Government Funding for Canadian Businesses: CDAP, IRAP, SR&ED Explained

Billions of Dollars Left on the Table

The Canadian government offers billions of dollars in grants, credits, and funding programs for small and medium-sized businesses every year. Yet the vast majority of eligible businesses never apply. Why? Because the programs are confusing, the application processes are time-consuming, and most business owners simply do not know what is available to them.

As a fractional CFO, one of the highest-ROI activities I do for clients is identifying government funding they qualify for and helping them access it. I have seen businesses receive anywhere from $15,000 to over $500,000 in funding they would have otherwise missed.

Let me break down the three biggest programs you should know about.

CDAP: Canada Digital Adoption Program

What It Is

The Canada Digital Adoption Program (CDAP) was launched to help Canadian small businesses adopt digital technologies. It provides both grants and interest-free loans to fund your digital transformation.

What You Get

• Boost Your Business Technology Grant: Up to $15,000 to develop a digital adoption plan with an approved digital advisor.
• BDC Interest-Free Loan: Up to $100,000 in a zero-interest loan from the Business Development Bank of Canada to implement your digital plan.
• Wage Subsidy: Up to $7,300 to hire a young person to help implement your digital strategy.

Who Qualifies

• Canadian-owned small or medium business
• Revenue between $500,000 and $100 million in one of the last three tax years
• Minimum 1 full-time employee (or equivalent)
• Must be a for-profit business

How to Apply

The application process involves registering through the CDAP portal, working with an approved digital advisor to create your plan, and then applying for the BDC loan to fund implementation. The key is starting with the grant application first, as the loan depends on having an approved digital adoption plan.

Pro tip: The digital adoption plan itself is incredibly valuable even beyond the funding. It forces you to assess your tech stack, identify gaps, and create a roadmap. Many of my clients have used their CDAP plans to justify technology investments that improve efficiency across their entire operation.

IRAP: Industrial Research Assistance Program

What It Is

IRAP is run by the National Research Council of Canada (NRC) and is one of the most generous funding programs in the country. It provides non-repayable contributions -- essentially grants -- to help small businesses conduct research and development and commercialize innovations.

What You Get

• Advisory services: Access to Industrial Technology Advisors (ITAs) who provide free guidance on technology, business strategy, and scaling.
• Project funding: Non-repayable contributions that can cover a significant portion of eligible R&D project costs, including salaries of technical staff, contractor costs, and some materials.
• Typical funding: Projects commonly receive between $50,000 and $500,000, though larger projects can receive more.

Who Qualifies

• Canadian incorporated small or medium-sized business (generally under 500 employees)
• For-profit company with a goal to grow through innovation
• Have the capacity to carry out the proposed R&D project
• Working on a technology-driven innovation (broadly defined -- it is not just for tech companies)

How to Apply

Unlike many programs, IRAP does not have a standard application form. You start by connecting with an ITA in your region who evaluates your business and project. If there is a fit, they guide you through the proposal process. Building a relationship with your local ITA is the most important first step.

Pro tip: IRAP's definition of "innovation" is broader than most people think. If you are developing a new process, improving an existing product, or creating custom software for your business, you may qualify. Do not self-disqualify before talking to an ITA.

SR&ED: Scientific Research and Experimental Development Tax Credits

What It Is

SR&ED is Canada's largest single source of federal government support for industrial research and development. It is a tax incentive program administered by the Canada Revenue Agency (CRA) that lets businesses claim tax credits for eligible R&D activities.

What You Get

• Federal tax credit: Canadian-controlled private corporations (CCPCs) can earn an enhanced credit of 35% on the first $3 million of qualified expenditures, and 15% on amounts above that.
• Refundable credits: For CCPCs, credits are often fully refundable, meaning you get cash back even if you do not owe taxes.
• Provincial top-ups: Many provinces offer additional SR&ED credits. In Ontario, for example, you can get an extra 3.5% on eligible expenditures.
• Eligible expenses: Salaries of employees performing R&D, contractor costs (up to 80%), materials consumed during R&D, and overhead.

Who Qualifies

Any Canadian business that conducts work involving:

• Scientific or technological uncertainty: You are trying to solve a problem where the solution is not known or obvious.
• Systematic investigation: You followed a methodical approach (hypothesis, testing, analysis).
• Technological advancement: The work attempts to advance knowledge in a field of science or technology.

This applies to far more businesses than you might think. Software development, manufacturing process improvements, engineering challenges, agricultural innovations, and food processing R&D all commonly qualify.

How to Apply

SR&ED claims are filed as part of your annual corporate tax return using Form T661. You have 18 months from your fiscal year-end to file. However, the documentation requirements are significant, and poorly documented claims are frequently denied or reduced.

Pro tip: Track your R&D activities in real time. Keep project logs, document the uncertainties you faced, and record how you tested different approaches. Trying to reconstruct this information at year-end is painful and often results in missed claims. I help my clients set up simple tracking systems that take 15 minutes per week and can be worth tens of thousands of dollars at tax time.

Other Programs Worth Knowing About

Beyond CDAP, IRAP, and SR&ED, here are a few more programs Canadian businesses should be aware of:

• Canada Small Business Financing Program (CSBFP): Government-backed loans up to $1,150,000 for equipment, leasehold improvements, and real property.
• CanExport: Funding up to $50,000 per market for businesses looking to expand into international markets.
• Provincial programs: Each province has its own economic development grants. Ontario has the Ontario Together Fund. Alberta has Alberta Innovates. BC has Innovate BC. These are worth researching based on your location.
• Futurpreneur: For entrepreneurs aged 18-39, offering loans up to $60,000 plus mentorship.

How to Get Started

The biggest barrier to accessing government funding is not eligibility. It is awareness and execution. Here is my recommended approach:

• Step 1: Audit your business activities against the eligibility criteria above. You may qualify for more than you think.
• Step 2: Start with the program that offers the highest likely return for the least effort. For most businesses, that is SR&ED if you do any R&D, or CDAP if you need to upgrade your technology.
• Step 3: Get professional help. The application processes are detailed and mistakes can be costly. A fractional CFO or grant specialist can pay for themselves many times over.

I help my clients navigate these programs as part of my fractional CFO engagements. If you think your business might qualify and you want someone to cut through the confusion, let us talk.

Book a free 30-minute consultation and we will identify which programs make the most sense for your business.