Funding Your Small Business
Borrowing money to start your business is never easy, but having a source of money is always helpful.
In Canada, small businesses have been a major player in keeping the economy strong. In fact, nearly half of the jobs created today are due to small business owners’ success. To continue the success of small businesses in Canada, and to continue with the hiring which grows the nations employment rate, capital is needed. However, these days capital to fund a business is not very easy to come by.
Capital, or funding to start your small business, is not very easy to get these days. The truth is a lot of small businesses fail right off the bat, but what people do not realize is that they end up failing mostly because of money, and not having enough of it to launch the business properly. So how is one supposed to launch, or grow a business when nobody wants to help you fund it? Funding all depends on you, your business model, the financial projects, and how you position yourself as the company’s spokesperson or sales person to investors.
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Whatever it is that you need to do to get funding for your small business, remember to be flexible, stay positive, and be vigilant in your efforts to do so. Here are just a few of the most realistic ways to fund your small business:
Fund the Business on Your Own
Most entrepreneurs always go into business with little to no money, and this becomes the biggest problem. How can you make money, or get money from investors, when you do not have any money of your own invested? To an investor, somebody who does not want to put up their personal savings into a business shows them that they do not believe in their own business and are afraid of failure.
Investing in your business should not be scary, but it should be motivational. Even if you have no money in your savings account to put towards a business, consider doing a start-up cost analysis and figure out exactly how much money you would need. A lot of times businesses start up for less than $5,000. Can you afford that? If not, maybe business is not for you at this point. Consider leveraging some of your assets in order to make some money to be able to launch your idea.
Access Funds from Friends and Family
Obtaining funding from your friends or family members is one of the easiest and most realistic ways to start up your business. Nobody else shares your vision of your business model like your brother, sister, or best friend would. However, at the same time, when borrowing money from friends and family, keep in mind that you may be risking personal relationships with them by taking money from them, especially if their investment is lost and your business fails.
If this is the only way for you to obtain funding, it is recommended to do it a bit at a time and treat it as a high interest loan. Borrow only what you need and pay it back as soon as you can before borrowing more.
Small Business Loans from Banks
You are probably thinking that since you do not have any business credit history, or your personal credit history is not the best, this cannot be the way to go. You are right to some degree. Many banks will not give out business loans to anybody who has bad credit or no credit, but it is still worth a try.
Go to your local bank with a business plan on hand and present your case. Show your financials and projections and ask for a minimal bank loan. If you are asking for a ridiculous amount, the banks will not go for it. However, even with bad credit, the bank may give you a thousand or two which you can use to start up your business. Pay it back and borrow more, building your credit. At the same time, you can use your personal credit cards as a lender, just ensure you pay back the balance as soon as you can.
Seek Government Assistance
Most business owners do not consider the government to be of any assistance when it comes to financing. What most entrepreneurs do not realize is that the Canadian government has hundreds of government assistance programs which help small business owners through funding in the form of grants, loans, and other financial contributions.
The chances that your business will get funding are lower than obtaining a bank loan, but there is no cost to apply. If you are successful, you can obtain a government grant which does not need to be paid back. Consider researching individual government agencies and the Government of Canada website to learn more about this type of funding.
Combination of All
If you are seeking a larger amount, you must know that not all methods may work for you. For example, your family and friends may not have the funds to lend you $50,000 to start your venture. However, they may have $5,000. This is a great start and a good way to get more from the banks when you already have $5,000 of your requirement.
Use a combination of family, friends, your own money (personal savings, credit cards, and similar options), and bank loans, then proceed to government funding. Piece by piece, you may reach your goal or get close to it if all else fails.
Regardless of which option for funding you select, remember that your business does not need to borrow from just one source. It can use multiple sources to build up your business. Do not ask for too much and leave it unused. Instead, borrow what you need to cover your expenses and day-to-day operations.