Highlights from the Canadian Federal 2021 Budget

Recently, the Canadian government released their Federal 2021 Budget to propose how they aim to help Canadian businesses recover from the COVID-19 pandemic, and “to heal the economic wounds left by the COVID recession”.

The COVID-19 pandemic, which shuttered businesses globally beginning in March 2020 has left a significant impact on Canadian businesses in the past year. 

According to the Canadian Federation of Independent Business (CFIB), over 225,000 businesses have failed as a result of the pandemic, despite multiple measures put in place by the government, such as the Canada Emergency Business Account (CEBA), Canadian Emergency Wage Subsidy (CEWS), and more. 

The 2021 Budget is meant to posit an answer to how businesses will fight (and beat) the pandemic. Specifically, the budget addresses three challenges:

  1. How to provide support to businesses so they’re ready once the economy reopens
  2. How to not only create more jobs but to recover the ones we lost, especially for industries and populations that were hit the hardest
  3. How to start building toward a more stable tomorrow, including investing in sectors that are poised to dominate in the future, such as green technology, digital transformation and innovation, and infrastructure

While you can review the full 2021 budget here in detail, we want to focus on the measures proposed by the Federal government to help Canadian businesses continue to grow and innovate through research & development measures.

Mitacs

Who the program is for: Highly-educated students and recent graduates

Purpose of the program: Empower highly educated students and graduates to explore research + training opportunities with innovative businesses through internships.

Proposed investment(s):

  • Allocate $708 million, creating 85k+ jobs, over the next 5 years to boost program participation.

Canada Digital Adoption Program

Who the program is for: Small and medium-sized businesses

Purpose of the program: Create jobs for young Canadians, and help small and medium-sized businesses adopt digital technologies.

Proposed investment(s):

  • Provide $1.6 billion over the next 4 years to Innovation, Science and Economic Development Canada
  • Provide $2.6 billion cash over the next 4 years to the Business Development Bank of Canada to help small and medium-sized businesses finance technology adoption

Supporting Technological Opportunities

Who the program is for: Small and medium-sized businesses that need unique technological or process solutions and/or are conducting “new research”

Purpose of the program: To support applied R&D projects led by Canadian businesses in collaboration with colleges, CEGEPs, and polytechnics, especially businesses owned by historically underrepresented groups

Proposed investment(s):

  • Provide $46.9 million over the next 2 years to support additional research partnerships between colleges, CEGEPs, polytechnics, and businesses through the Natural Sciences and Engineering Research Council’s College and Community Innovation Program.
  • Provide $5.7 million over the next 2 years to provide more businesses with access to the National Research Council’s Industrial Research Assistance Program’s Interactive Visits.

Forward Momentum with Capital Projects

Who the program is for: Small and medium-sized businesses that are also Canadian-controlled Private Corporations (CCPCs)

Purpose of the program: To provide capital investments to further incentivize businesses to transition to a more productive, knowledge-intensive economy and will include digital assets and intellectual property

Proposed investment(s):

  • Provide $1.5 million of eligible investments by CCPCs made on or after Budget Day and before 2024. Eligible investments will cover over 60% of capital investments typically made by CCPCs

Canada Small Business Financing Program

Who the program is for: Small businesses and independent entrepreneurs

Purpose of the program: To make sure small business and independent entrepreneurs can access the capital they need by creating amendments to the existing Canada Small Business Financing Act and its regulations, resulting in increasing financing by $560 million

Proposed investment(s):

  • Expanding loan class eligibility to include lending against intellectual property and start-up assets and expenses.
  • Increasing the maximum loan amount from $350,000 to $500,000 and extending the loan coverage period from 10 to 15 years for equipment and leasehold improvements.
  • Expanding borrower eligibility to include non-profit and charitable social enterprises.
  • Introducing a new line of credit product to help with liquidity and cover short-term working capital needs.

