, an abundance of natural resources and access to various funding options, Canada is set to become a frontrunner in paving the way for an agricultural revolution.

NorthBridge Consultants has been assisting companies in accessing government funding for over 25 years. As one of the largest independent government funding consulting firms in Canada, our objective is to maximize the government funding potential for your company. Contact us today to find out how much funding your company could receive.

Co-authored by Rebecca Galicha, Technical Writer and Ela Malkovsky, Technical Writer/ Editor-in-Chief at NorthBridge Consultants.

What Every Canadian Startup Needs to Know About Non-Dilutive Financing

When it comes to starting a Canadian business, especially one with expensive R&D aspirations such as those in the high tech industry, it’s of crucial importance that a startup leverages government funding to extend the runway of its venture.  

A startup that doesn’t capitalize on the wide range of government funding opportunities is putting itself at a huge disadvantage, which can not only limit profitability but also undermine innovation and relinquish equity that would otherwise remain centralized.

In order to maintain the vast majority of control in a company during the startup process, it’s important that funding leverages non-dilutive financing when possible. While dilutive funding can be advantageous to get over fiscal hurdles requiring a quick injection of revenue, dilution will affect executive discretion and detract from long-term profits as financers exercise their power as shareholders or seek high returns on their investments. Venture capital and angel investors should, therefore, be tentatively used during the startup process until after the risk surrounding commercialization has been surmounted and any leverage held by financers is obviated. The SR&ED tax credit program, in combination with the other sources of non-dilutive government funding, can maximize a startup’s potential for success by reducing the risk of research and development.

Maximizing Profits and Mitigating Risk with SR&ED

Canada’s Scientific Research and Experimental Development (SR&ED) program provides an amazing means of funding a business every fiscal year with tax incentives. That means small and medium-sized enterprises (SMEs) can start collecting substantial returns up to 35% on qualified expenditures following their first year of research and experimentation, as long as program criteria are met. The Canadian government’s commitment to supporting innovation ascends beyond almost every other industrialized nation in the world, as demonstrated by the more than $3B paid out each year to participating companies. A startup that structures their business to meet SR&ED requirements from the start will be all the more prepared to save countless dollars that can accelerate business growth and product development as the money is reinvested into further project innovation.

To qualify for SR&ED, first and foremost a company must be a Canadian-controlled private corporation with a total net income below $800k and taxable capital employed in Canada not exceeding $50M. A company can claim expenditures related to experimental development, applied and basic research, and support work by ensuring that these expenditures meet the three criteria of SR&ED’s assessment on scientific or technological eligibility. That is, a company must establish that their claimed project (1) has technological uncertainty that can only be overcome through (2) systematic investigation and that hypothesis formulation and experimental analysis during development (3) generates information that advances understanding of the underlying technologies.

Another critical requirement to claiming SR&ED is ensuring that the necessary information is collected throughout the year to comprehensively file a claim, which is why structuring a startup to track experimental development, employee labor, material expenditures, etc. is essential for maximizing business efficiency. With a practical tracking system in place, claiming SR&ED tax credits can be a lucrative strategy for financing prototype and minimal viable product (MVP) development, as well as funding clinical trials (in the medtech industry for example), because it affords a company the opportunity to take risks in their experimentation to improve new technologies and approaches, and ultimately help form and articulate patents/IP to garner further investment.

Combining Sources of Early-Stage Funding

Depending on the size of a startup and the stage of business development, companies can also avoid dilution by applying for multiple government loans and grants. Loans bear the cost of interest in return for less operational oversight, while grants serve as a non-repayable contribution that is contingent on meeting various qualifications.

The National Research Council of Canada’s Industrial Research Assistance Program (IRAP) offers an especially rewarding means of financing SMEs qualifying in technology innovation. IRAP funding typically ranges between $50k-250k, making it a great opportunity to subsidize research and experimental efforts without diluting shares or falling beholden to acquisitive creditors. The Ontario Centres of Excellence (OCE) is another great source to receive innovation funding through industry-specific programs with special emphasis on digital and software work within the information and communications technology (ICT) sector.

