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There are several ways of raising capital. Which option your business goes for will depend upon your business sector, what the funds will be spent on, which province you are located in and your type of organisation.  Let’s look at each option in more detail.

Scientific Research and Experimental Development (SR&ED) Program

The Canada Revenue Agency (CRA) controls the Scientific Research & Experimental Development (SR&ED) tax credit system. It is a program that helps businesses to take part in research and development projects, creating or improving products, processes, principles, methodologies, or materials. It enables business across all sectors to conduct R&D (research and development) and is the largest source of federal government support.

Eligible businesses can receive as much as a 70% refund on qualifying expenditure, in the form of refundable or non-refundable tax credits. The amount varies according to province. Qualifying expenditures covers such things as salaries, sub-contractor fees and materials.

Canadian-controlled private corporations (CCPC) can earn investment tax credits (ITC) on any Canadian SR&ED of 35% up to the first $3 million of qualified expenditures and 20% on any excess amount. Similarly, other corporations, proprietorships, partnerships, and trusts may attract ITC of 20%. Businesses of any size can apply, no matter their sector, as long as they have incurred expenditure on qualifying research and development.

Digital media tax credits -
Ontario Interactive Digital Media Tax Credit

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is based upon eligible Ontario labour expenditure, marketing and distribution expenses linked to interactive digital media products.

It comes in the form of a 40% refundable tax credit on offer to all qualifying corporations that develop/market their own products. For labour used to develop products under a fee-for-service arrangement, the rate is 35%. The same 35% rate applies to labour costs incurred by digital game corporations. There is no limit applied to the amount of labour expenditure nor is there a per-project or annual corporate limit. Eligible marketing and distribution expenses have a set limit of $100,000 per non-specified product. Any Canadian or foreign-owned corporation can apply if it develops an eligible product at a permanent establishment in Ontario and files a tax return in Ontario.

RRRF - Regional Relief and Recovery Fund (RRRF)

The RRRF is a complementary fund that runs alongside other federal programs. To qualify, organisations must have already applied for other federal support measures. Examples of these benefits are the Canada Emergency Business Account, the Wage Subsidy and the Commercial Rent assistance for small businesses. It will be necessary to say whether these benefits were rejected, approved or they were ineligible. RRRF loans up to $1M is available to help support small business with funding to pay for fixed costs like rent, utilities, and other commitments.

As far as the eligibility criteria for the Canada Emergency Business Account (CEBA) is concerned, this was expanded in June 2020 to cover owner-operated businesses. If you are a sole proprietor, a business that relies on contractors, or even a family-owned corporation that pays employees via dividends, you may now be able to apply for a $40,000 interest-free loan from the bank to cover operating costs during the current Covid-19 pandemic. This has been organised in co-operation with Export Development Canada.


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