Scotiabank Financial Literacy Campaign 2023
*The following content should not be considered financial advice. Before acting upon the following information, we recommend you seek the guidance of a qualified financial or business advisor who can take your unique needs into account.
Barriers surrounding financial management are consistently top pain points for small business owners in Canada. Throughout November, in alignment with Financial Literacy Month, Scotiabank and Startup Canada will be breaking down key aspects of this complex, often overwhelming hurdle many early stage founders face. Through the curation of tailored financial resources, the case studies of leading founders, and the expertise of applicable support organizations, we can work together to empower more entrepreneurs in Canada with the financial know-how and tools they need to succeed.
This month-long series will break down four topics critical to the financial literacy and wellness of early stage entrepreneurs:
- Accessing Government Grants for Your Business
- Funding for Black Entrepreneurs in Canada
- Finding The Right VC or Angel Investor
- The Importance of Business Advisors
Accessing Government Grants for Your Business.
Year-over-year, funding is consistently the most pressing challenge experienced by Canadian entrepreneurs. However, not all types of funding, nor access to said funding types, are created equal. According to the 2022 Startup Canada Census, the number one finance-specific challenge experienced by founders – over access to equity or debt financing – is access to government grants, with nearly 70% of respondents indicating this as their primary barrier.
For the first installment of the 2023 Financial Literacy Campaign, Startup Canada welcomed Nicole Frey and Brianna Blaney to talk about accessing government grants for your business. Nicole Frey is the Founder of the Animal Food Bank Foundation, the only cross-country food bank providing food and supplies to pets in need. Brianna Blaney is the Co-Founder and CEO of Pocketed – an intelligent match making platform helping businesses easily access grant funding, tax credits, and other non-dilutive funding.
The Case Study:
SC: Nicole, what is your business and what do you do?
NF: Our business is not really a business in the traditional sense of the word, as we are a nonprofit. It started with meeting a homeless gentleman and his dog, Odin, in late 2019 in Kelowna and wanting to feed his dog. From there, our efforts manifested into this thing – Animal Food Bank – which has become a force in Canada! We have over 100 volunteers, and we have done 2.3 million pet meals over the last three and a half years!
SC: What were the circumstances that led you to explore grant funding?
NF: We’re the only pet food bank in Canada that operates across provincial borders and operates on a scale that allows us to donate mass quantities – like 1.7 million meals over the last little bit. That requires a lot of administrative work on the back end!
The idea was to create our own software, tailored to what we do and how we do it, but that remained flexible enough to allow other organizations, entities or people who want to start an animal food bank to plug into our system – and access our network of food to be able to provide relief in their area.
SC: Today, what does your business’ financing breakdown look like?
NF: Because we are a nonprofit, we are not attractive to investors. So the traditional funding of startups isn’t something that we can do. The operation of our food bank itself is entirely reliant on donations from the public and the community. What our grant allows us to do is hire a team of employees for a specific period of time in order to develop and release the software.
Grant Funding 101:
SC: Brianna, what is a business grant? Free money sounds like there may be a catch!
BB: “Free money” is a great lead generation tool for grants, but I would say the free factor depends on what you define as free! Yes, you’re not paying to access grants as they are a non-diluted funding source – meaning they take no equity of your business – but you are expected to deliver as a result of receiving that grant.
At the end of the day, while you’re not paying for access to this capital (grants are typically non-repayable), you are expected to report back on your performance, use of funds, and what the provider has helped you achieve in your business.
SC: What are the high-level benefits and drawbacks of grant funding for entrepreneurs?
BB: They are a very powerful funding tool, particularly when you use them in conjunction with equity financing, debt financing, or are making money and experiencing healthy cash flow in the business. That’s actually how we at Pocketed got started – we invested a small amount of money and then leveraged that capital to access grants that returned almost 10x our founder investment. We were strategic about pairing grants with our own money.
Grants are very powerful in the sense that they can really accelerate your growth. But grants, ultimately, aren’t really money intended to turn on the lights – they are money to help you turn on more lights, fuel more engines, and really accelerate growth. So that can be very challenging for entrepreneurs. They want grants before they are really ready for grants, which can be frustrating.
SC: When should business owners start exploring opportunities and applying for grants?
BB: As a founder, I think it’s important to be looking at all of your funding options early on because you can shape your business and understand those key inflection points in your growth. It’s never too early, but that being said, companies that are typically the most successful with grant funding are those that have access to existing capital.
