How to tell if your small business needs government funding

Knowing when your small business needs government funding can mean the difference between success and failure. So before you apply for funding, or hold off on applying for government funding, stop and think. Do you need it?

When it comes to government funding there is a difference between your small business needing the funding and wanting the funding, so be sure to first understand the two.

Government funding is often seen as “free money”, something that may not have to be paid back so why not take advantage of it, right?

The truth is that there is so much more to government funding then what meets the eye. For example:

• There are many different types of government funding programs
  • Government Grants
  • Government Loans
  • Tax Breaks/Tax Credits
  • Incentives
• There are many different types of government grants
  • Non repayable government grants
  • Partially repayable grants
  • Conditionally repayable grants
  • Partial contributors
• There are many different types of government loans
  • Interest free government loans
  • Low interest government grants
  • Government guaranteed loans

Before you jump to conclusion and say “yes I want funding because it’s free money”, be sure to know the differences between each one of these funding program types.

As each funding agency in Canada has a it’s own set of rules, criteria and qualifications you must meet in order to get your small business funded, it’s important to get to know the program/agency you are applying to. That is if you need the funding.

Government funding isn’t just “free money” that you can take and do as you wish. Instead, government funding once provided is strictly and carefully monitored to ensure that you as the business owner who obtained the funding is actually benefiting from the funds provided for the exact purpose you applied for.

For example:

Your funding application and your business plan stated you need $12,500 in funding to help you pay for new equipment. The government agency verified your needs and provided you the grant for that. A few months down the road you buy one piece of equipment and use a percentage of the funding to pay an employee. Technically, you have broken the rule of that funding agency, and the “non repayable grant”, now has to be paid back in full.

As you can see, funding can only be used for the exact purpose you apply for and is not always just free money.

Before you decide that government funding is right for you, it’s important to know more about it.

How can you tell if your small business needs funding?

To be able to tell if your small business needs funding, be it from the government, business partners, private investors, banks, or any other source, first you have to know what it is that you need to do with your  business.

Do you need help hiring staff, paying for wages, paying for tools or equipment, paying for marketing and advertising, paying for R&D, or maybe to help you improve your cash flow?

If you answered yes to any of those, the next question to ask yourself is; do you have any money  which you can use to fund the above mentioned or do you for sure need to borrow?

If you need to borrow, break it down to the following:

• How much money do you need?
• Do you need all of it now or can it be broken down over time?
• Is it easier to borrow on credit card/savings/banks or do you need the government?
• What happens if you can’t get funding?

If at the end, you know that government funding is the only solution to help your small business – start your funding search now and apply.

Once you’ve figured out that you need government funding to help your small business succeed, remember that you will need a business plan and that on average it can take between 2 weeks to over 6 months to actually get funding – that is if you are eligible and meet all of the program criteria.

Knowing you need government funding and delaying it longer will only hurt. Take a look at our Funding Database and see how our platform can help!