No guide covers both sides of the border. US grant firms don't touch IRAP or SR&ED. Canadian firms don't do SBIR. And the generic "international funding" resources treat US and Canadian programs as separate lists rather than a coordinated strategy.
That's a problem, because a cross-border tech startup with the right structure can access significantly more non-dilutive funding than a single-country company. SBIR Phase I ($150K-$305K) plus IRAP ($75K-$200K) plus SR&ED ($100K-$400K/year) plus provincial credits -- $500K to $2M+ in the first 18-24 months, without giving up a single share.
This guide explains how to structure your company, sequence your applications, and build a funding stack that pulls from both jurisdictions simultaneously.
The cross-border advantage
A single-country startup picks from one menu. A cross-border startup picks from two -- and the menus are complementary, not overlapping.
| US programs | Canadian programs | |
|---|---|---|
| R&D grants | SBIR Phase I: $150K-$305K | IRAP: $75K-$500K |
| R&D tax credits | Section 41: ~6-8% of qualifying R&D | SR&ED: 35% refundable (CCPC) |
| Phase II / scale-up | SBIR Phase II: $600K-$1.25M | IRAP scale-up + provincial |
| Sector-specific | DARPA, DIU, ARPA-E, ARPA-H | IRAP Defence Assist, AI Assist, Clean Tech |
| Tax credit timing | Annual (offset payroll taxes pre-revenue) | Annual (cash refund 8-14 months after work) |
The stacking math: A cross-border startup with 5 Canadian engineers ($600K salaries, assuming ~80% of time involves SR&ED-eligible technological uncertainty = $480K eligible) and a US entity pursuing NSF SBIR could realistically access:
- IRAP: $120K (first project, covering a portion of allocated salaries)
- SR&ED on remaining eligible Canadian R&D: $126K (35% of $360K after IRAP reduction of eligible pool)
- Ontario OITC: $29K (8% on eligible Ontario expenditures -- flows automatically from the federal SR&ED claim, no separate application required)
- NSF SBIR Phase I: $305K
- Total first-year stack: ~$580K in non-dilutive funding
And that's before SBIR Phase II, US R&D tax credits, or provincial programs.
Corporate structure: get this right first
You cannot access both programs with a single entity. SBIR requires a US small business. IRAP requires a Canadian SME. The structure you choose at incorporation determines your funding ceiling for years.
Option A: Canadian parent + US subsidiary
The Canadian entity is the holding company. The US entity (typically a Delaware C-corp) is a subsidiary that applies for SBIR.
Best for: Canadian-founded companies raising initial capital from Canadian investors. Preserves CCPC status for enhanced SR&ED (35% refundable). The Canadian entity accesses IRAP, SR&ED, and provincial programs. The US subsidiary handles SBIR, US customers, and US operations.
The catch: The US subsidiary must independently meet SBIR's 51% US citizen/permanent resident ownership requirement. If the Canadian parent owns 100% of the US sub, the ownership test looks through to the parent's shareholders. Canadian citizens who are also US permanent residents (green card holders) satisfy the test. Canadian citizens without US residency do not.
SBIR foreign screening: The 2026 reauthorization requires disclosure of all foreign ties, with mandatory due diligence across 8 federal watchlists. Canada is NOT a "country of concern" (those are China, Russia, North Korea, Iran), but a Canadian parent adds review friction. Expect additional questions, not disqualification.
Option B: US parent + Canadian subsidiary
The US entity (Delaware C-corp) is the parent. A Canadian subsidiary handles Canadian R&D, IRAP, and SR&ED.
Best for: US-founded companies expanding to Canada, or companies raising primarily from US VCs (who strongly prefer Delaware C-corp structures). Clean SBIR eligibility through the parent entity.
The catch: A Canadian subsidiary controlled by a US parent typically loses CCPC status. This drops SR&ED from 35% refundable to 15% non-refundable -- the difference between a $210K cheque and a $90K credit you can't use until profitable. See our SR&ED guide for structuring options to preserve CCPC status.
