By OptiVal Editorial Desk
If you sell into the United States, or your inputs cross the border on the way in, you have probably written off most federal funding as somebody else’s program. The Canada Strong Diversification Fund deserves a second look. Ottawa recently restructured the fund’s program page into two clear streams, and the first one now explicitly names small and medium-sized enterprises as eligible. The old shorthand, that this was a big-company-only fund, no longer matches what the page actually says.
The fund is delivered through the federal Strategic Response Fund. It has backed tariff-hit industries, steel, aluminum, automotive and forest products, since September 2025. On August 25, 2026, Ottawa expanded it to industries hit by the newer round of American tariffs and added $2 billion in funding. Applications run on continuous intake, first come, first served. Waiting costs you nothing except your place in line.
Stream 1 of the Canada Strong Diversification Fund: adapt, pivot, diversify
Stream 1 funds projects that help companies pivot operations toward alternative markets, become more self-reliant, and anchor strategic investment in Canada. The page names aluminum, automotive, forest products and steel, plus other industries exposed to tariff impacts. Crucially, the page says this stream helps companies including small and medium-sized enterprises. There is no stated project-size minimum on Stream 1, which is the real change from the fund’s earlier large-projects framing.
Priority goes to projects that meet at least one of four tests. Your project is in a highly trade-exposed sector, or your company is facing significant revenue loss, shrinking profitability, or job losses. It is a larger project with both front-end development costs, like engineering design, and capital spending aimed at new markets or better competitiveness. It is critical to keeping industrial or skills capacity in Canada. Or it builds your ability to serve the Canadian market and grow exports. You do not need all four. One strong fit is enough to make the expression of interest worth writing.
Eligible costs go beyond bricks and equipment. Alongside the Strategic Response Fund’s standard eligible costs, Stream 1 covers pre-development spending tied to retooling and market diversification, things like front-end engineering and design studies. That matters because the planning work is often what stops a smaller firm from applying: you can get support for figuring out the pivot, not just for building it.
Stream 2: capital maintenance for s.338-hit businesses
Stream 2 is the narrower, bigger-ticket stream. It offers non-repayable funding to help businesses affected by the newer Section 338 American tariffs repair, replace or restore existing equipment and buildings so they can keep operating. Support runs for up to two years.
The bar here is specific, so check it honestly before you spend time applying. Your organization must be incorporated or registered in Canada and carrying out business here. You need at least 10 full-time equivalent employees, at least $20 million in annual revenue, and an average of at least $5 million a year in capital expenditures over your three most recent fiscal years. You must be able to show direct or indirect impact from the Section 338 tariffs. Funding requests must land between $5 million and $30 million.
Stream 2 targets sectors like wood and paper manufacturing, plastics, ICT manufacturing, machinery, electrical equipment, furniture, chemicals, food and beverage, and textiles and apparel, with room for other heavily impacted industries. Eligible costs are capitalised equipment and building costs, plus the direct labour needed to maintain capital assets. Routine operating expenses do not qualify; this stream is about keeping the physical plant alive, not covering payroll.
Which stream fits your business
Most small and mid-sized firms reading this will be looking at Stream 1. If tariffs have dented your margins or forced you to rethink where you sell, and you have a credible plan to pivot, diversify markets, or build domestic capacity, Stream 1 is written for you. The absence of a stated minimum project size is the signal: Ottawa wants applications from firms that would previously have self-selected out.
Stream 2 fits a smaller group: established manufacturers and processors with serious capital stock, real tariff damage from the Section 338 measures, and a maintenance backlog they cannot fund themselves right now. If you clear the $20 million revenue and $5 million capex bars, the non-repayable structure makes this one of the more generous federal offers currently open. If you do not clear those bars, do not stretch your numbers to fit. Put the energy into a Stream 1 expression of interest instead.
How to apply, and why soon beats later
Both streams start with an expression of interest submitted to the fund, and both run on continuous intake until the money is committed. Funding is allocated first come, first served, and the page encourages eligible businesses to apply as early as possible. That is not marketing language. It means a complete, coherent application submitted now beats a perfect one submitted after the envelope is gone.
Before you apply, line up three things. First, evidence of tariff impact: lost contracts, margin compression, cancelled orders, anything that ties your pain to the American measures. Second, a project description that maps onto the stream’s language, pivoting to new markets or maintaining capital assets, with costs broken out. Third, your financials in order, because any federal contribution agreement will ask for them. If your books are not ready for that kind of scrutiny, that is the first problem to fix. Our tariff support roundup for Ontario exporters covers the provincial programs that can stack alongside federal money.
Not sure which programs you qualify for? We help small businesses find funding and prepare applications, and our funding eligibility calculator gives you a quick read on where you stand. Book a free consultation and we will talk through your options. If you want hands-on help with an application, our consulting runs $125 an hour.
