By the end of 2015, there were 1.14 million small businesses in Canada, making up 98% of Canada’s business landscape. Collectively, these businesses employed over 8 million people. And, each and every one of these businesses needed financing to get off the ground and grow into a successful venture. Fortunately, there are a number of options when it comes to financing a small business in Canada.
Finance Options for Your Business
There are traditional forms of business financing that have been around for decades, as well as financing options that have developed in recent years. It’s up to you to choose which is right for your business:
Self-financing: If you have the money or can acquire it by using assets as collateral, you may be able to avoid the financial stress of getting a loan or other forms of financing. This will allow you to keep full control of your business. It’s risky but can really pay off in the long run. The key is to generate revenue quickly.
Family: If you have family or friends who can front the capital to get your business off the ground, that might be a good option. Just remember not to take this business relationship for granted and set the terms clearly from the beginning.
Grants and Subsidies: The Canadian government offers grants and subsidies to small businesses. You can find more information about this option here.
Bank Loan: This is one of the most traditional and common ways to finance a business. Do your homework when choosing a lending institution and have a business plan ready to show them.
Venture Capital: Ideal for tech businesses, venture capitalists want to help a solid idea get off the ground. However, they will also want equity in the company and high ROI, so be sure you are ready to share control of the business.
Angel Investors: These are individuals who want to invest in a small venture and work on a smaller scale then venture capitalists. They want to oversee the management practices of the business and often bring with them years of experience and a solid business network.
Microfinancing: Microfinancing is similar to a bank loan but tends to be smaller and have shorter payback periods. This makes them easier to obtain. They aren’t offered by traditional banking institutions, but there are many sources for microfinancing in Canada.
Crowdfunding: The internet has made it possible to go out and find individuals who want to help get a company off the ground. Usually, you offer a reward for their financial contribution, such as early access to products or services.
Dos and Don’ts of Small Business Financing
When financing your new business, here are a few tips of what you should and shouldn’t do:
Do:
- Borrow when the time is right – Too early and you risk spending the money where you shouldn’t. Too late and you put your business under too much financial pressure.
- Get the borrowing amount right on – This isn’t a ballpark figure. You should have solid numbers and projections.
- Take your bookkeeping seriously – You need to track every single penny going into and out of your business.
- Have your elevator pitch ready to go – Include what makes your business sound and your track record.
Don’t:
- Focus on one potential source of financing – Shop around and consider all the options.
- Make a decision solely on interest rates – There are other important factors to consider, such as the term of the loan and repayment structure.
- Repay your financing too quickly – This can leave you short on funds, so look at your numbers to see if it’s viable to pay extra.
To learn more about financing your small business or buying an existing business, contact the qualified consultants at Beal Business Brokers & Advisors at (204) 478-7266 or send us an email through our contact form.