Recovery for the Aerospace Sector

Who the program is for: Businesses within the aerospace sector

Purpose of the program: To help position Canada’s aerospace sector once restrictions on travel are lifted and the industry begins to recover

Proposed investment(s):

  • Provide $250 million over 3 years, on a cash basis, for the regional development agencies to deliver an Aerospace Regional Recovery Initiative
  • $1.75 billion in the Strategic Innovation Fund

Small Business and Entrepreneurship Development Program

Who the program is for: Entrepreneurs from equity deserving groups such as racialized Canadians, young people, LGBTQ2 people, and more

Purpose of the program: To help simplify and streamline the government’s support programs, and to help equity deserving entrepreneurs access funding and capital, mentorship, financial planning services, and business training

Proposed investment(s):

  • Provide $101.4 million over 5 years to Innovation, Science and Economic Development Canada for the Small Business and Entrepreneurship Development Program

Support for Female Entrepreneurs

Who the program is for: Female entrepreneurs

Purpose of the program: To provide affordable financing, increase data, and strengthen capacity within the entrepreneurship ecosystem

Proposed investment(s):

  • Provide $146.9 million over 4 years to strengthen the Women Entrepreneurship Strategy, resulting in greater access to financing, mentorship, and training

Black Entrepreneurship Program

Who the program is for: Black entrepreneurs

Purpose of the program: To support and empower Black entrepreneurs and owners of small and medium-sized businesses to overcome systemic barriers

Proposed investment(s):

  • Provide $51.7 million over 4 years to Innovation, Science and Economic Development Canada and the regional development agencies for the Black Entrepreneurship Program

Industrial Research Assistance Program (IRAP)

Who the program is for: Small and medium-sized businesses

Purpose of the program: To help innovative small and medium-sized businesses gain access to R&D expertise and capital

Proposed investment(s):

  • Provide $500 million over 5 years and $100 million per year ongoing, to expand IRAP to support up to 2,500 additional qualifying  innovative businesses

Venture Capital Catalyst Initiative

Who the program is for: Startups and businesses

Purpose of the program: To increase venture capital funding and support the continued growth of Canada’s innovative companies

Proposed investment(s):

  • Provide $450 million over 5 years on a cash basis for a renewed Venture Capital Catalyst Initiative that would increase venture capital available to entrepreneurs

Clean Technology Exports

Who the program is for: Businesses within the Clean Technology sector

Purpose of the program: To help clean-tech businesses tap into export opportunities and the rapidly growing pools of global climate finance

Proposed investment(s):

  • Provide $21.3 million over 5 years and $4.3 million per year ongoing, to Global Affairs Canada for the continuation of the International Business Development Strategy for Clean Technology

Innovation and Industrial Transformation through the Strategic Innovation Fund

Who the program is for: Businesses that fall within the Clean Tech, Aerospace, and/or Life Sciences sectors

Purpose of the program: To target strategic investments in important areas and fulfill strategic objectives, such as achieving net-zero greenhouse gas emissions, foster recovery and growth of certain sectors, build resilience, and create more jobs in the economy

Proposed investment(s):

  • Provide $2.2 billion over seven years, and $511.4 million ongoing to support innovative projects across the economy—including in the life sciences, automotive, aerospace, and agriculture sectors
  • Net-Zero Accelerator: Provide $5 billion over 7 years to increase funding to support net-zero technologies and meet the goal to be net-zero by 2050
  • Aerospace Sector: Provide $1.75 billion over 7 years in recognition of the longer-lasting impacts following COVID-19
  • Life Sciences: Provide $1 billion of support over 7 years to grow Canada’s life sciences and bio-manufacturing sector, restoring capabilities that have been lost and supporting the innovative Canadian firms and jobs

Artificial Intelligence (AI) Strategy

Who the program is for: Innovative startups and scale-ups in the AI sector

Purpose of the program: To support highly innovative Canadian startups and scale-ups take advantage of growth opportunities within AI and foster research

Proposed investment(s):

