As you start a small business in Ontario, government funding options may be considered to help you get the capital required to start up.
The Ontario government has a number of different funding programs to help with this.
Knowing which programs are best suited for your type of business and the various funding areas funding needs can help you succeed
So what are the various government funding program types?
The most common include government grants, government loans, and tax breaks or also refer to as tax credits.
In this article, we’re going to be looking at the difference between government grants and government loans.
Government Grants versus Government Loans
Both government grants and government loans are provided by the various levels of the Canadian government. The funds can come from your local government, the provincial Ontario government, and via the federal government of Canada.
Wherever the money comes from, funds can be used to help your small business advance and pay for the various expenses you may have.
There are multiple types of government grants.
Not all government grants are made equal. But all government grants are non repayable.
There are a few different types of government grants including those of:
- Non repayable government grants
- One time and Renewable Grant
- Partial contributions
While other government grants exist, these are the top grant types.
Non repayable government grants
Just as they are called these types of government programs are non repayable. This means that the money that you are provided with to fund whatever requirement you have for your small business, the money does not need to go back.
The money is yours to do with what you wish as long as it covers the initial application requirements you applied for.
Failing to apply the funds towards a requirement that you initially stated could however result in a penalty and require you to pay the money back.
One time and renewable grants
The one time grants are usually funding programs that are created to fund at 1-time purchase or payment. These programs aren’t placed to get you a kick start with your business.
Generally, the one-time grant payments are made to help you hire staff, provide training, go green, and so on.
The renewable aspect comes in if you’re a larger company and you need to have these types of expenses ongoing, and require support.
Another form of government grant that requires no repayment, however, most business owners try to shy away from this type of funding.
The partial contribution part requires that you as the business owner put in a portion of the funding towards your own business as well.
This way both you and the government agency providing you the funds share the same risk.
The percentage of the partial contribution may vary from program to program, business to business to business, and may have additional terms to meet in order to be eligible.
A government grant is always preferred. It is free money that you can use the start and boost your small business in Ontario. While not everybody can qualify for a government grant if you do, you are in luck.
Access the Ontario small business start-up platform and the funding database to see all available government grants as of today.
If by chance you’re not eligible for any government grants, government loans aren’t just as good if you need the funding.
The majority of government loans are far better than any private or bank loans. A government loan means money in your pocket to cover the needed expenses of your small business.
There are different types of government loans to consider, And these include:
- Low interest loans
- No interest loans
- Conditionally repayable loans
- Government guaranteed loans
In a comparison of government grants and government loans, the loans are often much easier to obtain.
They have more options for you to consider and often have less strict requirements. Government loans can also be used for more types of expenses.
Low interest and no interest loans
These types of loans are provided by the government and also come from various levels of the government, including the local, provincial and federal governments of Canada.
While these are funds you have to pay back because they are still considered a loan, there are options that have very low-interest rates that make it easy to borrow. There are also programs that have no interest tied to the amount at all.
Conditionally repayable loans
Some of the best types of government loans are conditionally repayable loans.
While it is money that you have to pay back, terms are often negotiated, and conditions are placed to help you as a small business borrow smart.
Some of the conditions may vary however, conditions such as not having to repay any amount of funding until you are successful and making money, is potential. Other conditions may be, only having to repay after a certain time such as 5 years later.
Conditional loans are very much recommended and comparison to any other types of loans available.
Government guaranteed loans
Often government-guaranteed loans are confused with guaranteed loans. What that means is that most people will consider that they are instantly approved and guaranteed the funding no matter what – however, that is not the case.
Guaranteed government loans mean that the government will be the co-signer on your loan.
So if things go south with the business you are on the hook for a percentage, while the government covers the rest.
In certain cases, the government can cover as much as 85% of the loan.
These types of loans are preferred as it gives you a protection layer and can ensure that if things go bad you have some security.
To see all available government loans for your Ontario small business, Try using the funding database provided by Ontario Startups.
As you can see there are different types of government grants and different types of government loans. Each program branches out into more, and the likeliness of funding depends on many factors but now you are better educated on the different types of government loans and the different types of government grants.
If you need guidance and assistance in determining what grandson loans are available for your business, But what you should consider 1st, speak to one Ontario Startups expert today.