| Sources of
Financing... |
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| Your savings. The most accessible and unconditional source
of funds for your new venture is your own accumulated wealth. |
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| Friends and Relatives: There's a major risk involved, in
raising money from friends and relatives. When and if the time comes to fish or
cut bait, you might have to decide which you value more: their friendship or
their money. |
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| Angels: As their name implies, angels appear from the most
unlikely places and at the most unlikely times to help you start your new
business. But they don't usually appear unless you spend some time looking for
them. Angels are often entrepreneurs themselves. They know how it feels to
search high and wide for money. Try asking intermediaries (accountants,
lawyers, bankers, consultants, and financial planners), who deal with
entrepreneurs as a regular part of their business and those who are familiar
with you and your capabilities as a business person. |
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Banks will provide financing to qualified customers, usually
in the form of a loan, which is generally secured by a fixed asset such as real
estate or equipment. If your business has no fixed assets, the bank will ask
you to use your personal assets as security.
Banks will not:
- risk their depositors' money on new ventures
- provide equity financing to entrepreneurs without assets
- speculate on tomorrow's successful new business without some
reassurance that the business can survive today
- lend money unless they're fairly sure they can get it back, on
time and with interest
- extend a loan to you just because you've dealt with the same
bank for 12 years!
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The Business Development Bank: The federal government
administers a bank whose mandate specifically focuses on small Canadian
companies. This bank provides counseling, consulting, and information, as well
as financing to small companies.
http://www.bdc.ca/
http://www.worldbank.org/ |
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| Canada Small Business Financing Act (CSBF): Under this act,
the government will guarantee most of a loan extended to a qualified
small business. |
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| Venture Capital: These people put their own financial
well-being at some risk to provide financing to entrepreneurs. All you need to
do is get down to business and build your company, sharing the eventual profits
with your investors. They will keep a close eye on their investment and they
will want to make certain that your business will be profitable. |
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You have access to credit that you may not have considered:
- Credit cards: A cash advance against your credit card
can be taken. There are cheaper sources of debt financing, but this is an
option.
- Trade credit: If you establish a good relationship with
your suppliers and they believe in your plan to build a business, they will
often provide you with their goods or services and allow you to pay for them
later.
- Customers: Depending on the type of business you start,
you can often work with your customers to share the costs of a project. A
contractor, for example, can provide their services while the customer pays for
the materials. You can also negotiate with customers to provide you with
partial payments over the course of a project, especially if it takes several
months.
- Real Estate: You can borrow money using your house or
other property as collateral for the loan.
- Equipment: Instead of using your own money to buy new
equipment, you can obtain an equipment loan, secured by the equipment itself,
which you can pay back over several years? Alternatively, why not lease it, or
buy a used one?
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