Ottawa ends digital-upgrade program for businesses early, with billions unspent

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The federal government is prematurely cancelling most of a $4-billion program to help small businesses upgrade their digital technology, with the funding left largely unspent.

The Canada Digital Adoption Program (CDAP), which was first announced in the 2021 budget, was once touted as a centrepiece of the government’s efforts to help businesses emerge stronger from the depths of the COVID-19 pandemic.

It finally opened for applications in early 2022 and featured a suite of different funding options, including $2,400 microgrants for website creation; $15,000 grants to hire digital consultants to create business plans; and interest-free loans of up to $100,000 to support technology upgrades. It was budgeted to run for four years.

But the program saw low uptake in the early going, as some entrepreneurs and business groups said it was confusing and complicated to navigate.

As of Tuesday, the government said more than 20,000 microgrants and more than 21,000 business-plan grants had been handed out over two years, representing a total of $274-million in support. Nearly 5,000 businesses received a total of $280-million in loans from the Business Development Bank of Canada (BDC).

However, that was far below target: The government had budgeted $1.4-billion for grants and advisory services, and $2.6-billion in loans, with the aim of helping 160,000 businesses.

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Although applications had increased in recent months, Ottawa ended the program’s largest components on Monday. The microgrant program, called the “Grow Your Business Online Grant,” will continue, but the larger grants will no longer accept applications and only those businesses that have already been through the grant phase are still eligible for a loan from BDC.

Nadine Ramadan, spokesperson for Small Business Minister Rechie Valdez, said the program was being wound down because the government had reached its capacity for dealing with the “high demand” from business owners.

“This program has been extremely successful in supporting tens of thousands of small businesses across Canada who needed support to grow and succeed while remaining competitive in the digital economy, and it will continue to support businesses who have already signed their grant agreements,” Ms. Ramadan said in an e-mail.

The government did not explain what would happen to the unused portions of the CDAP budget.

Dan Kelly, president of the Canadian Federation of Independent Business, said he was not surprised at the early cancellation of most of the program and he wished the government would be transparent about the CDAP’s shortcomings.

“As with most government programs, they have so many rules and requirements, most small firms just give up on the whole thing,” he said.

He said he hoped the government used the funding to instead cut taxes for small businesses.

Most of the CDAP’s budget was dedicated to a program designed by bureaucrats that would see an entrepreneur hire a third-party consultant for up to $15,000 to draw up a business plan, and then the entrepreneur would use that business plan to apply for a loan from BDC.

With the grant money going to the consultant and not the business owner, the CDAP program ended up creating a cottage industry of what the government called “digital advisers” who would try to sell small businesses on their services. And while the government created an online directory of just over 700 consultants for businesses to choose from, a disclaimer on its website notes Ottawa “does not warrant the quality of the services provided by such advisers.”

David Nagy, the founder of eCommerce Canada and one of the first advisers to sign up, said he and his team of 10 tried to give entrepreneurs full value for the plans by doing detailed technical audits of the businesses’ operations.

However, he said he felt some advisers were overly aggressive in recruiting small-business owners to the program. “It’s tough to police, right, because you’ve got 700 people that are ambitious, trying to sell, trying to educate and trying to achieve something,” he said.

Mike Couch, managing partner of Couch & Associates, said he was sad to see the program go because he felt his team was also having a positive impact for small businesses as an adviser with the CDAP.

However, he said he was also aware of practices that he felt were unethical, such as companies recruiting small-business clients for a fee.

“We’ve done our best to uphold the values of the program and really our brand as well,” he said. “So it’s been a bit disheartening to understand that there are a lot of people out there that are selling off leads of businesses.”