Gerry's Blog

Frequently Asked Questions

various topics related to business planning
4 minutes reading time (702 words)

Frequently Asked Questions

Frequently Asked Questions

FAQ: I would like to apply for the New Brunswick Small Business Investor Tax Credit program but it looks complicated. Is it worth the effort?

The purpose of the New Brunswick Small Business Investor Tax Credit (SBITC) program is to help small businesses raise equity capital by encouraging New Brunswick residents to invest in them.

This blog is specifically about the New Brunswick program, but some of you may be interested to know that Nova Scotia has a somewhat similar program called "Equity Tax Credit" program and Prince Edward Island has a program called "Share Purchase Tax Credit" program.

My purpose in this blog is to give you some sense of what the New Brunswick program is about and hopefully encourage you to follow up for more details. You can find the complete description of the program, as well as the various forms (all 7 of them) that you will need, on the Department of Finance web site.

The program allows for investors to be individuals, corporations or trusts. However, in this blog I am only going to consider investors who are individuals.

I will be discussing some of the major requirements but first you should know that if you apply on behalf of your business (which must be incorporated), and are successful, then investors (and you could be one of them) are eligible for a 30% tax rebate on their personal income taxes.

This is huge. And if this were not enough, the new government has indicated that they plan to increase this to 50%. Frankly, this is very huge!

Another exciting thing about the SBITC program is that all sectors are eligible, so most likely your small business would qualify.

Still, there are 9 specific "Corporation Eligibility Criteria" that your business must meet. Your corporation probably meets all 9 criteria, but you do need to go through each one just to make sure. Don't let some of the business jargon throw you off - call or e-mail me if there is something you do not understand.

Once you determine that your corporation is eligible (the 9 criteria) then you need to provide information on 8 specific "Corporation Application Requirements". The first of these is an investment plan (i.e. how much money you plan to raise, from whom, for what purpose, and what type of shares you will be giving the investors in return). The rest of the 8 requirements mostly deal with financial and corporate documents. This stuff you should already have.

So, once you know that your corporation is eligible and have met the application requirements, you need to make sure that the "Investor Eligibility" and "Investment Eligibility" requirements are met.

Don't worry. This is the easy part. This just sets out some of the boundaries.

For example, investors must be at least 19, must invest at least $1,000 and hold the investment (the shares you give for the investment) for at least four years - this type of thing. The applicant corporation (your company) must raise at least $10,000, have at least three investors and only use the investment money raised to do the things that you put in your investment plan, stuff like that.

Of course there are some other details you need to be aware of, and some things you need to do each year to keep the government informed. There is significant government involvement here - there has to be a paper trail.

So, is it really worth the effort?

Look at it this way - you have to produce a product that you plan to sell to a bunch of people you probably don't know and you intend on being successful. Isn't it worth a few hours of you time to look further into a program that could substantially reduce your financial risk and provide the capital needed to take your business to the next level?

As they say - you owe it to yourself.

My next blog will consider the question "I am a farmer and lately I have been reading a lot about the importance of having a business succession plan. Just how important is it and how do I go about it?". Stay tuned (Next post October 20, 2014).

 

 

Frequently Asked Questions (FAQ)
Frequently Asked Questions
 

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