Here’s an overview of typical financing sources;

Personal investment

When borrowing, you invest some of your own money – either in the form of cash or collateral on your assets. This proves to your banker that you have a long-term commitment to your project.

Love money

This is money loaned by a spouse, parents, family or friends. A banker considers this as ‘patient capital”, which is money that will be repaid later as your business profits increase.

Angels

Angels are generally wealthy individuals or retired company executives who invest directly in small firms owned by others. They are often leaders in their own field who not only contribute their experience and network of contacts but also their technical and/or management knowledge.

Angels tend to keep a low profile. To meet them, you have to contact specialized associations or search Web sites on angels. The Canadian Angel Investment Network can help put entrepreneurs in touch with angels. Angel Investors Canada is a not-for-profit organization that promotes best practices in this field.

Business Incubators

Business incubators (or ‘accelerators’) generally focus on the high-tech sector by providing support for new businesses in various stages of development. However, there are also local economic development incubators, which are focused on areas such as job creation, revitalization and hosting and sharing services. The Canadian Association of Business Incubators has a comprehensive list of business incubators in Canada, plus links to other resources.

Grants and subsidies

It’s not always easy to bring innovations to light so government agencies provide aid to Canadian companies. You may have access to this funding to help cover expenses, such as research and development, marketing, salaries, equipment and productivity improvement.

Getting grants can be tough. There may be strong competition and the criteria for awards are often stringent. Generally, most grants require you to match the funds you are being rewarded and this amount varies greatly, depending on the granter. You will also be asked to provide a detailed project description, an explanation of the project’s benefits, a detailed work plan with full costs, details of relevant experience and background on key managers and completed application forms when appropriate.

Bank loans

Bank loans are the most commonly used source of funding for small and medium sized businesses. Consider the fact that all banks offer different advantages, whether it’s personalized service or customized repayment. It’s a good idea to shop around and find the bank that meets your specific needs, such as offering value-added consulting services. In general, you should know bankers are looking for companies with a sound track record and that have excellent credit. A good idea is not enough; it has to be backed up with a solid business plan.

“BDC is one of the financial institutions that offers start-up financing to entrepreneurs,” says Laine. “We often work in partnership with chartered banks, we take on more risks and our loan options are more flexible. For example, entrepreneurs may also be able to postpone the principal payments for up to 12 months. This type of financing is designed for companies in the manufacturing, distribution, services and tourism sectors.” 

BDC Perspective

The Business Development Bank of Canada is passionate about one thing: entrepreneurs. Helping them is our raison d’être. BDC listens and knows how to meet their needs. We have business relationships with 29,000 entrepreneurs across Canada. We understand the challenges they face every day, and we use our human and financial capital to provide the means to reach their aspirations. At BDC, we do everything to help entrepreneurs grow their business. BDC offers financing, venture capital and consulting services. BDC focuses on small and medium-sized enterprises (SMEs).

BDC services are available across Canada in both official languages through a network of more than 100 business centres. Its head office is in Montreal. Learn more about the advantages BDC offers.

In Thunder Bay: