Retroactive funding for innovation may be available to some Canadian fabricare businesses. 

By Becca Anderson

I just had a fascinating interview with Shannon Fraser of Henderson Associates, which helps companies secure Canadian government funding for innovation and operational improvements. Though this won’t apply to many of our readers, there may be some who will take advantage of the opportunity to explore this further.

Most grant programs require you to apply before a project begins and then wait to find out whether you’ll receive funding. The federal SR&ED (Scientific Research & Experimental Development) program works differently. In all cases, companies complete the work first and then apply for reimbursement afterward. 

Henderson Associates works exclusively with the SR&ED (Scientific Research & Experimental Development) Fund. Before you click out of this article, that doesn’t just mean finding the next cure for cancer. It can include many things, some of which fall within our industry.

What is this fund?

This government fund is 40 years old, and has a $4.2 billion budget. Unlike many grant funds, this one is retroactive. It reimburses your company for work you’ve already done—and when you get the money, you are free to use it in any way you want. You’ve already shown you were willing to do the work. This is money rewarding you for doing that.

Some of the types of projects Shannon cited were:

• Automation
• Product improvement
• Cleaning agent development
• Developing a new, proprietary methodology of cleaning
• Updating and automating an obsolete plant
• Adding facilities to automate clothing drop-off/pick-up
• Buying equipment and then customizing it in house

These were just ideas she had off the top of her head. There are undoubtedly other projects that could qualify as well. 

The important point is that when you apply for this grant, you have already done the work. You will have to prove what the need was, how your work responded to that need, and the outcome. And that takes a specialist to write your grant application. At Henderson, they have engineers and other professionals who create what is, in essence, a scientific research paper on your behalf. They send it to the government for review, and if it’s accepted, you’ll receive retroactive funds for anything you wish to spend it on.

What Makes SR&ED Different?

• Retroactive funding 
• Cash reimbursement for many applicants 
• Freedom to use the funds however desired 
• Existing project rather than proposed project

Eligibility

Of course, there are rules surrounding a fund like this. Shannon outlined them as follows.

• The company must be a Canadian Controlled Private Corporation (CCPC).
• Sole proprietorships and other business structures are not eligible. 
• You must have at least 1 person on T4 payroll (not using subcontractors for the project.) That could be just the company owner.
• You must have at least one year in business before applying (this is not for start-ups).

You have to be willing to do the project even without grant money; this is an after-the-fact reimbursement. What you are reimbursed on is payroll used to develop the project, and capital expenditures. Payroll is the primary factor in calculating reimbursement, although other eligible costs may also be considered, including equipment expenses and costs associated with testing and development. 

First year applicants can get up to $100,000 back. An equation is used to determine how much. You will have to show how much of the company’s time was used on the project (payroll). So, say it took 25% of your payroll for that period to do the work. 

Shannon explained that applicants can seek reimbursement of up to 65% of the payroll devoted to the project, along with certain eligible capital and development costs. The exact amount is determined by a government formula and varies by project. 

If you’ve heard of the SR&ED program before, or even researched it online, you may think it is strictly a tax credit. In fact, Shannon said, the government only enforces that method of reimbursement if your payroll exceeds $3 million per year. Otherwise, the reimbursement is typically paid directly to your company. 

How does it work?

I asked Shannon to walk me through the process for a new grant application. It seems relatively simple. While some grant application companies want to come alongside you for weeks or months on end, Henderson keeps it simple.

• You book a video meeting with Shannon or someone else and they will walk you through the procedure (what the fund does, the government process, etc.)
• You sign a contract if your idea is viable for the fund and you want to proceed.
• You meet with a grant writer, who will put together that “scientific research paper” that the governement requires. The writers are engineers, scientists, etc. They’ve done lots of these. In that meeting, you’ll explain your innovation so they can communicate it properly. 
• The grant paperwork is written. This takes about 2 weeks. If there are any follow-up questions, they communicate with you via email, to save you time and effort.
• You must grant them Level 1 CRA access, to verify details.
• When the proposal is submitted, the government takes 2-3 months to review. Typically, from start to finish, it takes about 4-5 months before you have cash in hand.

How does Henderson Associates make its money in all this? They work on a strict contingency basis. You don’t pay them a dime unless your grant is funded. If a claim is successful, Henderson Associates receives 25% of the amount recovered. According to Shanon, 80% of the grant applications they submit are successful.

Next Steps

If you have already completed a project, or are just heading into one, this grant program might be of interest to you. But you won’t know unless you ask some pointed questions. So, Shannon suggested that any company needing more information contact her via email and run it by her. If it fits the criteria, she’ll send you a link so you can have a video chat on your phone or computer to get into more detail. Fraser encouraged interested companies to contact her with questions about potential eligibility. 

Food for thought— or maybe a boost to your bank account.

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