Thursday, December 12th, 2019

How-To: Fund your Business

By Liz Doyle-Harmer on Mar 15 2010 • Filed under How-To

March is all about finances and taxes and how better to start the month off than with a discussion on how to find the funds for your new or growing business.  

Before you can find the funds for your business you must first determine how much you need. Most lenders, investors and even grantors will require a business plan with financials to better understand what is required to run your business. So do your research. Estimate both your start-up and ongoing costs. Call potential suppliers and get accurate quotes. Figure out whether this is a business you can afford to be in – ideally before you enter it.  

Pilar Galiana, Founder of Ella Says, a digital planning and project management shop headquartered in Ontario, knows researching costs can be a tedious process but believes it’s one that pays off. 

“For me my hard costs were minimal,” she says. “The big piece was potential lack of salary. I did an analysis of our [family’s] spending, we set a new budget, cut back severely, met with a financial planner and met with the bank. It wasn't difficult. It was time consuming and a bit of a wake-up call to see where you are spending your money.” 

Doing a cost analysis is a step many eager and enthusiastic entrepreneurs tend to skip. To those who discount the importance of this step, Pilar cautions, “I think going in with your eyes open is important. Amongst other things, the research helped me understand how much I need to charge and that will definitely impact my long term success.” 

Once you’ve got a firm handle on how much it will cost to run your business, then you can explore the five various financing options available: 

Personal sources: These include your personal savings and assets that you can contribute to the business. If you haven’t started yet, consider postponing the launch of your business until you have saved an adequate cash cushion to support yourself in the early months and years of your business. Pilar worked hard to secure a contract to launch her business before quitting her day-job. Had that contract not worked out, however, she would have been financially prepared as she had already significantly reduced her personal expenses and put aside savings to help finance her business and support her family during start-up. 

Bootstrapping: Bootstrapping is basically about keeping your costs low and spending in check through both the start-up and early stages of your business. Your greatest resource here is creativity. Buy your computer second-hand, shop on Craigslist, work from home, barter your services and hire interns. Look at every expense you’ve identified and use your creativity and ingenuity to brainstorm a low-cost way to cover it.  

Loans: Loans are money provided for a fee (interest) where the entrepreneur needs to pay back the interest and principal within a specified time frame. Informal sources of loans include your friends and family and are worth tapping into. Richard Branson, Founder of Virgin, borrowed money from his aunt during his early entrepreneurial career and the loan helped him overcome a difficult period when the banks weren’t willing to lend to him.  

Formal channels include private banks (Scotiabank and RBC are particularly active in the small business market) and the Business Development Bank of Canada (BDC), the government’s bank that lends money to entrepreneurs. One key loan program available to all Canadian entrepreneurs is the Canadian Small Business Financing Program. This program is guaranteed by the government but administered by the major banks so ask your banker about it next time you meet with her. 

Grants/Donations: What could be better than money with no strings attached; money you don’t have to pay back?! As with loans, there are both informal and formal sources of grants and donations. Again, informal sources include friends and family. Look at every item on your expense list. Do you have friends or family who might be able to contribute some old bake sheets for your cookie business? Or can you ask for cash for your birthday this year instead of a new sweater?  

Formal grant programs are few and far between but here are two worth mentioning:

Leadership Grants Association: A not-for-profit association providing non-repayable grants of up to $100,000 to Canadian entrepreneurs. (Editor's Note: see comments section below)

National Research Council’s Industry Research Assistance Program: Provides non-repayable contributions to Canadian small businesses interested in growing by using technology to commercialize services, products and processes in either Canada or abroad. 

Equity: Equity investors provide funds in exchange for ownership in your company. You can find investors through both informal networks (leverage your friends and family and any wealthy or generous contacts they may have) and formal networks. For the latter, you can tap into either angel investors – wealthy individuals keen to invest in start-up and early growth companies – or venture capital funds which invest in early-growth companies on behalf of their clients.  

In general, angel and VC investors invest in high-growth industries including technology, biotech and alternative energy but many invest outside these industries as well. Check out a few of the following options: 

Ontario Venture Capital Fund: A $205 million fund launched in Nov 2007 and backed by the Government of Ontario, RBC, Manulife and BDC. Invests primarily in technology ventures.  

