How to Get Funding to Start a Small Business in Canada (Even if you have no money)

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Last Updated on September 4, 2022 by Treana Wunsch

Introduction: Get Funding to Start a Small Business

Knowing how to get funding to start a small business can be confusing. What types of funding are there in my area? Which funding options are the best for my situation? What do I need to do to apply? Will I need to pay it back? Will I need to hand over a part of my business? In this article, I will answer all these questions and more.

Even if you have very little money, there is most likely a way for your to start or expand your small business.

If you’re just starting out on your small business journey, you can learn what steps to take in my article A Comprehensive Guide on How To Start a Small Business in Canada

In investing, what is comfortable is rarely profitable.

What is small business funding?

Small business funding is a process by which small businesses can secure the capital necessary to start up or expand their operations. There are many different sources to get funding to start a small business, including government grants and loans, private investment, and crowdfunding.

The first step to get funding for a small business is to develop a well-thought-out business plan. This plan should outline your business goals, strategies for achieving them, and how much money you will need to get started or grow your business. Once you have a solid business plan in place, you can begin approaching potential investors and lenders.

How to Write a Kick-Ass Business Plan

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There are a number of government programs available to small businesses in Canada, including the Small Business Loans program and the Canadian Youth Business Foundation program. Private investors such as venture capitalists or angel investors may also be a source of funding to start a small business.

When can I apply for small business funding?

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As mentioned above, the first step in applying for funding to start a small business is to develop a business plan. This will give you a clear idea of your expenses and how much money you need to get started. Once you have a business plan, you can start researching different funding options to decide the best one for your business.

How to Write a Kick-Ass Business Plan

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When applying for funding to start a small business, be sure to have all of your documentation in order. This includes your business plan, financial forecast, and any other relevant information that will help support your application.

How to apply for small business funding

Small business funding can be obtained through a number of sources, including government programs, private lenders, and venture capitalists. The best way to secure funding to start a small business is to create a well-written business plan that outlines the company’s goals, financial needs, and repayment ability.

To apply for small business funding from the government, businesses must first register with the Canadian Revenue Agency. They will then need to provide several documents, including their business plan, financial statements, and proof of citizenship. The government offers a number of programs that provide loans or grants to small businesses.

Private lenders are another source of small business funding. These include banks, credit unions, and online lenders. When applying for a loan from a private lender, businesses will need to provide collateral as well as their business plan and financial statements. The interest rate on private loans is typically higher than on government loans.

It is a common misconception that if you incorporate your business at inception that your personal credit doesn’t come into play. This is wrong. Most investors, especially banks and institutions will base the application on your personal credit and you’ll have to sign a personal guarantee. This means that if your business later defaults, you will be obligated to personally pay it back.

The benefits of small business funding

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For small business owners in Canada, there are a number of ways to get funding to start or grow their businesses. One option is to apply for government grants. The Canadian government offers a number of programs and services to help small businesses get started and grow. Another option is to take out a loan from a financial institution such as a bank or credit union.

Small business funding can be used for a variety of purposes, such as purchasing inventory, equipment, or property; expanding your facilities; hiring staff; or marketing and advertising your business. By accessing additional funding, you can help your small business reach its full potential.

There are many benefits to small business funding. By taking advantage of government programs and services, or by accessing loans from financial institutions, small business owners can get the resources they need to start or grow their businesses.

The drawbacks of small business funding

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Small business funding can be a great way to get your business off the ground. However, there are also some drawbacks that you should be aware of before you apply for funding.

One of the biggest drawbacks is that you will likely have to give up some equity in your company in order to get funding. This means that you will have less control over your company and may have to give up some of the profits down the line.

Another drawback is that you may have to put up personal assets as collateral for a loan. This can be risky if your business fails and you are unable to repay the loan.

Finally, remember that it can take time and effort to find the right source of funding for your small business. Make sure you do your research and compare different options before making a decision.

Different types of small business funding in Canada

Small business funding in Canada can come from a variety of sources, including government grants and loans, angel investors, and venture capitalists. 

Banks and Lending Institutions

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There are a number of ways to finance a small business in Canada. One option is to seek funding from banks and other lending institutions.

