You have your MVP, have either a working business model or the beginnings of one, and have achieved at least preliminary market traction. If this is the position you’re in, then you have probably already begun planning to raise funds to commercialize or to scale-up your company. However, the options of financing start-up and scale-up businesses are wide-ranging. It is recommended that you look into non-dilutive means to finance growth aside from equity, including loans (debt), government grants and government tax credits. Instead of giving up all future earnings in perpetuity (as with the case with equity), these alternative options are varied and expansive depending on your funding needs.

Bank loans are an extremely common source of funding for small to medium-sized businesses, but bankers are searching for companies with assets to finance. It is difficult for a start-up to come up with the collateral to qualify for a bank loan, so it is recommended that you speak with the Business Development Bank of Canada (BDC).  BDC offers financing solutions through its small business loans, and they also support programs for new entrepreneurs such as Futurpreneur Canada. In Ontario, the Southern Ontario Fund for Investment in Innovation (SOFII) loan program can also help you to work with your bank to secure financing terms.

When it comes to government grants, the Industrial Research Assistance Program (IRAP) is an example of a grant program which offers support and funding for projects related to the commercialization of R&D. Securing funding from grant programs can be difficult due to significant competition, small windows of opportunity, and strict eligibility criteria.  It should also be noted that grants will not typically reimburse expenditures that were incurred before the funding agreement has been executed.  Grants frequently require businesses to match funds being awarded, and also require complex reporting processes in order to secure these reimbursements. 

It is recommended that you consult with a grant funding expert in order to help you through these processes.  When you are able to generate $5M revenue annual, you can also obtain support through the Accelerated Growth Service (AGS).  This AGS is a program powered by Innovation Canada, providing fast growing businesses the opportunity to be aided by the Canadian government stay and grow within Canada through financing, technical advice, and foreign market expertise assistance.

Other options for grant funding include supercluster programs which are areas of intense business collaboration comprised of companies, academic institutions, and not-for-profit organizations designed to improve growth and innovation in targeted sectors. Supercluster funding requires that you form partnerships with other Canadian entities and collaborators to formulate solutions that generate industry-level effects.

Last but not least, the Canadian government offers R&D tax credits to help subsidize qualifying expenditures.  Unlike its United States counterpart, Scientific Research and Experimental Development (SR&ED) tax credits offer fully-refundable tax credits to eligible small businesses.  These tax credits must be claimed with your tax return on an annual basis.  The SR&ED program is administered by the Canada Revenue Agency, who requires that you create contemporaneous SR&ED tracking systems to substantiate your eligible activities.  If your company is interested in potential SR&ED tax credits, it is recommended that you contact a SR&ED professional to ensure you have a SR&ED-compliant tracking system set up. 

When you are financing your company, make sure to take full advantage of less-expensive options before more expensive options like equity. These options, including debt and government funding, can provide you with non-dilutive financing. Government funding technically comes at no cost, but involves significant overhead.  So make sure you contact a funding professional to fully explore all government funding options and the overhead involved.