The second indicator is companies that are investing in fundable activities in their business. What I mean by that is that our government isn’t altruistically handing out money to for-profit businesses; they’re seeking to drive a benefit to Canada.
The Scotiabank Women Initiative is proud to partner with Pocketed for an exclusive offer for program participants. Learn more here.
Finding Grant Opportunities & Determining Eligibility:
SC: Brianna, other than Pocketed, how do small business owners find grants?
BB: When you’re talking to small business owners that are looking for grants, they are often using Google – going to the depths of the internet trying to find something applicable to their business – or they’re leveraging some of the tools that exist from the government. The challenge with tools like this is that they’re not comprehensive at a federal, provincial, municipal, and private funding level. Information about grants in Canada is also incredibly fragmented. They are hard to find, and programs can change at the drop of a hat! That’s a huge part of what we seek to do at Pocketed – using intelligence and proprietary insights we have on programs to educate business owners on which programs they should be pursuing and why.
SC: What’s the biggest challenge in determining one’s eligibility for a grant?
BB: It’s time-consuming to determine which programs actually align with your business goals, and it’s difficult to determine which ones you have a competitive chance of winning. Just because you are eligible does not mean you are competitive to win that program – and grants can be very competitive.
SC: Nicole, take us on the journey of your first successful grant application.
NF: So, the area of our business we were hoping to expand was the creation of software. I got in touch with Pocketed through a referral from somebody I know in the tech sector. The founder of Pocketed and I had a call, and it was great – we connected, and I was very quickly introduced to other members of the team. The more I talked to the team, the more comfortable I felt.
The Pocketed team was so excited for us that they all called me. It’s like camaraderie and a team – they’re not there just to make a dollar and write a grant. They are invested in the success of what we are doing as well. That’s what sets them apart!
SC: Brianna, what information is typically needed to apply for most grants?
BB: Really effective grant applications tell a compelling story. They are truthful, they highlight your benefit to Canada, and they actually move the needle for your business. That being said, there are really two extremes.
- When thinking about what’s required for a grant application, think about the amount of money you’re being awarded. Typically, the larger the program and the larger the funding award, the more involved and complex the application process will be.
- On the flip side, if you’re pursuing a smaller grant – maybe a student hiring fund – the process will be much more straightforward, faster, and simpler for you.
In general they’re hard to do well, and as an entrepreneur you need to supply a lot of information. All of the basics that you would expect like your incorporation number, registration dates, and your address are of course required, but for larger, complex programs it isn’t uncommon to be asked for 20+ pieces of information or resources as part of the application to prove that you have access to existing capital, that you’re moving the dial on your business, and that you’re able to create meaningful impact through the government funding program.
SC: Do you advise founders to onboard a grant writing expert in this process, or can they do it themselves?
BB: There are many programs in Canada that you don’t need a grant writer for – you can do it on your own and retain 100% of the benefit of those funds. In fact, when you’re at a really early stage and need a grant, we encourage you to do that. Do it yourself, understand the complexity, and get a feel for what they’re asking you for.
That being said, as you grow your business your capacity changes. For those companies, we absolutely encourage you to consider hiring a grant writer. Excellent grant writers bring a lot to the table – they can help you craft a really compelling story and they will do a ton of the heavy lifting and framing, which will, ultimately, contribute to the success of your application.
SC: How should entrepreneurs go about finding the right grant writer for them? What makes a great grant writer?
BB: Ultimately, excellent grant writers come with the curiosity of a journalist, are strong writers, and understand the demands of each funder. That’s what makes Pocketed so compelling – we don’t shoehorn you into any one grant writing relationship; we allow you access to our entire team of grant writers. This enables you to have the right partner for every application you want to pursue, ultimately getting you as much money as you possibly can through government funding programs!
More generally, great grant writers will sometimes have a specialization, but at their core, they are creative generalists. On top of that, you want to make sure there are no typos. It sounds trivial, but great grant writers have exceptional attention to detail.
SC: Nicole, as a nonprofit, what benefits did a grant sourcing and service provider give your business?
NF: We don’t have staff – I’m not an employee on the operations side, and all of our volunteers are simply volunteers. So there is no time or capacity for us to research and find grants, let alone apply for them. So to have an entity, like Pocketed, that can do that for you but also truly get it and understand your business is invaluable. Our grant writer, Steve, gets it. His applications are amazing and are definitely better than what I could write myself.
Learn more about grants and subsidies to grow your business with ScotiaAdvice+ here.
Managing & Utilizing Grant Funding In Your Business:
SC: Nicole, what type of grant did you successfully acquire?
NF: Our grant is administered through the Red Cross. What’s really interesting about this grant is that it had tiers – so because we operate across different provinces, we qualified for the largest tier of funding. It was a federal government fund associated with community services and recovery.
SC: How did you actually secure the funds? What did that system look like?
NF: This particular fund is 80% upon signing of the agreement, and then the remaining 20% is issued at the conclusion of the project. This actually poses a challenge – I have to come up with a way to bridge that lack of funding towards the end of the project. For that, we are actually approaching some traditional lenders to see what kind of deals they can offer us to help us bridge that.
Yes, getting grant funding is great, but you also need to be intimately acquainted with your cash flow. If the grant funding lags behind the need to pay expenses, you need to be prepared well in advance in order to cover those gaps in cash flow.
SC: Brianna, what can business owners spend money on once a grant is secured? Are there any restrictions or qualifying factors?
BB: Grants in Canada fund a wide range of activities. That means you can deploy the capital in a lot of different ways depending on what that grant is intended to fund. A really important note on those fundable activities is to make sure that you’re spending the money from a given grant on the activities that were approved for funding by that grant. Make sure you’re respectful of those boundaries.
SC: Nicole, how hands-on was/is your grant provider? Walk us through the agreement’s parameters.
NF: That information was all included in the initial application. So there are some deadlines for report writing, and the administrator will remind you of them.
You have to read your grant agreement. Thank goodness for Pocketed, again, because you can ask them questions when you’re confused about things. It’s not necessarily realistic to assume that your grant provider is going to be available as quickly as you may need, or in the capacity you may need. If you don’t figure out how to move forward, that will impact your ability to deliver on what you applied to do.
SC: So grant agreement parameters can change drastically from provider to provider?
NF: Oh yes. Our grant is for a variety of different projects, for a variety of different nonprofits, for various project sizes, and in various locations – so there is no way for them to provide the same information to everybody, because everything we are doing is completely different from another recipient. It really depends on what you’re applying for, who the provider is, and how often they do that type of funding.
SC: What advice do you have for others relating to fund management and organization?
NF: Don’t mix your funds up with your regular operating costs – whether that’s donations or private funding – because there are going to be very strict grant reporting requirements, and rightfully so.
SC: What was your largest hurdle or lesson learned while utilizing the grant?
NF: You have this wonderful plan with staff and contractors in place… and then things never work out as you planned. You need to find a way to stay on track or catch up even though there may be big hurdles flying at you. As we encounter hurdles, it becomes very important to react and problem-solve very quickly.
Grant Funding and Canada’s Entrepreneurial Ecosystem:
SC: What impact has grant funding had on your venture’s success and growth?
NF: We would not have been able to build the software. I have been trying to get this software funded for two years, and it never would have happened without this grant. It’s the difference between doing it and not doing it, it’s really that simple. We can talk about the impact of what we do, the importance of the work, and the philosophy of why the software is needed, but the reality is that none of it matters if we can’t execute. Without grant funding, we wouldn’t be executing.
SC: In 2023, with debt being expensive and equity capital spending growing more conservative, why are government grants and grants, in general, vital to Canada’s entrepreneurial ecosystem?
BB: Our world is facing huge issues. We have poverty, we have climate change, and we have unbelievable catastrophes happening every single day across the globe. We need to solve these problems with innovation and to realize innovation, we need entrepreneurs. So it is critical for our government to continue investing in entrepreneurs, and grant funding in Canada is one of the ways they can do that.
Grant funding and tax credits are two very tangible ways our government invests in entrepreneurs and supports our collective commitment to innovation. We will not solve the problems that we need to solve at the global level if we continue business as usual
Right now, grants are critical. It’s hard to access other capital as a small business owner.
That also means that we’re seeing grants become increasingly competitive – people are tapped out of other options. Grants are powerful, and we need them now more than ever, but we also need to equip companies to win them.
Plug into Scotiabank’s support programming for entrepreneurs with the Scotiabank Women Initiative and learn more about the Canadian Small Business Financing Program, including information on Term Loans and Line of Credit.