To start and fund your business in Canada may be a difficult thing to do, especially if you do not plan well. You may have a perfect business plan but if you don’t have a perfect finding plan you may not succeed in the business. For this reason alone, it is always good to know how to fund your business. The benefits of your finding plan and also the disadvantages. Most importantly, it is also good that you have a good backup plan for your business. All these will add to the success of business especially in this age of global inflation and high cost of living.
Starting up a business in Canada is actually a good idea for you. The good news is that the market is ready for your small or middle scale business. However, before you can succeed in your startup business, make sure that the fund for the business is ready.
Thankfully, there are many ways to fund your business in Canada and whichever way you decide to use. You have to make sure that you plan well so that your fund will be adequately managed. The way you manage your fund determines the success of your business. Therefore, managing your startup fund is very important for the growth of your business.
In this article, you are going to see the best ways to fund your business in Canada, especially if you are starting up a new business.
In this article
- Best 7 ways to fund your business in Canada
- #1. Personal savings
- #2. Government loans and grants
- #3. Loans from family and friends
- #4. Loans from banks and other financial institutions
- #5. Business Development Bank of Canada
- #6. Investors
- #7. Crowdfunding
- Other ways to fund your business in Canada
- Startup accelerators
- Compete for funds
- Business-to-business Financing
- Franchise financing
- Frequently Asked Questions
Best 7 ways to fund your business in Canada
From personal savings to government grants and loans to loans from family and friends. There are several ways to fund your new business in Canada. Here are the seven best ways to fund your business in Canada. They include:
- Personal savings
- Government loans and grants
- Loans from family and friends
- Loans from banks and other financial institutions
- Business Development Bank of Canada
#1. Personal savings
This is arguably the best way to fund your business in Canada. Using personal savings to start your business has a lot of benefits. Here are some of the advantages of funding your business with personal savings:
- It’s the cheapest form of financing
- It gives you full control over expenses and how you run the business
- You are free from debt
- You learn to be mindful of spending and thoroughly think through all expenses, and
- Builds credibility and creates a good impression in the eyes of a potential investor.
However, you must be aware of the risk of losing your savings in the business. Therefore, you must be sure that you separate your business money from your personal money.
#2. Government loans and grants
Based on the type of business, the industry and province of residence, you can qualify for either a government grant or loan. Getting a loan from the government can be helpful but grants are always better as it is free. However, before you can get a grant from the government, there are eligible criteria you must meet which include:
- A detailed project description
- An explanation of the benefits of your project
- A detailed work plan with full costs
- Details of relevant experience and background on key managers
- Completed application forms when appropriate
#3. Loans from family and friends
You can as well borrow money from your spouse, relatives and friends to fund your business in Canada. The aim is to repay the money once your business begins to grow. But you must know that money from friends is usually not enough which can be a hindrance for your business. Another advantage of this is that it offers a repayment plan that is beneficial to both parties.
#4. Loans from banks and other financial institutions
Banks and other financial institutions can offer you assistance in terms loan to fund your business in Canada. There are certain factors that you must consider while looking for loans from bank. Factors like duration of the loan, flexibility of repayment, loan collateral, and the rate of interest. All these factors play very important roles whenever you are taking a loan from the bank.
#5. Business Development Bank of Canada
This is owned by the Canadian government with the sole purpose of granting loans to businesses. You can get upto $100,000 CAD for your startup business in less than 48 hours from BDBC. The application is filed online, there’s no application fee, and the business loan is provided at a competitive interest rate.
Also known as angel investors, you can use money from these top businessmen who want to invest in your business to fund your business in Canada. Their goal is to get a good return on their investment, and they’ll usually pick businesses that demonstrate rapid growth, are innovative or have a mission that aligns with their values. They can invest as much as $1,000,000 CAD depending on the business.
The new increasingly popular way for new businesses to get funded is to put your business idea up on the web and ask people to donate money so you can go ahead and do it. Crowdfunding portal has a growing number of websites where you can post your business idea and campaign for funds. The two biggest crowdfunding portals in Canada are Kickstarter and Indiegogo.
Benefits of crowdfunding
- Lets you test the waters and gauge consumer interest in your product or service.
- Lets you build a customer base from around the globe.
- Creates a buzz around your business
Other ways to fund your business in Canada
In addition to the above ways of funding your business in Canada. There are other ways to do that.
Startup accelerators or incubators is another great way of funding your business in Canada as most of them provide education, mentoring and money as well.
The downside is that, startup accelerators are very much a tech phenomenon; you’ll be hard-pressed to find such opportunities for businesses in more traditional arenas. Another potential downside is that accelerators offer investment in exchange for equity and you may or may not want to share ownership of your new company.
Compete for funds
It seems that there is an increasing number of contests that offer money to businesses as a prize every year. The best part of this is that, it also offer things such as access to expertise and training that can make all the difference to a new business.
Financing other companies is the best way for some companies to increase the reach of their own products and secure their supply chains. For example, Whole Foods Market Inc., a U.S.-based chain of natural and organic foods, loaned Molly B’s Gluten Free Kitchen, a Toronto-based family business, $50,000 to buy a commercial oven the Canadian small business needed to expand.
If you want to start a new businessess and it is a franchise business, the franchisor you are going into business with may be able to provide you with the financing you need. Instant Imprints Canada and Murphy Business Canada are two franchises that offer such financing and they’re just the tip of the iceberg.
Franchises businesses are easier to finance than other startup businesses. Because there are more traditional lenders willing to loan them money.
Frequently Asked Questions
How long does it take to get a loan from a bank?
Depending on the complexity of your application, after all requested documents are received, it can take a couple of days to two weeks for the loan to be approved. Typically, it takes a few days to prepare the loan application.
How can I get an investor to sponsor my business?
Follow the steps below to get an investor for your business:
- Look for angel investor groups across Canada that support investment activity through accelerators.
- Network with other entrepreneurs to connect with venture capitalists or visit industry conferences to spread your business story.
- Prepare well and be ready with an elevator pitch that talks about how your product or service benefits customers and your competitor landscape.
How does crowdfunding work?
Crowdfunding is the process of raising money from the general public. To do this, you pitch your business plan to the public, set a funding target, and convince them how your product or service is unique and valuable. You can seek donations or investments in return for special rewards or an ownership stake in your company.
In summary, you can use any of the methods mention above to fund your business in Canada. However, you must consider both the advantages and disadvantages of each method before choosing it. This will help you to know how to manage your fund and new business appropriately.