Government Funding for Food Businesses: Part 1: Understanding Grants and Loans
Accessing government funding programs can be intimidating for leaders in the food industry that are unfamiliar with the process.
Understanding the types of funding available, how it’s distributed from the funding body to recipients, and who can apply for the programs is a time consuming and resource-intensive process that many businesses choose to avoid altogether.
But both federally and provincially, the government allocates money to provide small businesses with grants, repayable funding, vouchers, and tax incentives. These programs are created to overcome growth challenges and execute on additional innovative strategies that otherwise may be limited in scope or low in priority. These funding types are often used by businesses to extend their cash flow and execute projects at a scale and speed that they would not be able to accomplish independently.
What can government funding be used for? Hiring and training staff, purchasing new equipment, conducting research and development, and expanding into new markets are just a few of the possible activities. Government grants and loans offer the ability to accomplish a wide range of strategic, growth-accelerating projects.
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Finding and Evaluating Government Funding Programs
Government funding is provided by federal, provincial, and municipal sources. Each source caters to their region’s most significant challenges and opportunities by providing funding to reduce the financial risk of certain projects. This leads to different program focuses, eligible expenses, timelines, and contribution amounts.
Government funding is generally provided from four sources:
- Federal Government Funding: Offered through the Government of Canada and its departments, federal grants and loans are typically available across the country, in all provinces and territories.
- Regional Development Agency Funding: Also offered through the Government of Canada, these are regionally-exclusive funds that provide specific focus for Atlantic Canada, Quebec, Northern Canada, Western Canada, Northern Ontario, and Southern Ontario.
- Provincial Government Funding: Offered through provincial governments (such as the Government of Ontario), provincial funding can be accessed by businesses whom operate in that province.
- Municipal Government Funding: Offered through local governments, these are often small or micro grants/loans where businesses must be operating specifically within a particular region or municipality.
Types of Funding for Food and Beverage Businesses
With small business funding coming from multiple sources of government, there are many types of programs your business may be eligible to receive. Government grants and loans are generally divided into four categories, or ‘bucket’ of funding. Each of these funding types can be used by food businesses to improve production and operational efficiency. This includes:
Business expansion funding seeks to reinforce and grow a business’s current profitability, employment, and economic activity. Because of this, pre-revenue businesses are typically ineligible for funding, as they do not have a stable, proven business model.
Business expansion funds generally seek to fund projects revolving around facility expansion to serve a greater portion of the global market. Food businesses can use this to increase production space, hire new employees, and integrate new, innovative processes. This funding focus also looks at export expansion activities such as attending trade shows and establishing foreign contacts.
Capital & Technology Adoption
Alternately, government funding for technology adoption looks specifically at improvements gained through replacing outdated machinery with newer, highly efficient models. Although these projects typically present financial difficulty for food producers and processors, the long-term benefits of gaining new automated processes are often significant.
Agri-food producers and processors often rely on equipment to achieve efficiency, which is why the government incents expansion of product lines and improvement of internal processes. This includes production, packaging, and storing excess product.
Hiring & Training
Finding and retaining top talent is critical to any business’ success. Smaller food producers/processor growth is especially dependent on the unique skills and capabilities of its employees; fortunately, funding is available for hiring and training activities including:
- Hiring recent post-secondary graduates;
- Third-party training from certified training vendors;
- Advanced technology and software training; and
- Collaboration with educational institutions.
Better still, hiring and training grants are typically open to businesses of all sizes and industries. Small agri-food businesses can still access these funds to develop internal strengths and build competitiveness.
Research & Development
Finally, research and development funding is available to support innovative food and beverage companies seeking new, more profitable ways of delivering products/services. Some of the many ways businesses can perform R&D include:
- Product/process prototyping;
- Software development/improvements;
- Product testing and certification;
- Late-stage technology development and commercialization; and
- Collaborating with post-secondary institutions.
Some R&D funding programs are tailored towards startups and early-stage businesses, while others are focused on mature, incorporated companies. In either case, applicants should be focused on how the research and development activity will create innovation within the industry or business.
Basic Eligibility Criteria for Government Funding
The food and beverage industry is a primary focus for government funding programs. It has many funds developed specifically for agri-food businesses, which makes accessing funding easier for those businesses who meet basic eligibility criteria. While meeting these do not guarantee you’ll be eligible for funding, they are a general basis for how most government grants and loans are administered.
To be eligible for many government funding programs, Canadian food businesses must:
- Be incorporated for at least 2-3 years;
- Maintain 5 or more full-time employees; and
- Generate annual revenues of at least $500,000.
Food startups and early-stage businesses who do not meet these criteria are not necessarily ineligible for funding, but do not have the potential to receive as much as mature, incorporated companies.
Government funding for startups in the food industry is available, but is generally limited and is more difficult to access. The best approach for these companies to take is to become incorporated as soon as possible and explore startup funding resources such as a funding checklist or becoming a Government Funding Insider.
Author: Jeff Shepherd obtained his Honours Bachelor of Business Administration from the University of Guelph-Humber. He has combined his passion for marketing and economic development in his role of Marketing Coordinator at Mentor Works.
Mentor Works is a business support organization specializing in Canadian government funding. The Ontario-based business has helped hundreds of businesses build and execute their funding strategy through a mix of federal and provincial government grants, loans, and tax credits. Mentor Works offers free online resources, funding webinars, and news via their website at www.mentorworks.ca.
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