N.B. Investor Tax Credit Program? - FAQ

FAQ: I would like to apply for the New Brunswick Small Business Investor Tax Credit Program but it looks complicated. Is it really 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 “Innovation 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 10 of them) that you will need, on the NB Department of Finance web site.

The program allows for investment in private corporations and in economic develop corporations. It allows for investors to be individuals, corporations or trusts. However, in this blog I am only going to consider investors who are individuals and who are investing in private corporations.

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 50% tax rebate on their New Brunswick personal income taxes. This is huge. 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 “Applicant 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 is 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 reside in New Brunswick, be at least 19, must invest at least $1,000 and hold the investment (the shares you get 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 your 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.