AI funding in Canada in 2026: LIFT, IRAP, the reformed SR&ED and the other federal levers

Ottawa has redrawn its toolbox in eighteen months. The CDAP (Canada Digital Adoption Program), long the front door for SMEs, is closed: its main grant stopped accepting applications in February 2024 and its micro-grant in September 2024, as BDC confirms. What replaced it is more ambitious.

Three developments dominate. First LIFT, launched by BDC on April 24, 2026: $500M in loans to get Canadian SMEs “off the AI sidelines,” in the bank’s own words. Then the SR&ED reform, enacted in March 2026, the most significant in decades according to tax specialists: ceiling doubled, capital eligible, public corporations included. Finally the national “AI for All” strategy, unveiled on June 4, 2026, which ties it all together with an openly stated target: lifting business AI adoption from 12% to 60% by 2034.

The same warning as for the Quebec programs: nothing is guaranteed. The programs are discretionary, the budgets melt fast and the criteria shift. The reference points in this article were re-verified against the official pages as of August 2026; every figure remains to be confirmed with the body concerned.

Here are the federal programs relevant to a business AI project, from the most accessible to the most specialized.

LIFT is a loan program, not a grant, and that is its strength: the funds are released quickly and the amounts are serious, from $25,000 to $5M, with a principal repayment deferral of up to two years. BDC is aiming at more than 1,000 SMEs with its $500M envelope.

The program has two streams. The digital and AI transformation stream is aimed at companies with revenue of at least $1M and requires a transformation plan developed with BDC’s advisory services: this does not fund a purchase, it funds a plan. The productivity and advanced equipment stream targets companies with $5M in revenue and up.

A detail that matters for the sovereignty of your data: BDC grants a preferential rate when the chosen solutions come from Canadian suppliers. The exact rate is not published, but the incentive is explicit on the program page. An AI project hosted on your own premises, designed by a firm from here, ticks that box and simplifies your Law 25 compliance into the bargain.

BDC backs its launch with two figures from its own research: roughly 30% of Canadian SMEs were using AI in 2025, and those that do are reported to be 24% more productive than the rest.

The SR&ED (scientific research and experimental development) reform received royal assent on March 26, 2026, and the CRA updated its parameters on April 1. For a Canadian-controlled private corporation the refundable credit stays at 35%, but the ceiling on eligible expenditures rises from $3M to $6M for tax years beginning after December 15, 2024. At the enhanced rate, that represents up to $2.1M in refundable credits per year.

Three other changes widen the door. The taxable capital thresholds at which the enhanced rate is lost rise from $10-50M to $15-75M. Capital expenditures are eligible again, which had not been the case since 2014: equipment dedicated to R&D can attract a 40% refundable credit on the capital portion. And Canadian public corporations now have access to the enhanced rate.

A procedural addition: an optional pre-approval process allows up to three projects to be validated for three years, with an accelerated 90-day review. For an AI project the dividing line is unchanged: adapting or fine-tuning models where standard approaches fail counts as eligible experimental development; installing a commercial tool does not. The CRA says so explicitly in its guidelines on eligible work.

The Regional Artificial Intelligence Initiative (RAII) came out of the $200M federal envelope shared among the regional development agencies in 2024. In Quebec it is administered by CED, and it runs until March 31, 2031: the longest horizon of any program in the landscape.

The principle: an interest-free repayable contribution generally covering up to 50% of the authorized costs of an AI adoption or integration project, and up to 90% as a non-repayable contribution for non-profits. Repayment is spread out after the project ends, which protects cash flow during the rollout.

The program is very much alive: on July 15, 2026, CED announced $13.85M shared among 63 Quebec organizations through this initiative. The “AI for All” strategy has also announced a $500M expansion of the regional AI initiatives, which points to regular envelopes ahead.

NRC IRAP is still administered by the National Research Council: the planned transfer to the Canada Innovation Corporation never took place, as the NRC’s 2025-2026 departmental plan confirms. Nothing changes on the ground, then: SMEs of 500 employees or fewer, a project with a real technological challenge, and everything starts with a conversation with an industrial technology advisor. The NRC publishes no official coverage scale; the ranges that circulate (60% to 80% of R&D labour) come from advisors’ practice, not from a published document. Since 2024, the AI Assist stream has added $100M over five years for SMEs developing and deploying generative AI solutions.

Scale AI, the AI-powered supply chains innovation cluster, reimburses up to 40% of the eligible expenditures of a collaborative project: you need a consortium of at least two participants, one of them an SME, and a project running 12 to 18 months. The cluster is well funded (up to $284M in federal commitment) and active: its December 2025 round shared $128.5M among 44 projects, more than $73M of it in Quebec. More than $13M was still posted as available in July 2026 and intake is continuous.

Mitacs Accelerate remains the simplest lever for injecting research into a project: the company contributes $7,500 for a four to six-month internship funded at $15,000, of which at least $10,000 goes to the graduate intern as a stipend. A master’s student in language processing refining your document extraction pipeline is exactly the format. The Elevate program applies the same logic to postdoctoral researchers ($30,000 a year paid by the company for $60,000 of funding, over two years).

Take a typical project we often see at scoping: a 40-employee manufacturing SME wants to deploy three sovereign AI agents (quotes, searchable procedures, meeting summaries) with an automatic extraction component that carries real technological uncertainty. Budget before support: $80,000, of which $25,000 is server hardware and $20,000 is eligible R&D labour.

Three concrete moves. One: if your revenue is over $1M, open the LIFT application with BDC, it is the fastest program to process and the transformation plan it requires will clarify everything else. Two: call CED’s regional office to check whether your project is eligible for the RAII before committing a single dollar, because expenses incurred before filing are generally ineligible. Three: if your project involves a real technical challenge, ask for a conversation with an IRAP advisor and start your timesheets now, because SR&ED is won with contemporaneous documentation.

At Cogio, every proposal shows the gross cost, the plausible support and the estimated net, with the assumptions written out in black and white. Our Funding page walks through the programs, and the scoping call does the rest.