Dragon’s Den: Generate both buzz and bucks for your new venture by pitching your business on CBC’s successful show.  

National Angel Capital Association: A non-profit association supporting and encouraging angel investment in Canada.  

Once you’re up, running and financed, make sure you stay on top of your funds. Monitor how much is going out and how much is coming in, and do a cashflow statement! Pay your interest on time and communicate regularly with your investors. Always keep your expenses in check and avoid spending lavishly in the early years. Remember that how you manage your funds is just as important as securing them.


26 Comments

  1. I did some research and discovered afew blogs with so many comments about leadership grants so I am not sending my valuable business plan so they can steal it! They dont have a legit address and no one has received any money. I dot have the url but you caet google bbb leadership grants and read the complaints one by a girl named Katie
    Im just glad I didnt buy their business plan services like some other naive ppl however I am glad I completed my busimess plan so I can

    impliment my business idea perhpas by selilng some shares in my company to people who are interested in it or just do it myself:-
    Good luck just dont give your valuable proprietory info to thiefs

  2. I have great reservation about a firm indicating they will give you up to $100,000 in capital for free. When called by their telemarketer, she couldn’t (or wouldn’t) tell me anything about the organization. She told me I had to talk to Shelley Barnes, my rep. Shelley emailed me and cc’d Arlene. In their credit, I have received an EXCELLENT outline of a business plan and how to fill one in. (So if nothing else, I have a great tool/resource guide. It is worth applying just to get this form). But I’ve also been emailed to say my entire package (min of 40 pages if I follow the outline) must be submitted by Oct 1, which at this point in time is only a little more than 3 weeks away. Not a lot of time. I have left a voice mail for Shelley because I want to ask details about this organization.

    Here’s a couple of major reasons for my suspicions: my first phone call – no number would come up on my phone’s screen. If you have a ligitimate organization, there should be no reason to block the phone number. Also, when looking at their website, there is NO identification with anyone/anything legitimate. That is, no government connection, no bank connections, no idication of who the angel investors are or what their expectations are, OR why they are investing in your company. Angel investors want to invest because they get something back for their investment. Philanthropy in your new businesses is not going to happen, especially in amounts up to $100,000. Any other true grant opportunity I have ever read about has been driven by VERY specific parameters (i.e. you are a student, working in Northern Ontario, or a minority group, or bringing a business to a particular region to drive employment etc). This opportunity is so open-ended that it leaves room for nothing but suspicion.

    Here is what I am going to ask them if/when they return my call:
    1. Tell me a little bit about your organization
    2. Are there volunteers?
    3. Are there angel investors?
    4. What is in it for the investor?
    5. What are the reasons for the formation of this organization?
    6. Tell me about the board of directors. What is their experience, history, expertise.
    7. Who is the review panel?
    8. What is the criterial for forming a decision on monies that can/will be granted?
    9. Where does the funding come from?

    What I suspect is that they are using this website for a number of purposes. First, to get sales through their ‘partners’ who can help you write your business plan (for a fee), develop your marketing materials (for a fee), get you legal help (for a fee), print your marketing materials (for a fee). In addition, it could be that they have people on the wings that in time DO want to buy you out (if/when you become profitable). Also, there is a possibility that they have people looking for unique opportunities themselves and want someone else (like yourself) that has done all the research for a particular market, to give them all the great ideas and essentially steal your thunder by beating you at your own plans. At the end of the day, how can you prove it if they do so? According to one of the previous writers on this blog, there is no real office, it is unknown if the people are really who they say they are. Honestly, I wish this whole thing were true but I think this whole deal stinks and I’m NOT going to give them any of my plans, ideas, marketing concepts, clients – NOTHING. If you are planning to work with these people, ask yourself if you can really trust complete, elusive strangers with your future goals and dreams.

    I’m not one for trusting the government, but when it comes to grants, unless it has a real face, I suggest you don’t trust it for one moment. ASK questions. Remember – no one gives you a free ride (not even the gov’t – don’t forget all the taxes you pay).

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