  • Provide up to $443.8 million over ten years, starting in 2021-22, in support of the Pan-Canadian Artificial Intelligence Strategy, including:
    • $185 million over 5 years to support the commercialization of AI innovations and research
    • $162.2 million over 10 years to help retain and attract top academic talent across Canada
    • $48 million over 5 years for the Canadian Institute for Advanced Research to renew and enhance its research, training, and knowledge mobilization programs.
    • $40 million over 5 years to provide dedicated computing capacity for researchers at the national AI institutes in Edmonton, Toronto, and Montréal.
    • $8.6 million over 5 years to advance the development and adoption of standards related to AI

Launch a National Quantum Strategy

Who the program is for: Canadian scientists and entrepreneurs

Purpose of the program: To help transform Canada’s efforts within the quantum technology field

Proposed investment(s):

  • Provide $360 million over 7 years to help amplify quantum research; grow our quantum-ready technologies, companies, and talent; and solidify Canada’s global leadership in this area.

Canadian Photonics Fabrication Centre (CPFC)

Who the program is for: CPFC facility

Purpose of the program: To foster further research and job creation within the photonics technology sector

Proposed investment(s):

  • Provide $90 million over 5 years on a cash basis to the National Research Council to retool and modernize the CPFC

Launch a Genomics Strategy

Who the program is for: Businesses, researchers, and workers within the genomics sector

Purpose of the program: To improve health and well-being for Canadians,  create jobs, and economic growth

Proposed investment(s):

  • Provide $400 million over 6 years to kickstart the new strategy and complement the government’s existing genomics research and innovation programming

Innovation Superclusters Initiative

Who the program is for: Superclusters

Purpose of the program: To help ensure those superclusters that made emergency investments to support Canada’s COVID-19 response and others can continue supporting innovative Canadian projects

Proposed investment(s):

  • Provide $60 million over 2 years to the Innovation Superclusters Initiative

Promote Canadian Intellectual Property

Who the program is for: Highly-innovative Canadian businesses that develop intellectual property

Purpose of the program: To support Canadian innovators, startups, and technology-intensive businesses to grow and scale their intellectual property

Proposed investment(s):

  • For ElevateIP: Provide $90 million over 2 years to help accelerators and incubators provide start-ups with access to expert intellectual property services
  • For IRAP: Provide $75 million over 2 years to provide high-growth client firms with access to expert intellectual property services

Space-based Earth Observation

Who the program is for: Highly-innovative Canadian businesses that develop intellectual property

Purpose of the program: To explore opportunities to support Canadian capacity, innovation, and jobs in the space sector

Proposed investment(s):

  • Provide $80.2 million over 11 years with $14.9 million in remaining amortization and $6.2 million per year ongoing, to Natural Resources Canada and Environment and Climate Change Canada 
  • Provide $9.9 million over 2 years to the Canadian Space Agency to plan for the next generation of Earth observation satellites

R&D Partnership with Israeli Firms

Who the program is for: Any business

Purpose of the program: To foster a close relationship between Canadian and Israeli SMEs to further develop global innovation

Proposed investment(s):

  • Provide $10 million over 5 years and $2 million per year ongoing, to expand opportunities for Canadian SMEs to engage in R&D partnerships with Israeli SMEs as part of the Canadian International Innovation Program

In addition, innovative Canadian businesses can also leverage the Scientific Research & Experimental Development (SR&ED) tax credit program, through which the Canadian government provides billions of dollars in tax credits to businesses that develop new or improve existing technologies, products, and materials. In fact, the government provides over $3 billion in assistance to over 20,000 claimants annually.  

While there is a common misconception that only businesses that perform scientific research can qualify for SR&ED, the program is designed to support research and experimentation in all industries, from life science and manufacturing to software development, oil and gas, agriculture, and more. Additionally, any Canadian company (large or small), as well as privately-owned and foreign-owned corporations, can claim SR&ED.

Whether it’s by leveraging SR&ED or through one of the many programs outlined in the federal 2021 budget, it’s fair to say that there will be ample opportunities for Canadian businesses to invest heavily in skilled talent and R&D activities over the next few years. 

To learn more about SR&ED or determine if your company’s R&D activities can qualify for the program, contact us for a free assessment.

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