RAII Southern Ontario 2026: FedDev's Interest-Free AI Funding, Who Fits and the Two Deadlines

FedDev Ontario reopened the Regional Artificial Intelligence Initiative (RAII) for southern Ontario businesses on October 13, 2026. It funds two kinds of projects: established companies putting AI to work in their operations, and AI companies taking a market-ready product to scale.

The money is real but it is not a grant. RAII is a fully repayable, interest-free contribution of $125,000 to $5 million per project, covering up to 50% of eligible costs. Repayment normally starts one year after the project ends.

There are two deadlines. If your project and eligible costs start before March 31, 2027, apply by November 24, 2026. Every other project has until January 19, 2027 at 4:59 p.m. Eastern. This guide covers who fits each stream, what it pays for, how the money works, and what to prepare.

RAII southern Ontario at a glance

The intake follows a federal announcement on October 13, 2026 that added $500 million over five years to RAII, bringing the national initiative to $700 million. FedDev has not published how much of that is set aside for southern Ontario, and each regional development agency runs its own intake (see the national table below).

Who can apply: the rules for both streams

Every applicant, in either stream, must be:

• A for-profit business incorporated and registered to do business in Canada or Ontario, located and operating in southern Ontario when it applies, or a First Nations, Metis or Inuit business
• The owner of the project's intellectual property, or able to show it will own it and has the rights it needs
• Able to show a commitment to the responsible development and use of AI

FedDev does not publish a revenue test. It allows one FedDev Ontario application per business at a time: if you already have a file under assessment in RAII or another FedDev program, you need a decision on it, or must withdraw it, before you apply.

Stream 1: AI Adoption

This stream is for established businesses using AI to change how they operate. The tests:

• At least 3 years of operations, shown by financial statements
• At least 5 and fewer than 500 full-time equivalent employees
• A project that goes beyond commonly available AI tools. Buying subscriptions to general-purpose assistants is not the target

No sector is required, but priority may go to healthcare and life sciences, energy and natural resources, transportation, agriculture, and manufacturing and robotics.

What adoption projects can include

• AI readiness assessments
• Acquiring and integrating AI solutions, such as predictive analytics or robotics
• Equipment upgrades, digital infrastructure and process re-engineering
• Data quality, governance and architecture
• Best management practices and access to AI expertise
• Non-duplicative training and capacity building, change management and employee AI literacy
• Cybersecurity, cloud diversification and responsible-use frameworks

In our experience, the strongest adoption files describe one operational problem and the AI system that solves it: a vision inspection cell that cuts scrap on a named line, demand forecasting tied to a specific inventory cost, predictive maintenance on identified assets. Data clean-up, integration, training and cybersecurity then sit in the budget as the work needed to make that system run.

Stream 2: AI Commercialization and Scale-Up

This stream is for companies building AI or AI-driven products. The tests:

• At least 1 year of operations, shown by financial statements
• At least 1 full-time equivalent employee in southern Ontario and fewer than 500 FTE in total
• A solution at technology readiness level (TRL) 6 or higher, which in practice means a prototype demonstrated in a relevant environment, not an idea or an early lab build

Priority may go to firms with market traction (sales, export potential, patent filings) or a record of support from the innovation ecosystem, such as accelerators or investors.

What commercialization projects can include

• Developing, testing, validating and demonstrating the solution
• Product refinement and market diagnostics
• Scaling infrastructure to serve more users
• Re-shoring or onshoring development, production or talent
• IP protection and commercialization, governance, and regulatory compliance and certifications
• Cybersecurity, and data acquisition and management
• Non-duplicative training

What RAII will not pay for

Eligible costs are new, incremental costs that are essential to the project and directly related to eligible activities. FedDev lists these as ineligible:

• Land and building acquisition, and vehicles
• Ongoing production or operating costs
• Refinancing existing debt
• Unreasonable or non-incremental costs, and costs not directly related to the project
• Application preparation costs, including fees for third-party consultants who prepare the application

Two timing rules matter. A project cannot start more than 12 months before your application date, and any activity or cost incurred before FedDev makes a formal decision is at your own risk. FedDev also asks you to state which costs are already incurred or expected by March 31, 2027, because it is prioritizing projects that can create economic impact in the near term.

Repayable, not a grant: how the money works

FedDev describes RAII funding as fully repayable and interest-free. Repayment normally begins one year after the project is completed. FedDev has not published the length of the repayment term, so treat it as a question for your FedDev officer, not an assumption in your model.

FedDev makes the final call on the amount, subject to available funding, and an application is not a commitment of funding. If you are approved, you are expected to sign the contribution agreement within 30 days and confirm every source of matching funds at that point, for example with bank statements, term sheets or conditional funding letters. That 30-day window is why the matching money needs to be lined up before you apply, not after.

Stacking RAII with SR&ED and other programs

Total government assistance from all levels on the project is capped at 50% of eligible capital costs and 75% of eligible non-capital costs. Indigenous-led projects can receive up to 100%.

Read with FedDev's 50% share, that has a practical effect (our reading of the caps): if FedDev funds 50% of a capital cost, there is no room left for other government money on that cost. On non-capital costs, such as salaries or professional services, other government sources can cover up to a further 25%.

SR&ED counts. FedDev's page states that other government assistance includes Scientific Research and Experimental Development (SR&ED) tax incentives, and asks applicants to exclude SR&ED-eligible costs from the application where possible. For an AI product company this is the main planning decision: keep the uncertain development work in your SR&ED claim and build the RAII budget around scaling, validation, compliance and infrastructure. On the SR&ED side, government assistance generally reduces qualified expenditures, so map each cost to one program before you file either.

