FedDev Ontario opens $5M AI funding stream for Southern Ontario small businesses

What was announced

FedDev Ontario has opened intake for the Regional Artificial Intelligence Initiative (RAII), a funding program offering repayable contributions to help small and medium-sized businesses adopt artificial intelligence or scale AI-based commercial solutions. The program is part of Canada's expanded $700 million national AI investment strategy, with $500 million added over five years. Applicants can receive between $125,000 and $5 million, covering up to 50 per cent of eligible project costs.

Who can apply

The program operates through two distinct streams, each with different eligibility criteria. Stream 1 targets established SMEs that have been operating for at least three years and currently employ between five and 499 full-time employees. These businesses must be looking to adopt AI to improve operational productivity. Stream 2 is designed for AI technology ventures that have been operating for at least one year, employ between one and 499 full-time employees, and are developing solutions at Technology Readiness Level 6 or higher. Both streams are open to businesses in Southern Ontario.

Priority sectors and project types

FedDev Ontario has identified specific sectors where AI adoption receives priority assessment. For the adoption stream, these include manufacturing and robotics, transportation and logistics, healthcare and life sciences, agriculture and agri-food, and energy and natural resources. Projects may involve predictive maintenance, fleet routing algorithms, medical imaging diagnostics, livestock monitoring, grid optimization, and similar applications.

For the commercialization stream, preference is given to ventures with demonstrated market traction, such as existing commercial sales revenue, active pilot contracts, or patent filings. Backing from accredited Canadian accelerators, incubators, or venture funds also strengthens applications.

Key dates and requirements

Applications opened on October 13, 2026, and the final deadline is January 19, 2027, at 4:59 p.m. EST. However, businesses planning to start eligible project costs before March 31, 2027, should apply by the early consideration deadline of November 24, 2026. The program requires applicants to secure matching funds equal to 50 per cent of the total project cost from non-federal sources. Eligible projects must involve bespoke AI integration, infrastructure upgrades, or technology scale-up rather than generic software subscriptions. Intellectual property rights must remain secured within Canada.

What businesses should do next

Owners considering this funding should first confirm that their financial statements meet the program's operating history requirements and that their payroll records accurately reflect full-time employee count. They should also clearly define their project scope, ensuring it focuses on custom integration or infrastructure rather than standard SaaS solutions. Finally, they need to secure proof of committed matching capital from sources such as business reserves, commercial lines of credit, or private investment. For official application guidelines and submission forms, consult the FedDev Ontario Regional Artificial Intelligence Initiative portal.