Grants vs Loans vs Tax Credits
Not all government funding is a grant. The three most common mechanisms for Canadian businesses, non-repayable grants, repayable financing, and tax credits, behave very differently, and the best strategy usually stacks more than one. Here is how they compare.
Non-repayable grants
Best for: Defined projects that fit a program's objective and timeline.
Repayable financing & tax credits
Best for: Ongoing R&D and capital needs where cash flow and timing matter.
| Criterion | Non-repayable grants | Repayable financing & tax credits |
|---|---|---|
| Do you repay it? | No (non-repayable grant) | Loans/contributions: yes. Tax credits: no, but they offset tax |
| How you receive it | Reimbursement or milestone payments | Financing up front; tax credits after filing |
| Competition | Often competitive, project-based | Tax credits are entitlement-based if you qualify |
| Stacking | Can stack, but assistance reduces a SR&ED claim's base | SR&ED commonly stacks with grants and IRAP |
| Typical fit | A specific expansion, hire, or capital project | Continuous innovation, working capital, tax recovery |
The bottom line
There is rarely a single right answer. The strongest funding strategies combine a non-repayable grant for a specific project, SR&ED to recover R&D spend, and financing to bridge timing, sequenced so one does not erode another.