If you are working with an NRC IRAP advisor, note that FedDev says a technical assessment of RAII applications may be done by NRC IRAP or another external party it contracts. Any IRAP funding on the same costs also counts toward the caps.

RAII across Canada: which agency, which status

RAII is delivered by each regional development agency, and your region decides where you apply. This is what each agency's page and our funding database showed on October 15, 2026. Amounts are shown only where the agency publishes them.

How to apply

RAII uses downloadable PDF forms, not an online portal:

1. Read FedDev's application guide for businesses in full.
2. Download the Application for Funding (For-Profit Applicants) and the mandatory RAII Supplemental Form to your computer and open them in Adobe Acrobat Reader, not a web browser.
3. In question 22, name the stream: "Regional Artificial Intelligence Initiative - Adoption" or "Regional Artificial Intelligence Initiative - Commercialization".
4. Attach the mandatory documents (below) and submit from the form.
5. Keep the email acknowledgement that records the date and time of your application. If it does not arrive, call FedDev at 1-866-593-5505.

What to prepare

• The RAII Supplemental Form, completed even if every answer is no
• Financial statements: 3 years for AI Adoption, at least 1 year for Commercialization and Scale-Up
• Financial projections for 3 to 5 years that show the project's effect and your ability to repay
• Articles of incorporation and ownership details, and a company structure diagram
• Biographies of the key people delivering the project
• A work plan with milestones, plus a list of jobs created or maintained
• Where it applies: an IP strategy, and proof of accelerator or investor support
• Evidence of your 50%: bank statements, term sheets or conditional funding letters, which FedDev requires with the contribution agreement within 30 days of approval

FedDev assesses how the project supports new or expanded activity in your company; the quality of the plan and budget, including your ability to repay and your capacity to deliver; alignment with program priorities, including participation of underrepresented groups; expected outcomes such as jobs, revenue growth and productivity; project risks and how you will manage them, especially responsible-AI risks; and compliance with legislation. No decision timeline is published.

A realistic timeline to November 24

If any eligible cost lands before March 31, 2027, the window between the October 13 opening and November 24 is about six weeks. A workable plan:

• This week: pick the stream, confirm the TRL and FTE tests, and decide which deadline applies
• Weeks 1 to 3: scope the project, collect vendor quotes, split capital from non-capital costs, and pull SR&ED-eligible work out of the budget
• Weeks 2 to 4: confirm your 50% with your bank, investors or board; build the 3 to 5 year projections
• Weeks 4 to 5: complete both forms, the work plan and attachments; have an officer review and submit before November 24

If your spending starts after March 31, 2027, use the extra time to firm up quotes and financing, and still aim to submit well before January 19, 2027. Funding is subject to availability.

Common mistakes to avoid

• Calling it a grant in your cash flow plan. It is repayable, starting about a year after the project ends
• Counting forecast revenue or in-kind work toward your 50%
• An adoption project that is really a software subscription to a commonly available AI tool
• Including land, buildings, vehicles, routine operating costs or application preparation fees in the budget
• Leaving SR&ED-eligible development costs in the RAII budget
• Missing the November 24 cut-off for a project that spends before March 31, 2027
• Applying while another FedDev Ontario application is still under assessment

How RAII fits with other FedDev and AI funding

RAII sits alongside FedDev's Business Scale-up and Productivity stream, which also offers interest-free repayable contributions; because FedDev accepts one application per business at a time, choose the program that fits the project rather than applying to both. Outside Ontario, the agencies' BSP programs work on similar repayable terms. For the program details in one place, see the RAII southern Ontario program page.

Frequently asked questions

What is the Regional Artificial Intelligence Initiative in southern Ontario?

RAII is FedDev Ontario's funding for southern Ontario businesses that are adopting AI (AI Adoption stream) or commercializing and scaling an AI product at TRL 6 or higher (AI Commercialization and Scale-Up stream). The 2026-27 intake opened on October 13, 2026.

Is RAII funding a grant?

No. It is a fully repayable, interest-free contribution. Repayment normally begins 1 year after the project is completed. FedDev has not published the length of the repayment term.

What are the RAII deadlines?

Apply by November 24, 2026 if your project and eligible costs start before March 31, 2027. The final deadline for all other projects is January 19, 2027 at 4:59 p.m. Eastern Standard Time.

How much can my business get from RAII?

$125,000 to $5 million per project, up to 50% of eligible costs. You fund at least 50%, and forecast revenue and in-kind contributions cannot count toward your share. FedDev decides the final amount, subject to available funding.

Who qualifies for the AI Adoption stream?

For-profit businesses incorporated in Canada or Ontario, located and operating in southern Ontario (or First Nations, Metis or Inuit businesses), with at least 3 years of financial statements and 5 to 499 full-time equivalent employees, adopting AI that goes beyond commonly available AI tools.

Who qualifies for the AI Commercialization and Scale-Up stream?

Businesses with at least 1 year of financial statements, at least 1 FTE in southern Ontario, fewer than 500 FTE, and an AI or AI-driven solution at technology readiness level 6 or higher. Priority may go to firms with market traction or innovation-ecosystem support.

Can I combine RAII with SR&ED?

SR&ED tax incentives count as other government assistance, and FedDev asks applicants to exclude SR&ED-eligible costs from the RAII application where possible. Total government assistance is capped at 50% of eligible capital costs and 75% of eligible non-capital costs.

Can a consultant be the contact on my RAII application?

No. The authorized project and financial contacts must be officers of your company. Advisors can help you prepare, but the costs of preparing the application, including consultant fees, are not eligible costs.