Innovation funding financing now available from BDC

When I think of domestic manufacturing in the 21st century, I often think of the Red Queen’s race in Lewis Carroll’s Through the Looking-Glass and Alice constantly running but remaining in the same spot. “Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else if you run very fast for a long time, as we’ve been doing.”

“A slow sort of country,” replied the Queen. “Now here, you see, it takes all the running you can do to keep in the same place! If you want to get somewhere else, you must run at least twice as fast as that!”

While many governmental programs incentivize domestic manufacturing innovations, these funds are often provided long after the manufacturer has spent the funds to attempt to innovate.

The Business Development Bank of Canada (BDC), describes itself as “a financial institution owned by the Government of Canada,” and “the only Canadian bank dedicated exclusively to entrepreneurs.” It recently announced a new financing program for anticipated innovation tax credits. This is very good news for anyone who is innovating with the intention of creating new products or processes, or improving existing products or processes. Quite frankly, as the Red Queen observed, if you’re manufacturing domestically, you’re most likely in a constant innovation mode.

In previous columns, we have discussed the federal SR&ED program and related provincial R&D programs. However, many of these programs require filing along with corporate tax returns. So, R&D or other related eligible tax credit innovation initiated at the beginning of one fiscal year, might not actually receive a refundable tax credit until 22 months later (assuming filing is 6 months after the year end, and the refund cheque is received within 4 months). This is where BDC comes in with its tax credit financing.

What you can expect

If you’ve made a previous successful SR&ED claim, you can get up to 125% of the anticipated R&D or other tax-credit-related expenses on the submitted claim. If this is your first time claiming, you can still get up to 100% of the anticipated R&D or other tax-credit-related expenses. In other words, once you’ve submitted your year-end tax filing, you’re immediately eligible for tax credit financing.

Often, when companies are in R&D mode, they incur significantly higher labour and material costs. Once the innovation is completed, they might need extra funds to help market products which are “better” or “cheaper” or “more robust” than the competition’s, so these funds come along at exactly the right time. Businesses will not have to dip into their existing lines of credit to innovate and market their innovations. BDC tax credit financing allows businesses to short-term borrow funds that they’re owed and, until the funds arrive, only pay the interest on the loan.

In more frustrating circumstances, if the innovation is not the success that the manufacturer hoped for, the business, having taken a risk and failed, might find itself in a difficult short-term financial bind. Since the Federal and Provincial Governments all award R&D tax credits through the SR&ED program, even for these failed projects, they too are eligible for BDC tax credit financing.

When the funds are received, your business has the option to pay back the loan, or, transfer the amount to a term loan and use the tax credit money for more immediate or urgant business funding requirements. You can take up to three more years to pay back the term loan, and, your personal assets are not taken as collateral for the loan. Precise guidelines to achieve this have been posted by Lend Genius, an expert in this field. Be sure to pay back loans as efficiently as possible to get the maximum benefit.

More good news

Hopefully, your innovation will prove a boon for your business. In this case, if the opportunity arises and you do find yourself wanting to pay back the loan at any time prior to the three-year term, there are no fees or penalties. BDC seems to have made this as simple and straightforward as possible for you.

So, even in the most difficult scenario, if you come across a hurdle during your manufacturing process such that a technological advance must be targeted and there is uncertainty with respect to the potential success of the project (or in attempting to resolve the hurdle, you don’t succeed, even if it’s because the cost of success would produce a product with an unacceptable cost structure), you most likely are still eligible for innovation tax credits. And now, BDC can advance you those specific funds.


Elliot Schiller is a Director at Toronto’s Teeger Schiller Inc., a firm specializing in government funding and systems selection/implementation. His clients receive over $5 M annually to support ongoing business innovation. E-mail, visit or phone 1-888-816-0222 Ext. 102