One of the fastest ways to lose grant funding is to spend it on the wrong things. Across Canadian grant programs, ineligible expenses are a top reason for rejected claims, delayed payments, and repayment of funds (called “clawbacks”) after approval. Most programs are strict about what they will—and will not—pay for, even if the cost seems reasonable for your business.
Below is a practical breakdown of eligible vs ineligible expenses in Canadian grant programs, plus the red flags funders watch for most closely.
Eligible expenses are costs a grant program has explicitly approved and agreed to reimburse or subsidize. If an expense is not listed as eligible in the program guidelines, it is usually ineligible by default—even if it supports your business goals.
Most Canadian grants share these common rules:
For example, the Canada Summer Jobs (CSJ) program only supports wages for eligible youth employees. It does not cover general business costs like rent or equipment.
While every program is different, these expense types are frequently eligible across federal and provincial grants:
In Canada Summer Jobs, for instance:
Grant reviewers look for patterns that suggest misuse of funds. These ineligible expenses are common red flags across Canadian grant programs.
Most grants do not fund business owners, shareholders, or related parties unless the program clearly allows it.
For example, wage subsidies like Canada Summer Jobs only apply to new youth employees, not business owners or family members.
Timing matters more than most businesses realize.
Even strong applications get rejected at the claim stage because invoices fall outside the eligible window.
Large equipment purchases raise flags unless the program specifically allows them.
Commonly ineligible items include:
Innovation programs like NRC IRAP are particularly strict. IRAP focuses on advisory services and project-specific R&D costs—not general capital assets.
Funders expect you to run your business without grant money.
Usually ineligible:
If an expense would exist even without the grant, it is often excluded.
Grant administrators use several checks to catch problems:
They also look for signs of double-dipping, which means claiming the same expense from multiple programs at once. Unless a funder specifically allows this (known as “stacking”), it is not permitted and can result in having to pay back grant funds.
Tools like GrantHub’s eligibility matcher can help you filter programs by province and industry in seconds, reducing the risk of applying to grants that won’t cover your real costs.
Many normal business costs are not grant-eligible. Always cross-check against program guidelines to avoid disappointment.
Reallocating funds between categories without written approval is a common cause of repayment of funds (clawbacks).
Missing invoices, unclear payroll records, or cash payments without receipts can invalidate an otherwise eligible claim.
Claiming the same expense across two programs is often prohibited unless stacking is explicitly allowed. Double-dipping can lead to grant repayment and may affect your chances of future funding.
Q: Are taxes like GST/HST eligible expenses?
Usually no. Most Canadian grant programs exclude recoverable taxes, since businesses can claim them back through tax credits.
Q: Can I pay myself from a grant?
In most cases, no. Owner compensation is commonly excluded unless the program explicitly allows it and caps the amount.
Q: What happens if I accidentally claim an ineligible expense?
The expense is typically denied, and you may need to repay funds already advanced. Repeated issues can affect future applications.
Q: Are used equipment purchases eligible?
Rarely. Many programs restrict funding to new equipment or exclude equipment entirely unless stated otherwise.
Q: Do advisory-only programs have eligible expenses?
Some programs, like NRC IRAP Advisory Services, provide support at no cost rather than reimbursing expenses.
Understanding eligible vs ineligible expenses protects your funding—and your reputation with grant funders. GrantHub tracks hundreds of active grant programs across Canada and shows you exactly what expenses each one supports, so you can apply with confidence and avoid costly red flags.
See also:
Was this article helpful?
Rate it so we can improve our content.
Canada Proactive Disclosure Data
The Canadian government has funded over 400,000 businesses through 1.27 million grants and contributions. Check your eligibility in 60 seconds.