Myths about small business grants in Canada

Most small business grants in Canada are not free money to start or run any business. They usually pay a share of a specific project, such as hiring, exporting, adopting technology or saving energy, and you put in money of your own. Knowing the common myths will save you time and help you find funding that actually fits.

Myth: there is free government money to start any business

This is the most common myth, and the one scammers rely on. Very few programs give a non-repayable grant just to open a business. Start-up support in Canada more often comes as a loan, mentoring, training, or a small grant tied to a training program for a specific group, such as young entrepreneurs or students.

What to do instead: read our guide to funding to start a business and browse start-up programs. Expect a mix of loans, advice and smaller grants rather than one large cheque.

Myth: you can get a grant for anything

Grants are written for a purpose. A program might fund export marketing, research and development, hiring a student, an energy retrofit or a community project. It will list its eligible costs, and anything outside that list is not covered.

Day-to-day costs like rent, existing staff, inventory or paying off debt are rarely eligible. If you start with "what do I need money for?" and then look for a program built for that purpose, you will do much better than starting with "what grants exist?"

Myth: grants cover the whole cost

Most business programs use cost-sharing: the program pays a share and you pay the rest. Each program sets its own share; check the program page. Some ask for matching funds or let you count in-kind contributions. Many pay by reimbursement, so you need cash to spend first and claim later.

Our guide to building a grant project budget explains how to plan for this.

Myth: you need a consultant to win a grant

You don't. Most applications are designed to be completed by the applicant, and many funders offer advisors, information sessions and an applicant guide. A good consultant can help with a complex file, but nobody can guarantee approval, and you should be wary of anyone who charges a large fee up front or promises "guaranteed" funding.

Read should you hire a grant writer? and how to spot a grant scam. Our scam warning signs are worth a look too.

Myth: only big companies win

Many programs are designed for small and medium-sized businesses (SMEs), and some are only for very small employers or for specific groups such as women, Indigenous, Black, young or newcomer entrepreneurs. Programs like regional development funding, energy rebates and student wage subsidies are used by small firms every day.

What matters is fit: whether your project matches the program's goals and whether you can show you'll deliver it. See funding for small businesses and the small business funding guide.

Myth: loans are always worse than grants

A grant doesn't need to be paid back, but it is often small, competitive, slow and narrow. A loan or a repayable contribution can be larger, more flexible and faster, and some come with friendly terms or advice. The right choice depends on what you need, how soon, and whether the project will earn money to repay it.

For a side-by-side view, read grant, loan or tax credit?.

Myth: tax credits aren't real funding

Tax credits such as the research and development credits under SR&ED can be worth a lot to an eligible business, and some are refundable. They work differently from grants: you usually claim them after the work, through your tax return. Read SR&ED vs IRAP to see how a tax credit and a funding program can fit together.

Myth: you can apply after you've spent the money

Most programs only pay for costs incurred after you're approved. Buy the equipment or sign the contract first and you may lose the chance to claim it. See apply before you spend.

Myth: once approved, the money just arrives

Approval usually leads to a contribution agreement, then claims with receipts, progress reports and a final report. Some programs keep a holdback until the end. Read what happens after you apply.

Where should I start?

Write down the project and what it will cost.
Run the funding check to see programs that fit your business and location.
Read each program page carefully, including who is eligible and which costs count.
Use the grant application checklist before you submit.

Frequently asked questions

Are there grants to start a small business in Canada?

Some, but fewer than people think. Start-up help is more often a loan, mentoring or training, with small grants for specific groups or programs. Check start-up programs for what is open.

Do I need to pay someone to find grants for me?

No. Finding programs is free on CanGrant and on funders' own pages. Be careful with anyone who charges to "unlock" grants or guarantees approval.

Can a sole proprietor get a grant?

Sometimes. Some programs require you to be incorporated, while others accept a sole proprietor. Each program says who can apply on its page.

Is a grant better than a loan?

Not always. A grant is non-repayable but often narrow and slow. A loan may be faster and more flexible. Choose based on your project and your cash flow.

This article explains how funding generally works. Each program sets its own rules, amounts and dates: check the program page and the funder’s site before you apply. A CanGrant editor hasn’t reviewed this article yet.