Finance Options

How to Get Funding for Your Small Business in Canada

Securing small business loans is a crucial way for many business owners and proprietors to grow their company. Whether this is to purchase new equipment, for leasing a new property or improving an existing premises, financing offers a chance to scale new heights and give businesses a boost. But how can small businesses tap into this chance of funding? Keep reading or visit our frequently asked questions to find out more!

What financing options for small business are available?

One option is to seek out financing from government schemes. These services are designed to give companies a chance to grow their business by making the most of policies, typically aimed at industries where investment is encouraged. In Canada, the government can provide companies with up to up $1 million, giving you the chance to take the next step in your business. Working with a reputable lender or financial institution could allow you access to the Canada Small Business Financing Program, along with other means of finance to make your small business a little bigger.

Small business financing optionsCanadian funding for small business via the government program is dependent on a few factors. The business must be for-profit and with gross revenues of $10 million or less. These businesses can come under a whole host of different guises, from sole traders to cooperatives and more. The loan is not available for financing goodwill, working capital or for funding assets required by a holding company. No more than $350,000 can be used to finance equipment or leasehold purchases or improvements. For small businesses, this creates a considerable opportunity to develop services and attract new customers and sales, as well as providing flexibility with regards to utilising funds.

There are other costs involved with the Canada Small Business Financing Program. There is a registration fee, equivalent to 2% of the total loan amount, although this can be financed in part through the loan itself. Then there are fees from your lender to consider, which must be financed independently of the loan, as well as interest rate. This fee is typically around 3% on a fixed or variable rate, but you should discuss this with your bank, financier or credit union. The lender you work with is ultimately responsible for your eligibility and the costs involved and terms of repayment. As the scheme is government led there are a wealth of options out there, and different companies will offer various incentives and solutions to your own working needs. It is vital that you assess your own needs and carefully consider the options you are presented with, as well as dealing with a fast and efficient lender.

Some lenders specialise in loans for particular types of business. For example, your business may be seeking financing for heavy equipment or machinery. Financial institutions often offer fast and efficient funding advice, giving businesses access to the tools and heavy industry that will allow them to prosper. Heavy duty industrial equipment is an area of huge expense, and in a volatile economy it makes sound financial sense to share the burden. Independent financing grants these small businesses a way to enhance services without the risk of going it alone. Deciding where your business fits in is a great way to establishing where you seek your financing opportunities with specialist areas of business funding. Certain industries are a better fit for investment, whereas others may need to demonstrate some flex and versatility to qualify for funding.

Financing in Canada does not necessarily have to come through government channels. There are new and innovative ways of achieving investment without applying for small business financing. One such example is merchant cash advance financing, which monitors the volume of credit card transactions from customers to dictate lending opportunities. The advantage of this method of funding is that it takes into account consumer patterns: for example lean times in the winter months versus high volume sales in the summer. This means the funding that is secured is manageable and relative to the business in question. For small businesses, merchant cash advance financing is a great way to access funding fast. For shortfalls like urgent repairs, a fund that is based on current spending patterns gives a degree of flexibility and security; when the finance is secured, the business will return to normal or better, and thus the funding will be repaid.How to choose the right finance options for your small business in Canada

There are some drawbacks to outside funding to be considered. For pursuing channels connected to the government’s small business financing, it should be noted that certain businesses hold more appeal. Different industries are held in higher esteem, and the lenders and administration who deliver funding may well take a dimmer view of your chosen expertise than an alternative option. For example, a restaurant business may struggle to attract outward investment but if your local area has a dearth of financial planning facilities, that may make your proposal a more successful one.That is not to say that all channels are closed off: it may just require other solutions, more flex, or a different route to financing altogether.

Existing funds are usually required to make the most of opportunities out there. This ties in with another important factor, which is to breed confidence in your lender. This can come in many guises. Some financial backers will want to see a significant investment of your own to show how serious your are. Others will need greater incentives to invest, such as a return on their original investment or a greater stake in the running of your business. It is also crucial to remember that in more conservative times, banks and credit unions will be less keen on financing for small businesses. These institutions will want to know that the money they advance will be not be wasted. This is why a strong business plan is absolutely crucial to the process.

A business plan will not only demonstrate to lenders that you truly mean business; it was also enable you to establish what kind of funding is required, or whether it is even required at all. By carefully considering your existing business, your clients, customers, facilities, administration, tax and assets and more besides, you will get a fuller picture of what kind of funding you require. This level of detail will only serve you well, whether you decide apply for small business funding via the Canadian government, independent options like merchant cash advance financing or something else altogether.

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