Canada’s Regional Defence Investment Initiative: Up to $10M for Defence Supply Chain Companies

Canada has spent decades underinvesting in defence relative to its NATO allies. That’s changing — fast. The federal government’s commitment to reach NATO’s 2% of GDP defence spending target is driving billions into domestic procurement, supply chain development, and industrial capacity building. The Regional Defence Investment Initiative (RDII) is the mechanism that channels that commitment directly to regional businesses.

RDII provides $125,000 to $10 million in repayable, interest-free funding for companies that operate in — or want to pivot into — defence supply chains. It’s delivered regionally through Canada’s six Regional Development Agencies: FedDev Ontario, PrairiesCan, PacifiCan, ACOA (Atlantic), CED (Quebec), FedNor, and CanNor (Northern). The FedDev Ontario version is the most detailed in its public guidelines, and we’ll use it as the reference here — but the core structure applies across all regions.

Why this program exists now

For years, Canada sat well below the 2% NATO spending target. That’s no longer politically tenable. Allied pressure, geopolitical shifts, and the government’s own defence policy update have put real money behind the commitment. But reaching 2% isn’t just about buying more jets and frigates — it requires building the domestic industrial base to support sustained defence procurement. That means companies making components, developing technologies, and providing services across the defence supply chain.

RDII is the regional funding mechanism for that industrial build-out. All supported activities must fall under NATO’s spending definition, and projects must demonstrate how they contribute to Canada’s defence industrial base.

The dual-use opportunity

This is the part most companies miss. You do not need to be an existing defence contractor to apply. The program explicitly supports companies that are “seeking to position themselves within defence supply chains.” If you make a civilian product with clear military applications — AI, cybersecurity, sensors, autonomous systems, quantum computing, advanced materials — you are eligible.

For dual-use projects, the military component must be demonstrated. That means showing that your technology, product, or service could ultimately serve a defence or military application. But here’s the key: activities necessary for realizing the whole dual-use project are eligible. You don’t need to split civilian and military development. If the project has a credible defence application, the entire project can be funded.

Who can apply

Through FedDev Ontario, eligibility requires:

• For-profit business, incorporated and registered in Canada for at least 3 years
• Located and operating in southern Ontario (other regions served by their respective RDA)
• Minimum 5 full-time equivalent employees in the region
• Addresses a market demand or opportunity within defence supply chains, including dual-use applications or pivots to defence markets
• Can only submit one application to FedDev Ontario at a time across all open programs

Priority sectors

The program targets sectors aligned with Canadian defence priorities:

• Artificial intelligence, cybersecurity, and quantum technologies
• Space
• Sensors
• Aerospace and shipbuilding/naval industries
• Land and armoured vehicles
• Uncrewed and autonomous technologies and systems
• Training and simulation
• Munitions and personnel protection
• Critical minerals and metals essential to defence

That last category is worth highlighting. If your company mines, processes, or manufactures with critical minerals that serve defence applications, this program overlaps with the Critical Minerals and Innovation Fund. Structure your applications carefully to avoid duplication and maximize coverage.

Eligible activities

RDII supports projects that can be executed between April 2025 and March 2029. Eligible activities include:

• Digitization, automation, and technology integration — investments that enhance productivity and competitiveness for defence applications
• Market diagnostics and commercialization — development, expansion, and participation in technology showcases and defence trade events
• Defence certifications — preparation and acquisition of certifications required to integrate into domestic and international defence supply chains
• Equipment and facility expansion — acquisition of equipment, expansion and modernization of facilities
• Dual-use technology development — adaption, adoption, development, or improvement of technologies with both civilian and military applications
• Late-stage R&D — research and development with a focus on support for late-stage product development

How funding works

RDII funding is structured as a repayable contribution — essentially an interest-free loan from the federal government.

