Crowdfunding’s Impact in Canada

In Canada, there have generally been four sources of capital for innovative SME’s. These are personal savings from the entrepreneurs, government grants, angel investors and venture capital. In addition, the presence of the SR&ED tax credits has proved to be a huge boost for the businesses that qualify. The federal and provincial governments are really working hard through the CRA to ensure that firms reap benefits in the form of tax credits. In addition, the legislative bodies have put in place measures, policies and regulations that make the environment conducive for literally any firm to apply for the credits. In the United States, the senate has approved legislation amending the country’s securities laws to permit crowdfunding to allow entrepreneurs to raise capital over the internet.

In the United States, the proposed law is dubbed the Jump Start Our Startups (JOBS) Act. In Canada, this law has been introduced but has yet to be implemented fully. For instance, in Ontario and other provinces, the policy makers wish to follow suit of the United States and seek to permit crowd funding by Canadian issuers. However, there has been a rift over which firms are allowed to make use of crowdfunding. Should crowdfunding be available to all SME’s or to just the innovative SME’s? If passed by lawmakers, crowdfunding could supplement other sources of capital for the innovative SME’s and it could be accessible during the very early stages of development, even prior to being eligible for the SR&ED tax credit.

Currently, this new method is being studied in the UK. It would be interesting to see how this proposed law would take off and act to the R&D companies there.