FINANCE RESOURCES

Financing your Business Starts with a Plan

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There are several options available to financing a business. If you intend to secure outside funding, you will need a formal business plan.

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Outside of external financing, the other option is to borrow from friends and/or family. This option presents obvious advantages and disadvantages. While the terms and conditions of the loan may be more flexible than those offered by banks, involving friends or family may result in unwanted interference, family discord, and relationship issues if the business loses money. 

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Other funding options include:

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• Grants

• Crowdsourcing

• Investors

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Bank Loans and Lines of Credit

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Bank loans and lines of credit can be acquired from several types of financial institutions, such as retail and commercial banks, internet banks, credit unions, and savings and loans associations. In Canada, retail and commercial banks are known as chartered banks. 

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Most of these institutions can extend a line of credit. This is a preset amount of money that borrowers can draw on as needed, paying interest only on the amount borrowed.

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Grants

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There is rarely such a thing as free money. Most grants require applicants to contribute their own funds to demonstrate sincere commitment. Grant programs do not, as a rule, offer seed money for startups. An investment of 10% to 50% is a standard requirement.

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Grant programs tend to be very exacting and specific as to how funds must be spent. Most focus on a particular industry sector, geographic region, and/or job creation.

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Crowdsourcing

 

Crowdsourcing is a means to raise money from a large number of people, typically via the internet. This involves fundraising on your own website or using an official fundraising website.

 

Crowdsourcing platforms generally charge 5% of the monies raised and payment processors an additional 3% to 5%.