How To Get Money To Grow Your Business

ByLaura Harvey
Getting money for your business

Small Business Capital in Canada

In most circumstances, a business needs to be incorporated to qualify for any capital arrangement. This is because incorporated businesses are considered to be separate legal entities from their owners, which makes them more attractive to lenders and investors.

Incorporation

Incorporation is a requirement for most small businesses to qualify for capital arrangements. This is because incorporated businesses are considered to be separate legal entities from their owners, which makes them more attractive to lenders and investors.

There are a number of benefits to incorporating your small business, including:

  • Limited liability: Incorporation protects your personal assets from business liabilities.
  • Access to capital: Incorporated businesses are more likely to qualify for loans and other forms of financing.
  • Tax advantages: Corporations have a number of tax advantages, such as the ability to split income with lower-taxed family members.

Figuring Out How Much Capital You Need

The first step in getting small business capital is to figure out how much you need. This will depend on the type of business you are starting, the industry you are in, and your specific goals. Once you have a good understanding of your capital needs, you can start to explore different financing options.

Debt Financing

Debt financing is the most common type of financing for small businesses. It involves borrowing money from a lender, such as a bank or credit union. Debt financing must be repaid with interest, but it can be a good option for businesses that need a large amount of capital upfront.

Here are some of the different types of debt financing available to small businesses:

  • Term loans: Term loans are repaid over a fixed period of time, typically 1 to 10 years.
  • Lines of credit: Lines of credit are flexible financing options that allow businesses to borrow money as needed and repay it at their own pace.
  • Equipment financing: Equipment financing allows businesses to purchase equipment without having to pay for it all upfront.
  • Invoice financing: Invoice financing allows businesses to borrow money against their outstanding invoices.

Pros:

  • Debt financing can provide a large amount of capital upfront.
  • It is a relatively easy type of financing to qualify for.
  • The interest payments can be tax-deductible.

Cons:

  • Debt financing must be repaid, even if the business is not profitable.
  • High interest rates can make debt financing expensive.
  • Debt can strain a business’s cash flow.
start a corporation

Equity Financing

Equity financing involves selling ownership in the business to investors. This can be a good option for businesses that need a large amount of capital but do not want to take on debt.

Here are some of the different types of equity financing available to small businesses:

  • Angel investors: Angel investors are individuals who invest their own money in early-stage businesses.
  • Venture Capital: Venture capitalists are professional investors who invest in high-growth businesses with a lot of potential.
  • Crowdfunding: Crowdfunding platforms allow businesses to raise money from a large number of small investors.

Pros:

  • Equity financing does not have to be repaid.
  • Investors can provide the business with valuable expertise and mentorship.

Cons:

  • Equity financing gives investors a share of the business’s profits.
  • Equity financing can be difficult to qualify for, especially for early-stage businesses.

Venture Capital

Venture capital is a type of equity financing that is specifically designed for high-growth businesses. Venture capitalists are investors who are looking to invest in early-stage businesses with a lot of potential.

Pros:

  • Venture capitalists can provide a large amount of capital to businesses that are growing rapidly.
  • They can also provide the business with valuable expertise and mentorship.

Cons:

  • Venture capitalists are very selective about the businesses they invest in.
  • They typically expect a high return on their investment, which means they may want a significant share of the business.

Finding the Right Financing Solution

The best way to find the right financing solution for your small business is to compare different options and choose the one that best meets your needs. When comparing different financing options, you should consider the following factors:

  • Interest Rates: Interest rates vary depending on the type of financing and the lender. Be sure to compare interest rates from different lenders before choosing a loan.
  • Terms: The terms of a loan will specify the repayment period, interest rate, and other important details. Be sure to read the terms carefully before signing any loan agreement.
  • Fees: Some lenders charge fees for processing loans. Be sure to ask about any fees before choosing a lender.
  • Eligibility Requirements: Lenders have different eligibility requirements for their loans. Be sure to check the eligibility requirements before applying for a loan.

Getting a Small Business Loan on My Own

If you are applying for a small business loan on your own, you will likely need to provide a personal guarantee. This means that you are personally liable for the debt if the business cannot repay it.

Will I Need to Provide Collateral if Anything?

Lenders may require collateral for small business loans. Collateral is an asset that the lender can seize if the business defaults on the loan. Some common types of collateral include business equipment, inventory, and real estate.

Can the Business Get Financing Without My Personal Guarantee?

There are some financing options available to small businesses that do not require a personal guarantee. For example, the government offers a number of loan programs for small businesses. There are also some private lenders that offer loans to small businesses without a personal guarantee. However, these loans are typically more difficult to qualify for and may have higher interest rates.

Where to Apply For Small Business Financing

There are a number of places where you can apply for small business financing. Here are a few options:

  • Banks and credit unions
  • Government loan programs
  • Private lenders
  • Venture capital firms
  • Crowdfunding platforms

When choosing a lender, it is important to compare interest rates, terms, and fees. You should also consider the lender’s reputation and experience.

Conclusion

Getting small business capital can be challenging, but there are a number of options available. By understanding your needs and exploring different financing options, you can find the right capital solution for your business.

Incorporation

As mentioned in the blog post, incorporation is a requirement for most small businesses to qualify for capital arrangements. This is because incorporated businesses are considered to be separate legal Debt Financing

Debt financing is the most common type of financing for small businesses. It involves borrowing money from a lender, such as a bank or credit union. Debt financing must be repaid with interest, but it can be a good option for businesses that need a large amount of capital upfront.

