Ian: : Welcome to the Business Coach Podcast, an advice-oriented series for Canadian entrepreneurs. I’m Ian Portsmouth, Editor of PROFIT Magazine and I’ll be your host as we tackle the hot issues and opportunities facing Canada’s small businesses. We’ve developed this podcast in cooperation with BMO Bank of Montreal. Over the course of the series I’ll be drawing on experts in a number of fields including some BMO experts in order to provide the credible information and prescription you need to run your small business better.
As every small business owner knows, capital is the life blood of a company. And just about every small business owner could use more capital to help them fund such critical things as innovation, inventory, capital improvements and general expansion. But given all the struggles that private companies say they have with raising adequate financing, you might be surprised to learn that there are millions and millions of dollars available to Canadian businesses free of charge and just for the asking.
I am referring of course to government grants and tax credits. Joining me to help us explore these under-appreciated sources of capital is James Perly, a Toronto-based government funding consultant. James welcome to the Business Coach.
James: Thanks Ian, glad to be here.
Ian: : So James, tell us, how much of this government grant and tax credit money is out there?
James: Oh, Ian, the federal government gives out over 3 billion dollars a year.
Ian: : That’s an astounding figure. Has that come down much in recent years, because I’m thinking, we’re all aware of government cut backs and a lot of people may think that there is no tax credit and grant money out there?
James: Really that’s money, you know, designed to stimulate the economy, so really, if anything, governments have actually been widening, kind of, the net that companies can qualify for as well as upping the amount. The government recognizes that really, you know, and it’s primarily in the creation of intellectual property, it’s going to be the future of Canada. So what you get is the vast majority of these funds are really targeted one way or another to stimulate research and development.
Ian: : So, who might qualify for these tax credits and grants?
James: Basically, you know, if you have engineers or computer scientists on staff, these is a high likelihood that you will qualify for something. A lot of these programs do give more if you’re, what they consider, a smaller business. You have, say, less than 300 dollars in taxable income with less than 500 employees. But it does not mean the big guys don’t qualify, they’ll just get less support.
Ian: : And what if I’m in Agriculture or Distribution or Retail, am I shut out or are there programs available to me depending on my industry and perhaps, of course, where I might be located in the country?
James: Sales type businesses are actually the ones that get the least amount of support so, really, you know, Distribution or Sales companies. agriculture is one of those special areas, kind of like, you know, books or movies where frequently, you’ll either have a federal, or quite often you will have provincial programs that are specific to that industry. Really, you have two large federal programs that cut across all industries, which are the SRNED and the IRAP programs.
Ian: : And, SRNED and IRAP are acronyms for something. Can you tell us what they are?
James: Sure, the SRNED is kind of the big daddy one, it’s a tax credit and if you’re a smaller company, it’s refundable, which means instead of using it as a tax credit, they will actually give you the money back if you don’t have tax payable. Now SRNED actually stands for Scientific Research and Experimental Development. And as a tax credit, it’s basically, you have to perform, you know, the work and you’re looking to recoup the money after the fact.
With IRAP, the acronym for that, they love acronyms right, it’s the government, so it is the Industrial Research Assistance Program, and that one is a forward looking one, so you have to apply before you do something and they’re going to help you develop a new technology that’s going to lead to commercialization.
Ian: : Now, in the case of SRNED credits, it’s my understanding that you don’t necessarily have to be putting R&D into a salable product. Sometimes, it can be simply an improvement in process, is that correct?
James: Yes, you see that a lot more in manufacturing, you know, we got to compete with China right, so we are not going to out produce them. So a lot of manufacturers here are looking at ways to do make products that are much more complicated and that involve a lot more steps that are going use very hard and though through put. So really, the design of a better methodology to make products can also qualify.
Ian: : So, I am an entrepreneur who wants my piece of the pie, what do I need to do to apply for this cash?
James: Well, you got to cut down a lot of trees right. Bureaucracy loves paper. You know, there are forms to be filled out, write-outs that have to be written, numbers that have to be crunched. You know, for some of these programs, we’ll hand in as much as 100 to 150 pages for each application.
Ian: : And, is the government generally looking for you to meet certain very objective criteria almost the way some banks will judge people for loans, pretty much using a computer or are there ways that you can sway the decision makers, are there ways to make your company appear to be more worthy of funding or whether it’s a grant or a tax credit?
James: You know, it’s interesting, for SNRED and any other tax credit programs the money that they give you is considered an entitlement and what that means is that if the work you did falls under the definition of the Act, then you qualify and they technically automatically owe you that money. So for that program, to make yourself more worthy, there is nothing you can do really other than involve yourself in the solving of more challenging and more contentious technological issues.
Now for IRAP, it’s completely different. You know, I tell clients to treat IRAP as if they were venture capitalists. IRAP sees the money they give out as investments in your firm and, you know, the pay back comes from helping you increase either your sales or your headcount and the resulting taxes that get generated from that. So IRAP is going to want to know that your company will be a good investment for them and that you will be able to capitalize on the help that they have provided you.
Ian: : So, you’re really demonstrating your market potential in that case.
James: Yes and the strength of your company, you know, and that, really, that they are going to see a return on the money that they see as an investment.
Ian: : So, James, you are a government funding consultant, you mentioned that you sometimes fill out 100 to 150 pages worth of forms and applications for people. Can you tell us more about your business and what you do for companies who are looking for this funding?
James: Sure. You know, Ian, there are really two things that we do in particular. The first is that we help our clients develop a unique strategy for each one of them so that we can manage on an on-going basis to ensure that they don’t leave any money on the table. A great example is a call that I had this morning, it last about an hour with the client and, you know, we just completed their SNRED return for the last tax year, and we are trying to do is we’re trying to determine what their likely cash flows would be from both the SNRED and the IRAP programs for the coming year, based on their development plan.
And really, the second thing that we do is manage this process from the start to finish. There is just a lot of work to do in generating, you know, all that paper that we need. And we focus on making this as painless as possible for the client. And, now, we have two large clients right now and, you know, they have applied successfully for over five years each internally and they just want to get this off their plate so that they can focus on their core business.
Ian: : Which is always a sound business decision to make. Where should people go to figure out what credits and grants they might qualify for?
James: If they want, they can send me an email, my email address is email@example.com. I’ll be glad to give them my two cents on their situation. They could also Google SRNED, IRAP or visit a Services Canada website that tends to have a lot more of those smaller programs down to the provincial or the municipal level.
Ian: : That’s great advice James and thanks for joining the Business Coach.
James: Thank you very much Ian.
Ian: : James Perly is president of James Perly Consulting, a provider of government tax credit and grant consulting services. He spoke to us today from his office in Toronto.
Thanks for listening to this episode of The Business Coach Podcast. I hope you discovered a few insights that will help you grow your business. You can download this podcast series at bmo.com, profitguide.com and from iTunes. Until next time I’m Ian Portsmouth, Editor of PROFIT Magazine wishing you continued success.