There comes a time in the life of every small business when it needs to look for funding. Getting the start-up funds that you need, or additional funds that you need to expand and grow as a business can be a challenge.
It can be a gruelling process and one that takes up a lot of your time. To help speed up the process and to give you the best possible chance of finding the funding that you need, here are 5 things you need to know about Canadian small business funding.
1. Banks and credit unions are where a lot of businesses get their funding from
Lenders like banks and credit unions are the traditional source of funds for the majority of new and existing businesses in Canada. However, this does not mean that being successful in your application for funding from these financial institutions will be easy. Far from it in fact. The truth is that getting funding for your business from a bank or credit union is gradually becoming more and more difficult. This is because banks are being encouraged to be conservative in their evaluations of small businesses and generally more risk-averse.
To get a loan from a bank, credit union, or really any source you’re going to need an extremely robust business plan.
2. Small business grants in Canada not as common as you think
The small business grants available are usually targeted to specific industries, or they have very high competition. If however, you think that you have a business plan that will rise to the top and the right experience to earn a business grant then you should, of course, do plenty of research on this opportunity.
Once you have conducted this research, you should take the time to understand the fine print so that you know for sure exactly what the conditions are for the small business grant. It could be extremely favourable and get you even more excited about the grant money. Or, if you notice any conditions that catch you by surprise, you may need to change your business plan to accommodate any stipulations as to how the grant money can be spent.
3. We’ve already mentioned it, but you need a business plan that rocks!
When it comes to applying for funding for your business, you need to be able to demonstrate that you have the business acumen to use the funds wisely and that you have a plan to pay it back that will work.
There is no magic wand that can create a business plan overnight, you will need to spend a significant amount of time researching and gathering data to support your business plan. You’ll need to include financial details, such as an income statement, cash flow projections, and a balance sheet.
4. The lender needs a reason to invest
You must show this clearly in your business plan. If there is no profit for the lender in funding your business then they simply won’t do it. If your business is just starting out, some investors may try to up their stake in the business by asking for a piece of it in exchange for funding. The lender may even ask for some control of how you run the business. You need to be prepared to handle these type of negotiations and how far you are willing to bend in order to get funding.
5. The age of your business is important
Newer businesses will have a harder time finding funding than older more established companies. This is for the obvious reason that an older business has already proven that it can make a profit and that it has the right people in charge.