While the number and extent of the initial government programs and assistance intended to support Canadian companies in light of the fallout of the COVID-19 pandemic is impressive, meeting the specific criteria and timing of these programs is proving to be challenging. This is particularly true for pre-revenue companies, such as life sciences and early stage innovative companies. In response to concerns that the initial programs would not be available to life sciences and other technology companies, the Canadian government has recently announced additional support programs.
In the last several days, three new programs were announced:
- the IRAP COVID-19 Innovation Assistance Program;
- the Regional Relief and Recovery Fund; and
- federal funding for COVID-19 medical research and vaccine development.
Each of these programs has hurdles that must be satisfied. Additionally, the IRAP program has an open application period of only one week, beginning on April 22 and ending on April 29, 2020, and so those interested must act quickly. Also of note is the reactivation and acceleration of processing SR&ED credits. The SR&ED program has provided crucial support to early stage life sciences companies and this renewed and accelerated activity is most welcomed by the sector.
In this bulletin, we discuss the key features of the newly announced government support programs for life sciences and other innovation-driven companies. Note that these programs are in addition to the recently announced Business Development Bank of Canada (BDC) Bridge Financing Program, as outlined in a previous Torys Bulletin, which also may be of interest for these companies.
What you need to know
- $250 Million IRAP COVID-19
Innovation Assistance Program: The Federal government
recently announced an additional $250 million of funding through
its Industrial Research Assistance Program (IRAP) which is
specifically targeted to help support early-stage and high growth
Canadian start-ups which would otherwise be unable to qualify for
other Federal COVID-19 emergency programs, such as those that are
pre-revenue. Online applications for the program opened on
April 22 and will close on April 29. To qualify for the program, a
company must meet the following criteria:
- Be ineligible for the Canada Emergency Wage Subsidy
- Be an incorporated, profit-oriented small or medium-sized business in Canada
- Be a company with 500 or fewer full-time equivalent employees
- Plan to pursue growth and profit by developing and commercializing innovative, technology-driven new or improved products, services or processes in Canada
- Lack sufficient financial resources to sustain operations from April 1, 2020 to June 23, 2020 inclusive
- Have a Canada Revenue Agency business number
- Be incorporated by no later than March 1, 2020
- $1.1 Billion COVID-19 of Strategic Research Financing. The Canadian Government has announced $1.1 billion of federal support for medical research related to COVID-19 prevention and treatment. The funding is split into 3 components: (1) vaccine/antiviral treatments - $115 million; (2) clinical trials - $662 million; and (3) testing and modelling - $350 million. Private sector life sciences companies which are targeting this therapeutic area may be able to access this funding.
- $962 Million Regional Relief and Recovery Fund. Regional Development Agencies (RDAs), which provide funding to small and medium-sized business throughout Canada, will be receiving $962 million of additional capital to support businesses affected by COVID-19 through the Regional Relief and Recovery Fund. Although details of the funding allocation and potential qualifying criteria have yet to be announced, life sciences companies around the country, particularly ones which are already funded by RDAs like FedDev Ontario, will be able to pursue and take advantage of this additional capital to support their businesses.
- SR&ED Backlog Clearing. The administration of the Scientific Research and Experimental Development (SR&ED) Program, which uses federal tax incentives to support Canadian companies engaged in research and development, had been previously suspended as a result of the CRA's operational response to COVID-19. Earlier this month, representatives of the CRA have indicated that the agency is looking to expedite previously backlogged SR&ED claims, and industry participants have confirmed that distribution of SR&ED funding has resumed.
Navigating Through COVID-19
These are undoubtedly challenging times, and companies, including those in the life sciences space, should explore every potential avenue of financial support until these economic headwinds have passed. For companies already funded through any of the government-related entities or programs listed above, we encourage reaching out to the loan or project officer assigned to your business in order to make sure that you can take advantage of any relevant support programs that are being offered. If you need any additional information or assistance in navigating these waters, feel free to reach out to us.
Originally published by Torys, April 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.