Here are some of the different types of debt financing available to small businesses:

  • Term Loans: Term loans are repaid over a fixed period of time, typically 1 to 10 years.
  • Lines of Credit: Lines of credit are flexible financing options that allow businesses to borrow money as needed and repay it at their own pace.
  • Equipment Financing: Equipment financing allows businesses to purchase equipment without having to pay for it all upfront.
  • Invoice Financing: Invoice financing allows businesses to borrow money against their outstanding invoices.

Equity Financing

Equity financing involves selling ownership in the business to investors. This can be a good option for businesses that need a large amount of capital but do not want to take on debt.

Here are some of the different types of equity financing available to small businesses:

  • Angel Investors: Angel investors are individuals who invest their own money in early-stage businesses.
  • Venture Capital: Venture capitalists are professional investors who invest in high-growth businesses with a lot of potential.
  • Crowdfunding: Crowdfunding platforms allow businesses to raise money from a large number of small investors.

Finding the Right Financing Solution

The best way to find the right financing solution for your small business is to compare different options and choose the one that best meets your needs. When comparing different financing options, you should consider the following factors:

  • Interest Rates: Interest rates vary depending on the type of financing and the lender. Be sure to compare interest rates from different lenders before choosing a loan.
  • Terms: The terms of a loan will specify the repayment period, interest rate, and other important details. Be sure to read the terms carefully before signing any loan agreement.
  • Fees: Some lenders charge fees for processing loans. Be sure to ask about any fees before choosing a lender.
  • Eligibility Requirements: Lenders have different eligibility requirements for their loans. Be sure to check the eligibility requirements before applying for a loan.

Getting Help

If you are not sure which financing option is right for your small business, there are a number of resources available to help you. The Canadian government offers a number of resources for small businesses, including information on financing options. You can also contact a business advisor or consultant for help choosing the right financing solution for your business.

Ontario Business Central Inc. (OBCI) offers a same-day incorporation service for businesses in Ontario. This means that you can have your business incorporated on the same day that you submit your application. OBCI also has a team of helpful and experienced staff who can help you with all aspects of the incorporation process.

In addition to its same-day incorporation service, OBCI also offers a variety of other resources for businesses, including:

  • Business name search
  • Domain name search
  • Trademark search
  • Business registration
  • Incorporation
  • Branding services
  • Marketing assistance

OBC is committed to providing its clients with constant communication throughout the incorporation process. You will be kept informed of the status of your application and you will have access to a dedicated OBC representative who can answer any questions you have.

Here are some of the benefits of using OBC for your incorporation needs:

  • Same-day incorporation: OBCI can incorporate your business on the same day that you submit your application.
  • Helpful staff: OBCI has a team of helpful and experienced staff who can help you with all aspects of the incorporation process.
  • Resources: OBCI offers a variety of resources for businesses, including business name search, domain name search, trademark search, business registration, incorporation, branding services, and marketing assistance.
  • Constant Communication: OBCI is committed to providing its clients with constant communication throughout the incorporation process.

If you would like further information, please feel free to reach out to any of our staff who are always here to assist in searches.

inquiries@ontariobusinesscentral.ca
Toll-Free: 1-800-280-1913
Local: 1-416-599-9009
Fax: 1-866-294-4363
Office Hours: 9:00am – 5:00pm
Monday – Friday E.S.T.

Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.

Laura Harvey
Laura Harvey

Laura Harvey stands as a beacon of entrepreneurial support and expertise, embodying the spirit and drive of the community she serves. As the proud owner of Ontario Business Central Inc., Laura's journey is one of dedication, passion, and an unwavering commitment to nurturing the entrepreneurial landscape in Canada.

With over three decades of experience as a corporate specialist coupled with over 25 years of entrepreneurial ventures, Laura brings a wealth of knowledge and insight to her role. Her expertise is not just theoretical; it's built on the real-life challenges and triumphs of navigating the business world. This unique blend of professional and personal experience positions Laura as a relatable and trusted guide for those embarking on their entrepreneurial journey.

Beyond her role at Ontario Business Central, Laura has extended her outreach through the innovative YouTube series "Taking the Leap." This platform allows her to connect with new business owners, offering them a stage to share their stories and insights. "Taking the Leap" is more than just a series; it's a community where aspiring entrepreneurs can find inspiration, learn from the experiences of others, and gain practical advice on crucial corporate tasks like registering a business, updating business information, understanding tax account intricacies, and much more.

Laura's contributions extend into the digital world through her in-depth blogs for Ontario Business Central. Here, she delves into topics essential for entrepreneurs and business owners looking to start, manage, and grow their ventures. Her writing is a reflection of her passion for supporting entrepreneurial advancement and a testament to her deep understanding of the corporate sphere.

Laura Harvey is not just an entrepreneur; she's a mentor, guide, and fellow traveler on the path of business ownership. She embodies the ethos of "walking the walk," providing both the tools and the encouragement for others to thrive in their entrepreneurial endeavors. Whether through her written words, her YouTube series, or her hands-on approach at Ontario Business Central Inc., Laura is dedicated to uplifting and assisting new and established business owners alike.

You can find Laura on Linkedin and Twitter and Youtube.

https://twitter.com/ONTBUSCEN
https://www.linkedin.com/in/laura-harvey-362b2740/
Taking The Leap YouTube Series