Acquiring Private Sources of Funding

Whenever a business does decide that private investment is the best way forward or bridge funding is required to overcome particular fiscal restraints, SR&ED financing can help to fill the funding gap in a non-dilutive manner, prior to subsequent funding rounds.

While the SR&ED tax credit program is critical for the viability of startup companies in Canada, the main challenge with the SR&ED program is that it often takes over one year before the funds can be received by the applicant. SR&ED financing helps to facilitate and alleviate existing cash flow issues in early-stage businesses, as startup companies often have difficulty commercializing their concepts after exhausting their previous rounds of funding. In this way, accrual debt financing in the form of SR&ED financing allows early-stage companies to bridge the funding gap and extend the runaway until the next funding round, thereby bolstering their business plans.

Moreover, a successful track record of securing government funding, such as SR&ED tax credits, can appeal to private investors by reducing the perceivable risk for funding product development.  

All of this funding information is sometimes a lot to process, but NorthBridge Consultants is here to help. If you have any questions or want to learn more about SR&ED for startups, please contact us.

Co-authored by Philip Finkelstein, Technical Writer, and Ela Malkovsky, Technical Writer/ Editor–in-Chief at NorthBridge Consultants.

Historic Reform of Funding Programs: Budget 2018 Highlights

Federal Finance Minister Bill Morneau’s third budget, tabled on February 27th, 2018, forecasted a deficit of $18.1B for fiscal 2018, with deficits projected to decline gradually to $12.3B by 2022.

Budget 2018 confirmed the announcements made in the 2017 Fall Economic Statement to reduce the small business tax rate to 9% by January 2019. There were no proposed changes to the corporate income tax rates or to the $500,000 Small-Business Deduction Limit for Canadian-controlled private corporations (CCPCs); however, Budget 2018 introduced a $50,000 threshold on passive income held in corporations. The small business deduction limit will be reduced by $5 for every $1 of investment income above the $50,000 threshold and will be reduced to zero at $150,000 of investment income, at which point the business owner will lose the Small Business tax rate and will be taxed at the general corporate rate.

Following a review of all innovation programs across 20 federal departments and agencies, Budget 2018 proposed a “historic reform of business innovation programs.” Overall funding will increase but the total number of business innovation programs will be streamlined by up to two thirds. The initiatives proposed in Budget 2018 include:

Research & Innovation

  • $700M over 5 years, starting in 2018, to enable the Industrial Research Assistance Program (IRAP) to support projects up to a new threshold of $100M.
  • The Strategic Innovation Fund (SIF) will move away from supporting smaller projects to allow for more focused support for projects over $10M.
  • The Build in Canada Innovation Program (BCIP) will be consolidated within Innovative Solutions Canada.
  • $85.3M over 5 years, starting in 2018, to support a new Intellectual Property (IP) Strategy aimed at helping entrepreneurs understand and protect their IP and get access to shared IP. Further details will be revealed in the coming months.
  • Five regional high-tech innovation superclusters were announced in February 2018 to receive $950M over 5 years in non-repayable funding.

Business Growth

Small business & Startups

  • $4.6M over 5 years, beginning in 2018, for Canada’s Start-up Visa Program, which provides permanent resident immigration status to innovative global entrepreneurs with business growth potential in Canada. As announced in July 2017, this program will be made permanent in March 31, 2018.
  • $115M over 5 years for the Women Entrepreneurship Strategy through regional development agencies.
  • $1.65B over 3 years for women entrepreneurs through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).
  • Regional development agencies may take on more responsibilities for accelerator and incubator support such as the Canadian Accelerator and Incubator Program.
  • The Venture Capital Catalyst Initiative was launched this past year to increase the availability of late-stage venture capital to support the growth of innovative Canadian firms.