Option C: Delaware Straddle (sister companies)
Two separate companies -- one Canadian, one US -- under common shareholder ownership. Neither owns the other.
Best for: Dual-national founders (Canadian citizens with US permanent residency) who want maximum flexibility. The Canadian entity is a clean CCPC. The US entity is a clean Delaware C-corp. No parent/subsidiary complications.
The catch: IP ownership must be clearly allocated between the entities. Investors may find the dual structure unusual. Works best when the same individuals can serve as officers/directors of both entities.
Which structure should you choose?
| Scenario | Recommended structure |
|---|---|
| Canadian founders, Canadian seed investors | Canadian parent + US subsidiary |
| Canadian founders, raising US Series A | Canadian parent (preserve CCPC now) → evaluate restructuring at Series A |
| US founders, expanding R&D to Canada | US parent + Canadian subsidiary |
| Dual-national founders | Delaware Straddle |
| Already have a US C-corp, no Canadian entity | Create Canadian subsidiary for IRAP/SR&ED access |
The most expensive mistake: Setting up the wrong structure and losing CCPC status before you realize what it costs you. A Series A startup with $2M in Canadian R&D salaries loses $350K+ per year in SR&ED refunds by not being a CCPC. That's not recoverable retroactively.
SBIR IP rights in subsidiary structures
SBIR requires that IP developed with SBIR funding be owned by the small business (the US entity). The government gets a royalty-free license for government purposes, but the company retains commercial rights. If your Canadian parent holds the core background IP and licenses it to the US sub, the SBIR-funded foreground IP (new inventions from the funded work) must stay with the US entity. This means your US subsidiary will own some IP and your Canadian parent will own some IP -- plan your IP allocation agreement between entities before your first SBIR application, not after.
PI residency: a concrete example
SBIR requires the Principal Investigator to be primarily employed (more than 50% of working time) by the US entity. If your technical co-founder is based in Toronto, they cannot serve as SBIR PI. You'll need a US-based technical lead employed by the US subsidiary. This doesn't mean your Toronto-based CTO can't contribute to the project -- they just can't be the named PI. Many cross-border companies hire a US-based senior engineer or technical director to serve as PI while the Canadian team works on the IRAP-funded portion.
IRAP, by contrast, has no formal "PI" concept. Your ITA (Industrial Technology Advisor) works with your Canadian team, but there's no equivalent of SBIR's PI employment requirement. Any qualified member of the Canadian team can lead the IRAP project.
Minimum viable Canadian presence for IRAP
If you're a US company setting up a Canadian subsidiary, you need:
- A Canadian-incorporated entity (federal or provincial incorporation)
- Canadian employees (T4, not just contractors) performing the R&D in Canada. IRAP strongly prefers companies with employees, though some projects with a mix of employees and contractors are funded.
- No formal seasoning period, but brand-new subsidiaries with no Canadian employees or track record will face more scrutiny from the ITA. Having even 2-3 Canadian engineers on payroll before your first IRAP meeting significantly improves credibility.
- A real Canadian office (home office is acceptable at seed stage, but co-working or leased space is better for optics)
You can begin the IRAP engagement process shortly after incorporating -- request an ITA meeting, explain your expansion plans, and discuss what projects might qualify. ITAs appreciate early conversations, even before you've fully staffed the Canadian team.
Sequencing: what to apply for and when
If you're Canadian-founded
Phase 1 (Months 0-3): Canadian foundation
- Incorporate Canadian entity (ensure CCPC status)
- Apply for IRAP -- it's always open, no fixed deadlines, 60-90 day decisions
- Start SR&ED documentation from day one (you'll claim retroactively at year-end)
Phase 2 (Months 3-6): US expansion 4. Incorporate US subsidiary (Delaware C-corp, ensure SBIR-eligible ownership) 5. Register on SAM.gov and SBA Company Registry (allow 2-4 weeks) 6. Submit NSF Project Pitch (fastest SBIR entry point, 3-week response)
Phase 3 (Months 6-18): Parallel execution 7. Run IRAP project in Canada, SBIR Phase I in US -- simultaneously 8. File first SR&ED claim at Canadian fiscal year-end 9. Explore provincial programs (Ontario OCI, Alberta Innovates, BC IDMTC) 10. Claim US R&D tax credit (Section 41) on US-entity R&D
If you're US-founded
Phase 1 (Months 0-3): US grants first
- Apply for SBIR through your existing US entity (SBIR is your home program)
- Start with NSF Project Pitch or the agency closest to your technology
Phase 2 (Months 3-6): Canadian expansion 3. Incorporate Canadian subsidiary -- consult a cross-border tax advisor on CCPC preservation 4. Hire Canadian R&D staff (minimum viable team for IRAP eligibility) 5. Begin IRAP engagement (request an Industrial Technology Advisor meeting)
Phase 3 (Months 6-18): Stacking 6. Run SBIR and IRAP in parallel (distinct work scopes, distinct teams) 7. File SR&ED on Canadian R&D expenditures 8. Explore IRAP's specialized streams (AI Assist, Defence Industry Assist, Clean Tech)
The full cross-border funding stack
Here's every program a cross-border tech startup should evaluate, organized by jurisdiction:
US side
| Program | Amount | Type | When to apply |
|---|---|---|---|
| SBIR Phase I | $150K-$305K | Competitive grant | After US entity is set up + SAM registered |
| SBIR Phase II | $600K-$1.25M | Competitive grant | After Phase I completion |
| US R&D Tax Credit (Section 41) | ~6-8% of qualifying R&D | Tax credit (offsets payroll taxes) | Annual, with tax filing |
| State programs | Varies ($25K-$200K) | Grants, tax credits | Varies by state |
| DARPA BAAs | $500K-$10M+ | Competitive | Rolling deadlines |
Canadian side
| Program | Amount | Type | When to apply |
|---|---|---|---|
| IRAP (core) | $75K-$500K | Advisory + grant | Always open, 60-90 day decisions |
| IRAP AI Assist | Up to program cap ($100M total) | Grant | For AI/ML companies |
| IRAP Defence Industry Assist | Up to program cap ($244M total) | Grant | For defense tech companies |
| IRAP Clean Technology | Up to program cap (~$98M) | Grant | For cleantech (absorbed SDTC mandate) |
| SR&ED (federal) | Up to $2.1M/year (CCPC) | Refundable tax credit | Annual, with T2 filing |
| Provincial SR&ED | 3.5-30% additional | Tax credit (mostly refundable) | Automatic with federal claim |
| CanExport Innovation | Up to $100K/year | Grant | For international R&D collaboration |
| Provincial programs | $10K-$500K | Grants, tax credits | Varies by province |
Programs to skip
| Program | Why |
|---|---|
| Strategic Response Fund (SRF) | $10M minimum -- too large for seed/Series A |
| Canada Digital Adoption Program | Cancelled (March 2024) |
| SDTC | Dissolved -- funding absorbed into IRAP Clean Tech stream |
| DOE Loan Programs Office | IRA-expanded authority under political challenge; minimum project size ($100M+) too large for startups regardless |
The rules of cross-border stacking
Rule 1: No double-dipping. You cannot use SBIR and IRAP to fund the same work. Each program must fund distinct R&D activities performed by distinct teams in their respective countries. SBIR funds US-based R&D. IRAP funds Canadian-based R&D. The projects can be related (different aspects of the same technology) but the specific funded activities must be separate.
Rule 2: SR&ED reduces by government assistance. Any IRAP funding received by the Canadian entity reduces the SR&ED eligible expenditure pool dollar-for-dollar. You still claim SR&ED on the remaining out-of-pocket R&D costs. SBIR funding received by the US entity does NOT reduce the Canadian entity's SR&ED pool (different entity, different jurisdiction).
