Key takeaways from a discussion on SR&ED and grants with Deloitte

Securing the right funding can provide a significant advantage for businesses aiming to accelerate innovation and growth. Navigating tax credits and government grants effectively can unlock crucial financial support—allowing companies to scale while maintaining full ownership.

To guide entrepreneurs in leveraging these opportunities, Innovation Factory partnered with Deloitte and sat down with experts like Mark McQueen, and Andrew Skeldon, who shared insights on Scientific Research and Experimental Development (SR&ED) tax credits and grant funding—two essential tools for Canadian businesses looking to strengthen their financial strategy.

Whether it’s navigating SR&ED tax credits, securing grants, or developing a long-term financial strategy, Deloitte offers tailored support for businesses at every stage of growth. Through Innovation Factory, entrepreneurs gain access to these specialized insights and services, equipping them with the tools and connections needed to scale effectively.

What is the SR&ED program?

The Scientific Research and Experimental Development (SR&ED) program is one of Canada’s largest tax incentive programs, designed to reward companies for innovation and R&D efforts.

“Companies often don’t understand what qualifies as SR&ED. It is a complex and nuanced program that provides support to Canadian companies that are trying to resolve scientific or technological uncertainties,” shared McQueen, Director at Deloitte. “If you are performing systematic work in a field of science or technology in an attempt to develop new knowledge in the field, you may want to further explore the SR&ED program.”

Key benefits of SR&ED:

• Entitlement program: Unlike grants, SR&ED is not a competition. If your work qualifies, you’re entitled to the tax credits.
• Retroactive claims: You can go back 18 months from your fiscal year-end to claim eligible expenditures.
• Covers multiple cost areas: Salaries, Canadian subcontractors, materials overhead, and R&D capital/leases expenditures (pending legislative approval) that meet the eligibility criteria can be claimed.
• Not just for large companies: Recent enhancements to the program (pending legislative approval) have made SR&ED more attractive program for early-stage start-ups who are often pre-revenue and/or have not reached profitability.

Beyond SR&ED: leveraging grant and incentive programs

In addition to SR&ED, businesses can explore government grants and loans to support hiring, expansion, and innovation. Andrew Skeldon, Director at Deloitte’s Global Investment & Innovation Incentives Group, shared some key areas where start-ups can seek grant funding opportunities

Areas of government grant and incentive support

• R&D & Innovation – Grants for businesses investing in research and new product development.
• Talent & Hiring Grants – Funding to support hiring co-op students and recent graduates.
• Expansion & Equipment – Programs to help businesses scale operations or purchase new equipment.
• Sustainability & Clean Tech – Funding for environmentally friendly innovations and emissions reduction.
• Export & Market Expansion – Grants that help businesses enter new markets outside of Canada.

“Unlike SR&ED, grants are competitive and have limited budgets, so businesses need to ensure they are well prepared to apply. Strategic planning is crucial to securing funding and maximizing opportunities for growth and expansion,” added Skeldon.

How to maximize non-dilutive funding opportunities

If you’re new to these funding programs, here are Deloitte’s recommendations on how to position your company for success.

Plan proactively

“Many grants require approval before making financial commitments such as issuing PO’s, hiring or initiating R&D projects. To avoid missing out, businesses should identify applicable grants early, ensure eligibility, and submit applications well in advance,” advised Skeldon. Creating a funding roadmap aligned with business growth can significantly improve success rates.

Optimize funding opportunities

SR&ED tax credits can sometimes be combined with various grants and incentives, maximizing financial benefits. By layering multiple sources of funding, companies can reduce development costs and accelerate innovation. However, compliance with stacking rules is essential to avoid exceeding allowable funding thresholds.

Leverage expert knowledge

Understanding the intricate details of funding policies, eligibility criteria, and the required documentation is crucial. Engaging with professionals who specialize in SR&ED and grant applications can streamline the process, reduce errors, and improve approval chances. Experts can also provide strategic advice on structuring claims for maximum returns.

Protect intellectual property

“If your business works with subcontractors, ensure that contracts clearly state that your company retains ownership of all intellectual property. This is especially important for SR&ED eligibility, as the entity owning the IP is the one that can claim the tax credits. Establishing clear IP agreements early prevents potential disputes and ensures compliance with funding requirements,” added Skeldon.

Funding is within reach

One of the biggest takeaways from the Deloitte team: too many companies miss out on funding simply because they don’t apply. These programs exist to help businesses innovate and grow—but they won’t reach out to you. It’s up to founders and business leaders to take advantage of them.

Be sure to connect with experts, ask questions, and explore your eligibility.

If you’re wondering whether your business qualifies for SR&ED or grants, connect with us for an introduction to the experts at Deloitte to learn more about the eligibility and criteria.