Export

  • The Canadian Trade Commissioner Service will amalgamate programs administered by Global Affairs Canada including CanExport, Going Global Innovation, Canadian Technology Accelerators, and Canadian International Innovation program.
  • $10M over 5 years, starting in 2018, to renew the Canadian Technology Accelerators Program for helping high growth tech companies grow in key U.S. markets.
  • $10M over 5 years, starting in 2018, to connect women with expanded export services and opportunities through the Business Women in International Trade Program.

Skills Development

  • Additional $448.5M over 5 years, starting in 2018, for the Youth Employment Strategy’s Canada Summer Jobs program to double the number of work placements and modernize the strategy in the following years.
  • $19.9M over 5 years, starting in 2018, to pilot an Apprenticeship Incentive Grant for Women, to provide a $3,000 grant for each of the first two years of training in Red Seal trades.
  • $46M over 5 years, starting in 2018, for a new Pre-apprenticeship program for underrepresented groups.

Victoria, BC Lunch & Learn- Government Funding for R&D, Innovation and International Growth

There are many Government Funding programs available to assist Canadian businesses with expenses related to R&D, new product development, manufacturing process improvements, tapping into international markets and workforce development.

Join this lunch & learn to learn about some of these programs, how they fit in the difference stages of your corporate development, and also about the limitations of government funding and the need for alternate sources of working capital.

Some of the funding programs covered include:

  • SR&ED (Scientific Research & Experimental Development)
  • IRAP (Industrial Research Assistance Program)
  • SIF (Strategic Innovation Fund)
  • SDTC (Sustainable Development Technology Canada)
  • Growing Forward / Agri-Innovation
  • BCIP (Build in Canada Innovation Program)
  • Engage, CRD, Mitacs (grants for working with universities)
  • CanExport
  • Hiring & Training Grants

About the presenter:

Jaap Siekman MSc, PEng, PMP
LinkedIn Profile
Jaap is the Regional Manager for NorthBridge Consultants. He educates start-ups and growing companies on Government Funding programs that support R&D and Innovation in Canada.

Jaap has ~28 years’ experience in Engineering, Manufacturing, Product Development and Management in a variety of industries.

NorthBridge is a national consultancy firm, with offices in BC, Ontario and Quebec.

 

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Abbotsford Lunch & Learn- Government Funding for R&D, Innovation and Growth

There are many Government Funding programs available to assist Canadian businesses with expenses related to R&D, new product development, manufacturing process improvements, tapping into international markets and workforce development.

Join this lunch & learn to learn about some of these programs and how they fit in the difference phases of your corporate development.

The presentation is geared towards industrial type businesses that design or make any type of proprietary product such as equipment, parts, food, materials, including software.

Some of the funding programs covered include:

  • SR&ED (Scientific Research & Experimental Development)
  • IRAP (Industrial Research Assistance Program)
  • SIF (Strategic Innovation Fund)
  • SDTC (Sustainable Development Technology Canada)
  • Growing Forward / Agri-Innovation
  • BCIP (Build in Canada Innovation Program)
  • Engage, CRD, Mitacs (grants for working with universities)
  • CanExport
  • Hiring & Training Grants for technical personnel

Fees/Admission:

Members: $10
Non Members: $15
Prices are subject to GST

Includes Lunch!

Location:

Sevenoaks Boardroom
2nd Floor, Sevenoaks Shopping Centre
32900 South Fraser Way
Abbotsford, BC

Date/Time Information:
Wednesday, January 24, 2018
11:45 AM – Registration & Lunch
12:15 PM – Presentation
1:00 PM – Adjourn

About the presenter:

Jaap Siekman MSc, PEng, PMP
Jaap is the Regional Manager for NorthBridge Consultants. He educated start-ups and growing companies on Government Funding programs that support R&D and Innovation in Canada.
NorthBridge is a national consultancy firm, with offices in BC, ON and QC.

Jaap has ~28 years’ experience in Engineering, Manufacturing, Product Development and Management in a variety of industries.

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