Most small business owners when seeking government funding often worry about paying the funds back.
When starting a small business in Ontario, you already have to consider the startup costs, the expenses to operate your business, the taxes you have to pay, so having additional expenses such as a government repayment, is the last thing you want to consider.
While government funding options are often more favorable for small businesses to consider over the traditional bank loans or private funding terms, your best bet is to go with a non repayable government grant if possible.
A business grant that you don’t have to pay back
First of all, is there a government grant that you don’t have to pay back if you take it from the Ontario government, or the federal government of Canada?
The short answer is, yes; there are various government grants that are non repayable – meaning, it is money that you don’t have to pay back!
These government grants are often called the non repayable government grants, partial contributions or the one time and renewable grants.
The grants that are provided can come from the local Toronto government office, the provincial Ontario government agency, or the federal government of Canada.
How can the government afford to not ask for a payment?
The government never loses.
As you get into business and either borrow money from the government in the form of a government loan, or obtain a government grant that you don;t have to pay back, the government still benefits.
If you don’t pay the funds back directly to the government, you will still use those funds you borrow to pay taxes, to hire staff, staff that will end up paying taxes; as your business grows and succeeds, so does the government!
Is there a chance you will be asked to pay the grant back?
Most government grant programs are non repayable, however if you go off track and use the funds in a different way than initially intended, you are breaking the agreement with the government, meaning you are at risk of being asked to pay the funds back, often with a penalty.
Remember, if you are applying for a government grant for hiring and training costs, and you end up using the grants towards rent, equipment purchase and travel costs, it is going against what you were approved for – this can result in the funds being asked back.
As long as you use the funds towards the exact purpose you initially applied for and what you were approved for, you have nothing to worry about.
Are these government grants taxable?
The government grants your small business receives in Ontario will be considered taxable income for the business. This means that you will be on the hook for having to pay the taxes on the corporate earnings, including the amount you obtain the funds for.
While there are certain ways to avoid the income tax on the grants obtained, in most cases, you will be on the hook!
How do you apply for the non repayable government grants?
With any government funding program, be it a grant, a government loan or any financial assistance provided by the Ontario government, to be eligible you have to meet the criteria each program set up.
These criterias depend on many factors, generally starting with your location, industry and the specific needs you require.
It is always recommended to have a business plan that clearly explains your business model, shows your growth strategy, projects your financial situation at least for 3 years, and clearly shows how you will benefit from the funds you are applying for.
To get help from the Ontario government in the form of a non repayable government grant, consider using the Funding Database at Ontario Startups to locate grant options your business may benefit from