Maximizing Non-Dilutive Funding: Unlocking Canada’s SR&ED Program with Deloitte

Key Takeaways on SR&ED and Grants from Deloitte

Securing funding is pivotal for businesses striving to enhance innovation and growth. Effectively navigating tax credits and government grants can provide the necessary financial support that allows companies to expand while retaining full ownership. Innovation Factory collaborated with Deloitte to offer insights from experts like Jennifer Edey and Andrew Skeldon, focusing on the Scientific Research and Experimental Development (SR&ED) tax credits and government grant funding—essential tools for Canadian businesses seeking to bolster their financial strategies.

Understanding the SR&ED Program

The SR&ED program is Canada’s largest tax incentive initiative aimed at rewarding companies for their R&D efforts. Jennifer Edey emphasized that many companies underestimate what qualifies for SR&ED. It's not only for groundbreaking inventions; even systematic improvements to existing technologies can qualify. The program offers several key advantages:

1. Entitlement: Unlike grants, if a business's work qualifies, it is entitled to tax credits without competition.
2. Retroactive Claims: Businesses can claim eligible expenses up to 18 months retroactively from their fiscal year-end.
3. Coverage of Costs: Eligible expenses can include wages, Canadian subcontractor costs, and materials.
4. Accessibility for All: Start-ups can also benefit from SR&ED, not just established companies.

Exploring Grant and Incentive Programs

In addition to SR&ED, various government grants and loans are available to support hiring, expansion, and innovation. Andrew Skeldon highlighted several areas for potential grant funding:

• R&D and Innovation: Grants aimed at businesses investing in new product development.
• Talent and Hiring: Funding to support hiring recent graduates and co-op students.
• Equipment and Expansion: Programs designed to scale operations or purchase new equipment.
• Sustainability and Clean Tech: Funding for projects focused on environmental friendliness and emissions reduction.
• Export and Market Expansion: Grants that facilitate entry into international markets.

Unlike SR&ED, these grants tend to be competitive and budget-limited, making strategic planning essential for success.

Maximizing Non-Dilutive Funding Opportunities

For businesses new to funding opportunities, Deloitte recommends a proactive approach. This includes:

1. Planning: Many grants require pre-approval before financial commitments can be made. Identifying applicable grants early and preparing applications can greatly enhance success rates.
2. Optimizing Funding: Combining SR&ED tax credits with various grants and incentives can effectively minimize development costs and accelerate innovation. However, ensuring compliance with stacking rules is vital to avoid exceeding permissible funding limits.
3. Leveraging Expertise: Understanding the complexities of funding policies and eligibility criteria is crucial. Engaging professionals who specialize in SR&ED and grants can streamline the application process and enhance approval likelihood.
4. Intellectual Property Protection: When working with subcontractors, it’s essential to establish clear contracts regarding intellectual property ownership. This is critical for SR&ED eligibility and prevents potential disputes.

Conclusion

A significant takeaway from the Deloitte discussion is that many companies forego funding simply because they do not apply. These programs, designed to foster innovation and growth, require proactive engagement from business leaders. Entrepreneurs should connect with experts, ask questions about eligibility, and explore the funding opportunities available to them. For those interested in learning more about SR&ED and grants, reaching out to Deloitte can provide invaluable guidance on eligibility and application processes.