Tariffs can be a huge burden for businesses and the Government of Canada wants to protect our economy with loans, grants, and tax relief. Whether you’re a startup trying to scale or an established company navigating new trade policies, securing the right financial support is crucial. But when it comes to tariff relief financing, should you go for a government loan or a grant?
Both funding options have their pros and cons, and the best choice depends on your business needs. Let’s break it down.
What’s the Difference Between Government Loans and Grants?
Before we dive into the best funding options, it’s important to understand the core differences:
- Government loans: These are funds that must be repaid, often with interest. They may come with lower rates and better terms than private loans.
- Government grants: These are non-repayable funds awarded to businesses meeting specific criteria, often linked to innovation, sustainability, or economic development.
Each has its benefits, but the right choice depends on your company’s financial health, long-term goals, and eligibility.
When Should You Choose a Government Loan?
Government loans are a great option when you need predictable, long-term financing. They typically work well for businesses that:
- Need to cover immediate costs due to tariffs or supply chain disruptions.
- Want to invest in new equipment or technology to reduce reliance on imported goods.
- Have a solid financial history and can manage repayments over time.
Popular Business Loans in Canada
If you’re considering a loan, here are some of the most common government-backed options:
1. Canada Small Business Financing Program (CSBFP)
- Offered by the federal government to help businesses get low-interest loans through traditional lenders.
- Can be used for purchasing equipment, real estate, or making leasehold improvements.
2. Business Development Bank of Canada (BDC) Loans
- The BDC provides financing tailored for small and medium-sized businesses, with flexible repayment options.
- Great for companies needing working capital due to higher costs from tariffs.
3. Export Development Canada (EDC) Loans
- Ideal for businesses facing international trade challenges.
- Offers support for Canadian companies affected by global tariffs.
Government loans are more accessible than grants and can provide immediate relief. But they do come with interest rates and repayment obligations.
When Are Government Grants a Better Choice?
Grants are free money, but they come with strings attached. Businesses that qualify for grants are typically those that:
- Are involved in innovation, sustainability, or export expansion.
- Need help developing new products or exploring new markets to reduce tariff impacts.
- Meet specific criteria set by the funding program.
Top Government Grants for Businesses in Canada
If your company is eligible, grants can be a powerful way to offset tariff-related costs. Here are some of the best options:
1. CanExport SMEs Program
- Helps small and medium-sized businesses expand into new markets.
- Covers up to 50% of costs for marketing, trade shows, and international business development.
2. Strategic Innovation Fund (SIF)
- Supports large-scale projects that boost economic growth.
- Ideal for businesses investing in new technology to reduce import dependence.
3. Industrial Research Assistance Program (IRAP)
- Provides funding for businesses developing innovative technology.
- Great for companies creating new products or processes that reduce tariff exposure.
The biggest challenge with grants? Competition and eligibility. Unlike loans, grants aren’t guaranteed. They often have strict requirements and lengthy application processes.
Which Option Works Best for Tariff Relief Financing?
So, should you go for a government loan or a grant to handle tariff costs? It depends on your situation:
| Factor | Government Loans | Government Grants |
| Repayment | Must be repaid with interest | No repayment required |
| Eligibility | Easier to qualify for | Strict eligibility criteria |
| Funding Speed | Faster approval process | Can take months to secure |
| Best For | Immediate cash flow needs | Long-term projects & innovation |
| Competition | Lower competition | Highly competitive |
If you need cash quickly to cover tariff-related expenses, a government loan is the better option. But if you have time and your project aligns with a grant’s objectives, it’s worth applying for non-repayable funding.
How to Apply for the Best Funding Option
Regardless of whether you’re applying for a business loan in Canada or a government grant, preparation is key. Here’s how to boost your chances:
1. Assess Your Financial Situation
- Do you have the cash flow to repay a loan?
- Does your business align with a grant’s focus areas?
2. Gather Documentation
- For loans: Financial statements, business plan, credit score.
- For grants: Detailed project proposal, expected impact, financial projections.
3. Explore Multiple Options
- Don’t put all your eggs in one basket—apply for both if possible.
- Look into private funding sources alongside government programs.
4. Get Expert Help
- Many businesses fail to secure funding due to errors in applications.
- Working with a financial advisor or grant writer can improve your chances.
Key Takeaways
- Government loans are faster and easier to secure but must be repaid.
- Government grants provide free money but are harder to qualify for.
- For immediate tariff relief, loans are usually the best choice.
- For long-term solutions, grants can help offset costs without debt.
- A combination of both may be the smartest approach.
Still not sure which funding option is right for your business? Contact us today to explore the best financing strategies for handling tariffs and growing your business.