Banks and other lending institutions can be good sources of funding for small businesses. They usually have programs specifically for small businesses and can offer advice on how to get started. BDC is ‘the bank for Canadian entrepreneurs’. This would be a great place to start. 

However, it can be difficult to get approved for a loan from a bank or lending institution. They will typically require a business plan, financial statements, and collateral. They may also want to see proof of income and credit history.

If you are having trouble getting approved for financing from a bank or lending institution, there are other options available. You could look into government loans or grants, or seek funding from venture capitalists or angel investors.

Government Grants

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There are a few key differences between grants and loans that small business owners should be aware of when seeking funding. For one, grants do not have to be repaid, while loans do. Grants are also typically awarded based on need or merit, while loans are typically given based on creditworthiness. That said, there are also many similarities between the two types of funding. Both can be used to start or grow a business, and both come with their own set of pros and cons.

For businesses that are just starting out, or for those that may not have strong credit, a grant may be the best option. However, grants can be difficult to obtain and are often competitive. Loans may be a better option for businesses with established credit and a solid business plan.

The Canadian government offers a variety of grants to small businesses. These grants are typically awarded based on the business’s ability to create jobs, spur economic growth, and/or promote innovation.

To be eligible for a government grant, businesses must usually meet certain criteria. For example, the business must be registered and operating in Canada, have fewer than 500 employees, and generate less than $50 million in annual revenue.

Government grants can be used to cover a wide range of expenses, including start-up costs, research and development, marketing, and employee training. Grant amounts vary depending on the specific program but can range from a few thousand dollars to over $1 million.

Government grants are a common source of funding for small businesses in Canada. You can go to the Business Benefits Finder on the Government of Canada website to find the grant that fits your situation.

Government grants for small businesses are also available at the provincial level in Canada. Most provinces offer similar programs as those offered by the federal government. Check the website of your provincial government.

Government Loans for small businesses in Canada

The Canadian government offers a number of loans and financing programs to help small businesses get started and grow. The most popular program is the Canada Small Business Financing Program (CSBFP), which offers loans of up to $1.15 million to small businesses with strong credit histories. Other programs include the Canada Small Business Financing Program, which provides loans of up to $500,000 to small businesses with strong credit histories, and the Start-Up Loans program, which offers loans of up to $30,000 to new businesses.

The Canadian government also offers a number of grants and tax breaks for small businesses. The most popular grant program is the Scientific Research and Experimental Development (SR&ED) Tax Credit Program, which provides tax credits of up to 35% of eligible research and development expenses.

Angel Investors

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Angel investors are another source of funding for small businesses in Canada. Angel investors are typically wealthy individuals who invest in small businesses in exchange for equity.

There are several benefits of using angel investors when starting a small business. First, angels are typically high-net-worth individuals who are looking to invest in early-stage companies. This means that they are more likely to have the capital that you need to get your business off the ground. Additionally, angels tend to be more hands-on than other types of investors, and they can provide valuable mentorship and advice.

Another benefit of working with an angel investor is that they may be more willing to take on risks than a traditional venture capitalist. This is because angels are often investing their own money, as opposed to institutional funds. As such, they may be more open to funding a company with a higher chance of failure but also a higher potential return.

Finally, it’s important to keep in mind that not all angels are the same. Some are looking for a quick return, while others may be more interested in helping your business succeed. Therefore, you should really focus on finding the angel investor that s right for you. The best way to find an angel investor is through networking and word of mouth.

There are a few potential drawbacks to using angel investors to fund your small business. First, it can be difficult to find an angel investor who is a good fit for your business. You will need to do your research and put together a strong pitch in order to attract the right investor.

Second, you will likely give up some equity in your company in exchange for the investment, which means you will have less control over your business.

Finally, there is no guarantee that you will be able to secure funding from an angel investor, so you should have other backup plans in place just in case.

Venture Capitalists

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A venture capitalist is an investor who provides capital to companies in exchange for equity. Venture capitalists typically are investing on behalf of a risk company or group of investors. They are looking for high-growth companies with the potential to generate large returns.

