Finding funding and financial support when you are starting or running a small business can be difficult, especially if you don’t know where to start. Whether you’re looking for start-up funds to looking to expand your business, there are many different ways to secure funding for your business.
Learn more about how to secure funding for your small business with the 5 options listed below.
These topics will help you understand more about small business financing and it’s role in small business management:
- Does Your Business Qualify for the Canada Small Business Financing Program?
- How to Qualify for a Small Business Loan
- A Guide to the Top Canadian Small Business Loans
- Should You Get a Small Business Line of Credit?
- 4 Tips to Make Your Startup Pitch Stand Out to Investors
- Which Crowdfunding Platform is Best for Your Small Business?
- Canadian Small Business Grants: Tools and Tips to Get Funding
Small Business Loan
A small business loan is a sum of money provided to a new or existing company to fund various aspects of conducting business. Financial institutions are often the most reliable and cost-efficient source of funding, and most banks offer several programs and options. Term, or instalment, loans are repaid over a specified period of time, usually in monthly payments. New small businesses often lack the credit history and collateral to qualify for these loans, especially when they’re seeking startup financing.
New ventures often seek funding through the Canada Small Business Financing Program. CSBFP loans are available through most lenders for both new and existing businesses. Personal loans are another option for new small business owners with good credit.
Using a government grant is a good choice if you don’t want to give up a stake in your company or accumulate new debt. Grants tend to be specific when it comes to eligibility requirements, so if your business is servicing a niche market, then grants could be for you. Also, applying for grants takes time and effort, and it’s important to be thorough when you’re filling out the application.
Most grants require that you have specific business objectives, detailed demographic and marketing research, and a complete business plan. There are five different types of grant opportunities in Canada including:
- Federal government grants
- Provincial and local government grants
- Government grants for women small business owners
- Corporate or private grants for small business owners
- NGO grants for minority small business owners
Learn more about government grants for Canadian small businesses here.
Crowdfunding is the latest way to find capital for your small business. These days the bank and government grants are not your only option when it comes to finding money for your startup. Crowdfunding is the process of raising the funds through a crowdfunding platform. When using a platform, the first step is to create a profile for your business or service and then you can set a funding goal and publish your profile online to start raising funds.
There two common types of crowdfunding:
- Rewards-Based Crowdfunding: People who donate will receive a product or service related to the small business. This type of crowdfunding is best for small business owners who want to get their business off the ground without being accountable to shareholders or deal with loan repayments.
- Equity-Based Crowdfunding: In this type of crowdfunding, donors receive shares in the company for their contribution to your small business. Equity-based crowdfunding is good for small businesses who have a solid growth plan in place.
For more on which platform to use for your small business click here.
Going to investors for financing your small business is a popular choice among many start-ups. Using angel investors and venture capitalists will most likely get you more funding for your business, however this comes with the price, as most investors expect some control of your company.
It is important to remember that potential investors are looking to make money, so it is best to look at this funding route as a partnership. This means investors are looking to get a high return on their capital. There are many ways to get investors interested in your business, you can pitch why your company is a good investment, or seek out a network, like the Canada Investment Network that provides a database of local investors.
Borrow Money from Family and Friends
Another option that you can consider is borrowing from family and friends. If you’re lucky enough to have family and friends that are willing to make an investment in your venture, this could be a good way to get the capital you need without worrying about approvals and losing a stake in your company.
Consider taking a formal approach to borrowing money this way. Write up a contract, make regular payments, and ask for what you need and not what you think you’ll need. Show your lender your business plan, and most importantly make sure you let them know how much you appreciate their help.
Keep an Eye on Your Financing as You Grow Your Business
It’s important to always keep track of all the money coming and going out of your small business. QuickBooks Online keeps all your financial activity organized in the reporting feature. From tracking expenses, sending invoices, and running payroll, Quickbooks has all the important information in one place. J0in 5.6 million people and try it for free today.