When entrepreneurs need money to start or grow their businesses, they often think of a traditional bank loan. However, that may not be the best financing strategy for your business – or even a viable one. Since small and medium size businesses tend to be difficult to financially evaluate, banks are hesitant to offer up small business loans. Fortunately, there are alternative financing sources. We’ll examine a few of them, below.
Though it’s not glamorous, personal financing can be very effective, depending on how much cash you need to start or grow your company. Bankrolling your own company involves planning, setting a budget (and sticking to it) and making your business a priority. Yes, it takes time, but actually saving money that you plan to invest into your business before you start, means that you won’t need to involve a third party. You keep control of your company and all potential profits.
Grants and Loans
In order to encourage new businesses, the Canadian government has set up various grants and loans that offer financing to entrepreneurs who may not be able to obtain a traditional bank loan. The amount of the loan varies from a few thousand dollars to more than $100,000 depending on the grant or loan, your chosen industry, and your business’ location. While theses grants can help your business get started or provide an influx of cash during a period of growth, keep in mind that they often require repayment.
There are also certain non-profit organizations that may distribute funding across a chosen industry. These companies also have access to grants and loans and should be included in your financing search. Certain grants may only be available at certain times of the year, so while researching your options, make a note of important dates and deadlines.
Winning an award for your business has a lot of perks, including networking, publicity, and prestige. But perhaps most importantly, awards can also earn your company some cash. Most business awards come with a cash prize that can range from a few thousand dollars to up to $50,000 or more. Plus, there’s the added bonus that the money is awarded with no repayment requirements. Professional associations and websites or magazines that target small to mid-size companies are likely to have information about various entrepreneurial award programs. The key is weighing the odds of winning against the time required to put together your contest entry.
Purchase Order Financing
One huge problem for start-ups is the scaling necessary to be able to accept that first large order. Purchase order financing companies will give entrepreneurs the cash they need to allow their business to scale up quickly in order to meet a sudden increase in demand. That first flow of profit can be incredibly valuable for a new or growing organization.
Crowdfunding harnesses the power of the Internet to connect your business with like-minded individuals. You make a pitch, share information about your products or services, and receive small investments from a large number of people to help back your efforts. Sure, this may sound like a pretty unique way to score some extra cash for your company – but crowdfunding is making its way into the mainstream. In fact, Canada has its own National Crowdfunding Association, which shares best practices, news, and other information via its website.
Whether you’re in the start-up or growth phase of your company, we can help you to secure financing for your business. Contact us to learn more.