Rule 3: SBIR PI must be in the US. The Principal Investigator on an SBIR award must be primarily employed by the US entity and the work must be performed in the United States. You cannot satisfy SBIR requirements with Canadian-based staff.
Rule 4: IRAP work must be in Canada. R&D funded by IRAP must be performed in Canada by employees or contractors of the Canadian entity. US-based work does not qualify.
Rule 5: Transfer pricing and withholding tax apply. If your US and Canadian entities transact with each other (IP licenses, intercompany services), pricing must be at arm's length. Both IRS and CRA actively audit cross-border transfer pricing. The Canada-US Tax Treaty reduces withholding on royalties to 10% (vs. 30% standard) and eliminates it on many service fees, but the classification of payments as "royalties" vs. "service fees" is heavily scrutinized. Get both the pricing and the payment classification right from the start -- retroactive adjustments are expensive. Consider a cost-sharing arrangement if both entities contribute to shared IP development.
What's changing in 2026
Canadian landscape:
- IRAP is expanding. Defence Industry Assist ($244M), AI Assist ($100M/5yr), and Clean Technology (~$98M from SDTC absorption) are new specialized streams with significant funding.
- SR&ED is the most generous in a decade. $6M expenditure limit (doubled from $3M), capital expenditures eligible again, higher phase-out thresholds.
- Canada Innovation Corporation (CIC) is expected to launch 2026-2027, merging NRC IRAP into a $2.6B innovation entity. This could change application processes and program structures.
- Trade tension response. The Strategic Response Fund ($5B) and Regional Tariff Response Initiative ($1B) create new funding for companies impacted by US tariffs.
US landscape:
- SBIR reauthorized through 2031. Agencies restarting solicitations April-May 2026 after a 5-month lapse.
- Strategic Breakthrough Awards. New post-Phase II pathway up to $30M with matching private capital.
- Enhanced foreign screening. Mandatory disclosure of all foreign ties. Canada is not flagged, but expect more paperwork.
For cross-border companies: The net effect is more money available on both sides of the border. Canada is actively increasing innovation funding as a trade response. SBIR is fully reauthorized with a new high-end scaling pathway. Companies structured to access both jurisdictions are better positioned than ever.
Common mistakes
1. Not setting up dual entities early enough. Founders wait until they find a specific grant opportunity, then scramble to incorporate in the other country. By then, they've missed the application window and the entity isn't properly structured. Set up your cross-border structure as part of your incorporation planning, not as an afterthought.
2. Losing CCPC status without understanding the cost. A Canadian startup that gives US investors voting control of the Canadian entity drops from 35% refundable SR&ED to 15% non-refundable. On $1M in R&D salaries, that's $350K in cash vs. a $150K credit you can't use. Discuss CCPC preservation with a tax advisor before signing term sheets.
3. Trying to fund the same work twice. Both SBIR and IRAP have clawback provisions. If auditors find you used both programs to pay for overlapping work, you'll be required to return the funds -- and you'll be flagged for future applications. Keep work scopes clearly delineated between entities.
4. Ignoring SR&ED documentation until year-end. SR&ED claims require contemporaneous documentation. Canadian engineers working on IRAP projects should be tracking time and documenting technical uncertainty throughout the year, not reconstructing records at tax time. See our SR&ED guide for documentation best practices.
5. Assuming one jurisdiction's rules apply to the other. SBIR's PI employment requirement has no IRAP equivalent. SR&ED's technological uncertainty standard is different from NSF's intellectual merit criterion. IRAP's ITA-guided process is nothing like SBIR's anonymous competitive review. Each program has its own logic -- learn both.
For a detailed comparison of IRAP and SBIR mechanics, see our IRAP vs. SBIR guide. For SR&ED specifics, see our SR&ED tax credit guide. For SBIR fundamentals, see our complete SBIR guide.
Want help building your cross-border funding strategy? Most US grant firms have never read an NRC contribution agreement, and most Canadian firms don't touch SBIR. Cada works both sides. Book a strategy review and we'll map your technology to the best-fit programs in both jurisdictions.