Finding Grants and Small Business Loans in Canada

Funding for small businesses in Canada is remarkably similar to the U.S., even to the extent that the airwaves and internet are streaming with offers to help you find “free” money. The truth is, even in Canada there isn't much of it floating around.

Why Businesses May Not Find Many Grants

Beginning with grant money, the Canadian government does provide a few small business grants. But you'll rarely see the word “grant” on official websites because they use different terms. When grants are available they are restricted to specific types of companies doing specific kinds of work.

One such program is a grant for new farmers in Quebec who are just getting started and are between 18 and 40 years old. Another example is a grant program for artists and crafters in the Northwest Territories.

The point here is that the Canadian government is not in the business of giving away money. They prefer to encourage business through low-cost loans or investment assistance programs. Small business owners willing to risk a bit of their own capital will be able to find plenty of funding resources in the form of small business loans.

One of the best assistance programs is Canada's self-employment program designed to help unemployed individuals start their own businesses. The program was originally a federal one but has since been passed on to the individual provinces. To be eligible, an individual must be unemployed and currently receiving provincial Works Benefits. Under the program, a qualified individual willing to invest his own resources and elbow grease can receive an income benefit for up to one year while he establishes his own company.

One example of a Canadian loan program would be the Canada Small Business Financing Program established in 1999. This loan program encourages small business lending at the retail level by offering to cover up to 85% of the loan value on any small business loan made by a commercial bank. If the borrower defaults on his loan, the maximum amount the bank could lose is 15%. This program has been very successful since its inception and in fact, was the successor to the equally successful Small Business Loans Act.

Other Types of Canadian Small Business Funding

The Canadian government offers other types of incentives to encourage small business in Canada including subsidies for facilities rental or purchase, hiring and training subsidies, tax refunds and credits, and equity financing. The latter is an attractive option for both the government and the business owner because it creates incentive on both ends to succeed.

For the government, they need to make money as any investor would. This makes them more likely to help the business owner in ways they wouldn't otherwise engage in. As for the business owner, keeping investors happy is a good way to keep equity funding flowing. Since it usually takes several years to make a business profitable, the more equity funding there is, the more likely the business will eventually turn a profit.

Without a doubt, small business funding is available in Canada. For start-ups and established businesses alike, entrepreneurs should simply be aware that nothing is free. Stay away from advertisers who promise you money for nothing. If you need help getting started in your search for funding, check out your local bank, employment office, trade group, or business association. They will be able to point you in the right direction.