Why choose to finance innovation in your company?
Financing innovation has many benefits for a company. For example, it can help improve efficiency and profitability, better position a company in a competitive environment, and even attract or retain the talent needed to support new projects. Above all, financing innovation is key to staying ahead of the competition. Innovation both helps protect and grow your business to keep you in the lead.
How do you determine where to invest the financing, and why?
To find out which financing method is best for your project, you first need to identify the areas of your company where you’d like to innovate. For example, you might want to improve your products, roll out new technology, or provide training to your teams so they can achieve their full potential.
What sources of financing are available for innovation?
There are many sources of financing available for innovation projects. Here are the main ones to consider, along with their characteristics. Take a close look at these options, as one – or more – may be right for you.
Commercial partnerships
Innovating often means venturing into uncharted territory. That’s why drawing on the experience of people who’ve been there before is invaluable.
Statistics² show that large companies are more likely to be innovative – at nearly 86% compared to 79% for SMEs. This is mainly due to more labour pool. But SMEs tend to be more agile and creative in maximizing limited resources, which provides fertile ground for innovation.
It makes sense for these two categories of companies to join forces and work together towards the desired innovation. For example, a large pharmaceutical company could form a strategic alliance with a life sciences start-up that has developed an innovative molecule, with the aim of manufacturing and marketing a new drug.
Research institutes
Research institutes are at the cutting edge of industry knowledge and trends and have access to a highly specialized workforce. Collaborating with one of them could give your project what it needs to take off. There are many organizations in Canada, but here are the most well-known (the following links lead to external websites):
- IVADO (research, training and knowledge mobilization consortium in artificial intelligence) and Mitacs. As a partner of these organizations, National Bank can act as a facilitator to help coordinate different types of financing.
- The National Research Council Canada supports technological innovation, notably through its Industrial Research Assistance Program and strategic research and R&D centres.
- The Natural Sciences and Engineering Research Council of Canada supports partnerships between the research community and companies.
- The National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) provides advice and funding to small and medium-sized enterprises.
Accelerators and incubators
Within the innovation support ecosystem, some accelerators and incubators support start-ups and developing companies. In addition to providing administrative, logistical and technical support, they also help finance innovation. ACET is one of them.
Tax credits
Scientific research and experimental development tax credits are a great way to help companies finance research and development. These incentives can cover a significant percentage of innovation spending, whether on salaries, consulting fees, equipment or even capital expenditures.
In addition to federal tax credits, each province and territory, with the exception of Prince Edward Island, Nunavut and the Northwest Territories, also offers a tax credit for eligible activities. In some cases, the combination of federal and provincial credits can total nearly 70% of expenses.
Government subsidies and funding
Different levels of government also finance innovation through subsidies. These can be applied at various levels. For example, they can be used to cover the costs of research, equipment, or researchers’ salaries.
These subsidies can also be used for the design and development of innovative product or service prototypes to help companies test new ideas more quickly. Marketing costs of new products or services, workforce training and the recruitment of qualified personnel to work on innovative projects are also eligible.
In Quebec, Investissement Québec (external website) is a major funding agency, but financing at the municipal level, such as the Open Innovation Subsidy Program for start-up companies in Montreal, is available too. Contact your municipality for more information.
You’ll also find other sources of innovation funding and support at the federal level, including (the following links lead to external websites): NRC IRAP, Innovative Solutions Canada, and Sustainable Development Technology Canada. Other Canadian provinces offer additional sources, such as the Atlantic Innovation Fund.
What other financing options are available?
In addition to sources of financing specific to innovation, it’s possible to obtain support for all kinds of projects. Private financing, bank financing, or a socio-financing campaign are all possible options.
Are you looking to finance a new project? Find out how National Bank can help you in your search for innovation financing.
