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After years of dreaming, an exhaustive amount of research and planning, have you finally decided it's time to scratch the entrepreneurial itch that's been nagging you your entire adult life.
One of the biggest challenges that frustrates new enterprises is a lack of access to capital. Contained in this article, we'll walk you through the various steps you can take to secure financing for your small business start up.
The most important step is to get started.
Banks, credit unions, and other financial institutions are the biggest providers of small business financing in Canada.
In fact, bank loans are the most common source of external funding.
Although loans are a common source of business capital, they do charge interest. Entrepreneurs who are short on cash can look at approaching these commercial lenders.
To get a loan from a credit organization, you must have a well-written business plan, and your business should have a solid track record. Banks can reject a loan application if they think your business is likely to fail, or has been in business for a short period.
Look around for a bank with the best interest rates, excellent customer services and a reputation for supporting small businesses.
After identifying the perfect bank, open and maintain an active business account. Get closer to lending officials and ask about the bank’s criteria for lending.
Obtaining such information can help you to make a compelling application that ticks all the boxes in the bank’s loan approval checklist.
In Canada, you can turn to the government for many things, including money to start and grow your small business.
With only about 5 percent of Small to Medium-Sized Enterprises applying for funding from government programs, you stand a chance of securing a grant. Through the Canada Business Network portal, you can search for grants available for your business type, study eligibility requirements and give it a shot. The best thing about grants is you have no obligation to repay it back. Once you secure a grant, you can pump all of it into your business without losing sleep over making repayments. But this doesn’t mean you won’t be accountable to anyone. Once approved for a grant, the relevant government department will track the progress of your business, so be ready to compile and submit business reports regularly. In addition to grants, the government also offers:
Sometimes you don’t even need external financing to fund your small businesses. With prudent financial management, you can plough your monthly or annual profits back into the business. Although retained earnings may not provide enough funds to expand your business rapidly, at least you won’t have to lose money in interest payments or give away a stake in your company. To maximize your profits and increase the amount you can retain and reinvest into the enterprise, learn the art of wise business spending. For example, don’t rent a fancy workplace that costs a ton of money when a cheaper alternative can serve your business just as well. Also, avoid purchasing expensive business equipment that can eat into your margins.
Personal money is another source of small business financing in Canada. Most entrepreneurs resort to making a personal investment after hitting external financing roadblocks. As you continue to look for external funds, you can channel a part of your income or savings into your business. In addition to providing the funds to kick start your business, a personal investment demonstrates your passion and commitment to the business. External investors and commercial lenders feel more comfortable giving money to founders with a decent investment in their own businesses.
Who will believe in your business if you don’t believe it in yourself?
Now that you know some of your financing avenues for helping to get your small business off the ground, it might be a good idea to talk to a specialist about your needs.