There is no way to run a small business without funding. Capital is needed in order to start, grow or expand any small business. As a business owner or entrepreneur without a great deal of money to invest, you will need to find ways to fund your venture to avoid closing down before you turn a profit. Developing a plan to fund your business can be challenging, but it is absolutely necessary for any new or existing company.
You are not alone. We’ve compiled 10 potential avenues for finding funding for your small business startup.
Small Business Lenders
A simple Google search can pull up a range of options for funding. Keep in mind, the vast majority of small business lenders rely heavily on high interest loans against your assets. Since you are borrowing funds on a short-term basis, you may be paying a large sum over a one-year period – potentially more than you would even if you used your personal credit cards.
Bank Loans
This is a viable funding option for new businesses or young companies. As a new business without a proven track record, it can be difficult to secure this funding. Banks may request assets in order to secure the loan. Bank loans are repaid with interest in a set period of time. It is important to ensure the repayment time is adequate for your business and needs.
The Ontario Government
There are hundreds of government funding programs including grants, loans and financial assistance programs. Take a look at our Funding Database to learn more.
Bootstraps
In other words, the business funds itself. As more revenue is generated, profits are reinvested directly into the growth of the company. By keeping track of your finances, you may find that you generate enough revenue to afford to grow the company over time without borrowing funds.
Community & Peers
Friends and family can provide both equity and debt funding. One advantage to this type of funding is that the lenders (your community) will be unlikely to impose on your business. Beware of the possible loss of close relationships when borrowing funds: selling a portion of the business in exchange for capital is risky since new companies can fail. Potential investors should be made aware of the risks involved.
Personal Funds
As a business owner, you may be able the fund your company’s growth yourself. Offloading assets including second properties, vehicles or equipment can generate the capital necessary to launch your startup. Alternatively, you can take out a personal loan, a line of credit or a second mortgage.
Investors
Increasingly, angel investors are searching for businesses to grow their capital. Investors often form investment groups in order to spread the risk and workload in terms of research. A local chamber of commerce can be an excellent way to find these groups or individuals that are interested in making an investment.
Partnerships
Partners would not necessarily become a working member of the company if they are just bringing the additional capital needed. The company can greatly benefit from aligning resources with a strategic partner. Partners can also be established with other businesses that could benefit from your company over the long term, such as a property management group with a property maintenance business.
Crowdfunding
On crowdfunding websites, people able to pitch their idea and have thousands of people invest with usually small amounts of money. With the many different websites that offer this service, proper research should be done before venturing forward with this plan.
Venture capital
The final option that owners of new businesses have is venture capital. Firms would invest into a company at the early stages of its growth. However, you can expect the firms to require a large stake as they normally invest large sums of money. This usually puts the owner in a position of not owning the majority share in their company.
Once you have the right business idea, finding funding is not too difficult with the right resources. Consider becoming a member of Ontario Startups and using our Small Business Startup Portal in order to help you along the way with our Startup Guide and Timeline, Business Plan Builder and the ultimate Funding Database.