• Funding range: $125,000 minimum to $10 million maximum
• Cost sharing: FedDev covers up to 75% of eligible costs; the applicant funds a minimum of 25%
• Repayment: Interest-free. Repayment begins 1 year after project completion
• Total government assistance: Can reach up to 100% of eligible costs (federal, provincial, and municipal combined)
• Retroactive costs: Costs may be retroactive up to 12 months before a signed funding application, but no earlier than April 1, 2025
• Project timeline: Projects must start no earlier than April 1, 2025 and complete by March 31, 2029

How projects are assessed

Applications are reviewed on multiple criteria. The strongest applications address all of these convincingly:

• Degree to which the company operates in or targets sectors reflective of Canadian military needs
• Whether the project activities meet a demonstrated demand or opportunity in defence supply chains — especially for companies proposing dual-use products or pivoting to defence
• Whether the project supports new or expanded initiatives for the company
• How the project boosts productivity, capacity, and competitiveness
• Alignment with the Buy Canadian Policy — priority for projects strengthening SME integration into Canadian supply chains
• Expected measurable economic benefits for Canada and the national defence industry
• Quality of project plan, budget, and IP strategy
• Capacity to complete the project by March 31, 2029

Application process

Applications are accepted on a continuous basis until funding is fully committed. There is no fixed deadline, but the funding pool is finite — the earlier you apply, the better your chances.

1. Complete the online self-screening tool to determine eligibility
2. Review the Application Guide for Businesses
3. Download and complete the Application for Funding with all mandatory attachments (incorporation documents, IP strategy, financial statements)
4. Submit your application — you’ll receive an email confirmation. Contact FedDev Ontario at 1-866-593-5505 if you don’t receive it.

After submission, any costs incurred before a formal decision are at the applicant’s own risk. If approved, you’ll sign a contribution agreement within 30 calendar days and begin claiming on a reimbursement basis.

Available across all regions

RDII is not limited to southern Ontario. The program is delivered by all six Regional Development Agencies across Canada:

• FedDev Ontario — Southern Ontario
• PrairiesCan — Alberta, Saskatchewan, Manitoba
• PacifiCan — British Columbia
• ACOA — Atlantic provinces (New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador)
• CED — Quebec
• FedNor — Northern Ontario
• CanNor — Yukon, Northwest Territories, Nunavut

Each agency administers its own version. The core parameters (repayable, interest-free, defence supply chain focus) are consistent, but regional eligibility criteria and application processes may vary. Contact your regional agency directly.

Our take: who this program is for (and who it isn’t)

Good fit

• Established technology companies with dual-use potential. If you build AI, cybersecurity, sensor, autonomous systems, or quantum technology for commercial markets and can articulate a defence application, this is one of the most accessible paths into defence funding. You don’t need an existing DND contract — you need a credible military use case.
• Existing defence suppliers looking to scale. If you’re already in the supply chain and need capital for equipment, facility expansion, or certification to win larger contracts, RDII at $10M is substantial.
• Critical minerals and advanced materials companies. If your materials serve defence applications (armour, electronics, propulsion), this program and the CMIF can be layered together.
• Companies pursuing ITAR/CTAT or NATO certifications. The program explicitly funds certification acquisition — a significant cost barrier for companies trying to enter international defence supply chains.

Not a good fit

• Early-stage startups. You need 3 years of incorporation and 5+ FTEs. If you’re pre-revenue or sub-5 employees, look at IRAP or provincial innovation programs first.
• Pure services companies without a technology or product component. RDII is project-based and focused on industrial capacity. Consulting firms or staffing agencies won’t qualify unless the project involves building a tangible capability.
• Companies that can’t articulate a defence application. The dual-use door is open, but you still need to demonstrate a credible military use case. If the connection is a stretch, the application will score poorly.
• Companies with an active FedDev application. You can only have one application to FedDev Ontario at a time across all programs. If you’re in the queue for another program, you’ll need to wait or withdraw.

How this fits into a broader funding strategy

RDII is repayable, so think of it as patient, interest-free capital — not a grant. That said, total government assistance can reach 100% of eligible costs when layered with other programs. A well-structured defence project could combine RDII with NRC IRAP (for the R&D component), SR&ED tax credits (on eligible R&D expenditures), the CMIF/Strategic Response Fund (for critical minerals or large-scale commercialization), and provincial innovation programs.

The key is mapping each cost category to the right program, ensuring stacking limits are respected, and sequencing applications so they reinforce each other. That’s what we do.