Venture capitalists typically invest in companies that are in the early stages of development, such as start-ups. They may also invest in more established companies that are looking to expand or restructure.

Venture capitalists, like angel investors, tend to be high-risk investors, as they are investing in companies that may not be successful. However, if a venture capitalist does find a successful company, the rewards can be great.

If you’re looking for funding to start a small business in Canada, approaching a venture capitalist may be an option worth considering. However, it’s important to remember that venture capitalists are typically only interested in businesses with high growth potential.

There are many benefits of using a venture capitalist to fund your small business. One benefit is that venture capitalists are typically more willing to invest in small businesses than traditional lenders, such as banks. This is because venture capitalists typically invest in high-growth businesses that may be too risky for banks to finance.

Another benefit of using a venture capitalist to fund your small business is that they can provide valuable advice and mentorship. Many venture capitalists have extensive experience starting and growing businesses, so they can offer valuable insights on how to overcome challenges and grow your business.

Finally, venture capitalists typically invest for equity, which means they will own a portion of your business. This can be beneficial if you want to maintain control of your business and don’t want to give up ownership stakes to outside investors.

There are a few downsides to using a venture capitalist to fund your small business. Firstly, they will typically want a large equity stake in your company – meaning they will have a say in how it is run. Secondly, they will likely push for a quick return on their investment, which may not be in the best interests of your business or its long-term growth.

Finally, venture capitalists tend to be based in major cities, so if you are located outside of one it can be difficult to access this type of funding.

This is a great resource to get you started on your search for the right investor for your small business idea.

Friends and Family

It can be difficult to get funding to start a small business in Canada, but one option is to have family invest in your business. This can be a great way to get the money you need to start your business, but there are some things you should keep in mind before asking family members for money.

You still want to make sure that you have a well-thought-out business plan. This will give potential investors, including family members, an idea of what your business is and how it will make money. Without a solid plan, it may be difficult to convince anyone to invest in your business.

You should also consider what type of investment you’re looking for from your family members. Are you looking for a loan that will need to be repaid with interest, or are you looking for them to simply invest in your company? If you are looking for a loan, then you will want to get some type of legal agreement that states how much interest they’ll be charged if the loan isn’t paid back in a certain amount of time. If you’re looking for an investment, then you should consider if your family member wants to have a stake in the company as well.

Whatever type of investment you’re looking for, you should be able to find a family member that can help you reach your goals. Just be sure to think about the consequences before making any agreements with them.

Crowdfunding

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Photo by Andrew Moca on Unsplash

Small business owners in Canada have a new tool available to them when it comes to seeking funding – crowdfunding. This type of funding allows businesses to solicit small amounts of money from a large number of people, typically through an online platform.

There are a few things to keep in mind if you’re considering using crowdfunding to finance your small business. First, you’ll need to create a compelling pitch that will convince strangers to invest in your venture. Second, you’ll need to be prepared to give up some equity in your business in exchange for the funds. And finally, you’ll need to make sure you follow all the legal requirements associated with this type of fundraising.

If you’re able to successfully navigate these challenges, crowdfunding can be an excellent way to get the financing you need to start your small business. Here is a list of 10 crowdfunding sites for Canadian businesses.

Conclusion

Keep in mind that getting funding for a small business in Canada is a process. It won’t happen overnight so give yourself a lot of time and leeway to complete it. There are many resources and organizations available to help you with the steps involved in starting a business. Don’t forget that the first step is to develop a business plan. Once you have a business plan, you can begin to look for funding sources.

As mentioned in this article, there are many options for funding, including government grants, loans, and private investment. With careful planning and research, you can find the funding you need to start your small business in Canada, even if you don’t have any money. 

Also, be aware that you may have to try several different funding options as the first investor you approach may not want to invest in your business. Don’t be discouraged. Learn from the experience and move on to the next investor. 

Here are 3 must-have software tools for small businesses that you can set up while you are waiting for your funding to kick in. 

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Treana Wunsch

Treana Wunsch

Volleyballer, dog mom, Feng Shui buff, and minimalist wannabe. Treana is obsessed with simplifying processes for entrepreneurs and small business owners.

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