Grant, Loan or Tax Credit

They are described together and behave almost nothing alike. The differences that matter are when the money arrives, whether it can be taken back, and what you have to prove.

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Grants & ContributionsRepayable FundingLoansTax Credits

The most consequential distinction is not whether money must be repaid but when it arrives. Most contribution funding reimburses costs you have already incurred, so it never solves a cash-flow problem at the start of a project.

Who does this work. Lexaltico LLP’s government funding and grants service is led by Mitch Parmasar, who is not a lawyer and does not provide legal advice. Where a matter calls for legal advice — a funding agreement, a governance question, a repayment demand — it is handled by a lawyer at Lexaltico LLP. The firm is responsible for all of the work described on this page.

Quick Answer

What is the difference between a grant, a loan and a tax credit?

A grant is money given for a stated purpose and not repaid provided the conditions are met — though it can be reclaimed if they are not. A contribution reimburses a share of eligible costs after they are incurred, and some contributions are repayable by design. A loan is repaid regardless of how things go, with interest. A tax credit reduces tax payable or produces a refund, is claimed through a tax filing rather than applied for, and is not competitive. Timing, certainty and paperwork differ across all four, and so does who you deal with.

Ontario law · Lexaltico LLP, Toronto · introductory call

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GRANTS

Not Repaid, But Not Unconditional

A grant is given for a purpose. If the conditions are met it is not repaid, which is what makes it attractive. The conditions are the substance: the money may be spent only on what the agreement permits, reports must be filed on schedule, records kept for a period, and changes approved.

So a grant is conditional money rather than free money, and the condition most often breached is reporting rather than spending. A grant can become a debt years after the project finished.

CONTRIBUTIONS

Reimbursement, and Sometimes Repayable Anyway

Most business funding is a contribution: the recipient incurs eligible costs, submits a claim with evidence, and recovers a share. Nothing arrives at the start, which makes it the wrong instrument for a project that cannot be funded first.

Some contributions are repayable by design, often conditionally — on reaching revenue, on commercial success. A repayable contribution is closer to a loan than to a grant, and reading which kind you are being offered is worth doing before comparing it with anything else.

LOANS

Certain Money, Certain Cost

A loan is repaid with interest whether the project succeeds or not, and may involve security or a personal guarantee. What it offers in exchange is certainty and speed: the amount, the timing and the terms are known, the process is not competitive, and the money generally arrives before the spending rather than after.

For a project with a real deadline, a loan that arrives now can be worth more than a grant that might arrive in eight months. Watch for personal guarantees, which convert a company obligation into a founder’s own.

TAX CREDITS

Claimed, Not Applied For

Tax incentives work differently from everything above. They are claimed in a tax filing and they are not competitive, so there is no intake window. Strict filing deadlines still apply: a federal Scientific Research and Experimental Development (SR&ED) claim must be filed within 18 months after the end of the tax year. Eligibility turns on whether the work done meets the definition in the legislation. Canada’s principal research and development incentive operates this way, and Ontario has its own innovation credits.

The professional you need is an accountant rather than a grant writer, and the practical requirement is contemporaneous records: what work was done, by whom, and why it qualified. Rates and rules change, so confirm the current position with the Canada Revenue Agency or your accountant rather than relying on a summary. We are not tax advisors and this page is not tax advice.

COMPARING THEM

Four Questions Rather Than One

When does the money arrive, relative to when you must spend? What is the total cost, including administration and founder time, not just interest? What does it oblige you to do, for how long after the project ends? And what can trigger having to give it back?

Compared on those, a grant is not automatically the best option. A non-repayable grant that arrives in eight months, reimburses sixty per cent of narrowly defined costs and brings three years of reporting can be a worse instrument than a loan that arrives in three weeks.

MIXING THEM

Stacking Rules and Double-Counting

Programmes commonly limit total government assistance for the same costs, and claiming the same expenditure under two programmes, or under a programme and a tax credit, can breach one of them.

Where more than one source is in play, check the stacking provisions in each agreement before claiming rather than afterwards. This is a common and entirely avoidable cause of a repayment demand, and it usually arises from good intentions and separate spreadsheets.

HOW WE WORK

What Lexaltico Does on a Funding Choice

The useful work is comparing what is actually on offer on the four questions above, and being clear about which parts are certain and which are not. Sometimes the conclusion is that the grant is not worth pursuing this year.

Programme comparison and applications are led by Mitch Parmasar, who is not a lawyer. Agreements, security, guarantees and stacking obligations are handled by a lawyer at Lexaltico LLP. Tax credits are a matter for your accountant, and we are not financial or tax advisors. Fees are quoted and agreed in writing before work begins.

Programme details verified 23 September 2026 against the funder’s own published pages. Funding programmes change their terms, their amounts and their intake dates without notice, and third-party summaries are frequently out of date. Confirm current terms with the funder before relying on anything here.

Common Questions

Frequently Asked Questions

What is the difference between a grant, a loan and a tax credit?

A grant is not repaid if conditions are met. A loan is repaid regardless, with interest. A tax credit reduces tax payable and is claimed in a filing rather than applied for.

What is a repayable contribution?

Funding that must be repaid, often conditionally on revenue or commercial success. It is closer to a loan than a grant, so read which you are being offered.

Is a grant always better than a loan?

No. A grant arriving in eight months, covering narrow costs, with three years of reporting can be a worse instrument than a loan that arrives in three weeks.

When does contribution money actually arrive?

After you incur and document the eligible costs. It does not solve a cash-flow problem at the start of a project.

Can a grant be taken back?

Yes, where conditions are not met — most commonly reporting failures, ineligible expenditure, unapproved changes or an unreturned surplus.

Can we claim a grant and a tax credit for the same work?

Check the stacking provisions first. Programmes commonly limit total government assistance for the same costs, and double-counting is an avoidable cause of repayment demands.

Who do we talk to about tax credits?

An accountant. They are claimed through a tax filing, and eligibility turns on whether the work meets the statutory definition. We are not tax advisors.

What should we compare options on?

When the money arrives, the total cost including administration and your own time, what it obliges you to do and for how long, and what can trigger repayment.

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Our lawyers offer an introductory call for most matters. Call, email, or book online. Do not sign anything before speaking with us.

Your name

Email address

Phone

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Briefly, what is happening?

A few questions about your government funding & grants matter optional

None of these are required and your enquiry sends without them. They let the lawyer read your situation before the call rather than during it.

What kind of organisation is it? optional

Where are you with it? optional

Is there an application or response deadline? optionalMost funding programmes close on a fixed date and do not reopen, so tell us any date you have.

Which programme, if you know it? optionalFor example SR&ED, IRAP, CSJ, or an Ontario or municipal grant.

Please do not send confidential documents or details through this form. We will ask for what we need once we have spoken and confirmed we can act for you.

Confidential and no obligation. We reply within 2 business days. You can call +1 416 333 6200 instead if you would rather speak to someone now.

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