Plain-English definitions for Canadian SMB finance.

Auto-renewal clause

A contract provision that automatically extends the agreement for additional terms unless one party gives notice — frequently a source of silent vendor cost drift.

Recovery rate

In financial recovery: the percentage of identified leak value that is actually recovered as confirmed cash savings.

BDC

Business Development Bank of Canada — a federal Crown corporation that provides financing, advisory services, and growth capital to Canadian SMBs.

Burn rate

The rate at which a business consumes cash reserves — typically expressed as monthly net cash outflow.

Contingency pricing

A pricing model where the service provider is paid only if and when a measurable result is achieved — fees are a percentage of the recovered or generated value.

Incorporation

The legal process of creating a corporation as a separate legal entity from its owners — provides liability protection and tax planning advantages.

KPI

Key Performance Indicator — a quantifiable metric used to evaluate progress toward a specific business objective.

Owner-manager

An individual who both owns shares of a private corporation and works actively in the business — eligible for unique tax planning strategies.

SaaS

Software as a Service — software delivered via subscription over the internet rather than installed locally; typically the largest growing operating cost for modern SMBs.

CCPC

Canadian-Controlled Private Corporation — a private corporation primarily controlled by Canadian residents, eligible for preferential tax treatment.

CRA

Canada Revenue Agency — the federal agency responsible for administering tax laws, collecting revenue, and delivering benefit programs.

GST / HST

Goods and Services Tax (federal) and Harmonized Sales Tax (federal+provincial combined) — Canada's value-added tax on most goods and services.

Input Tax Credit

A GST/HST credit that allows registered businesses to recover the sales tax paid on purchases used to produce taxable supplies.

LCGE

Lifetime Capital Gains Exemption — allows Canadian residents to shelter up to ~$1.25M of capital gains on qualifying small business shares from tax.

Proxy method

An SR&ED election that calculates qualifying overhead as 55% of qualifying salary, eliminating the need to track individual overhead expenses.

QSBC

Qualified Small Business Corporation — share status required to access the Lifetime Capital Gains Exemption on a sale of business shares.

RRSP

Registered Retirement Savings Plan — Canadian tax-deferred retirement account; contributions reduce taxable income, growth is tax-free until withdrawal.

Small business deduction

Federal tax preference that reduces the corporate tax rate on the first $500K of active business income for CCPCs from ~26% down to ~9%.

SR&ED

The Scientific Research and Experimental Development tax credit — Canada's largest federal R&D incentive, returning up to 35% of qualifying expenditures.

TOSI

Tax on Split Income — Canadian rules that limit income-splitting strategies between family members through private corporations.

CDAP

Canada Digital Adoption Program — federal grant of up to $15,000 plus a $100,000 interest-free BDC loan to help SMBs adopt digital technology.

Depreciation (CCA)

The accounting allocation of an asset's cost over its useful life. In Canadian tax: Capital Cost Allowance (CCA) — the tax-deductible version with class-specific rates.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization — a profitability measure that strips out financing and accounting decisions to show core operating performance.

Free cash flow

Cash generated by operations after capital expenditures — the cash actually available to repay debt, pay dividends, or reinvest.

Operating margin

Operating income as a percentage of revenue — measures core profitability before financing and tax effects.