Starting a Business: Finding Small Business Financing in Canada

Where to Find the Money You Need to Start a Business in Canada

Man in front of delicatessen
Small business financing (Canada). Blend Images - Ariel Skelley / Getty Images

Do you have the money you need to start your business? While many new small businesses are financed out of their owners' pockets, many others need money from other sources to get off the ground. This page presents the main small business financing options for financing a new business in Canada.

First, though, you need to know about the two basic kinds of financing.

Learning the Small Business Financing Lingo: Debt vs. Equity Financing

The two basic kinds of financing you can get are debt and equity financing. The money you put into financing your new business is an example of equity financing.You can also get equity financing from others by getting investors, either private ones, such as your family or an angel investor, or public ones, such as through taking your company public or equity crowdfunding.

Debt financing, on the other hand, is basically money that you borrow. Traditionally, you would borrow money from your family or friends or from a financial institution such as a bank.

If you are seeking debt financing, you'll likely find that you will be expected to provide equity financing as well. How much equity financing you can provide in relationship to how much money you’re trying to borrow is the basis of the debt-to-equity ratio (also known as leverage), an important consideration for any potential lender.

What's the big difference between debt and equity financing? With equity financing you have to give up some of the ownership of your company in exchange for the money the investor or investors put into your business.

The Most Common Sources of Small Business Financing

You've already guessed; most new small businesses are self-funded. The next most common sources of startup business financing are family and friends. Read more about these and other options for financing a new business in 8 Sources of Business Start Up Money.

Small Business Grants

Many people starting small businesses assume that they'll be able to get a government grant to provide the money they need for their startup plan but small business grants are not a viable option for startup business financing for most small businesses in Canada. The Truth About Small Business Grants in Canada explains why – and presents specific information on some of the small business grants available to small businesses.

Still, there are some. Check out this list of available Small Business Grants in Canada.

Nothing on this list for you? Read 5 Tips for Finding Small Business Grants in Canada to make your search easier.

Small Business Loans in Canada

Most small businesses that aren't self-financed or financed by family and/or friends are financed through small business loans.

Small business loans can be a particularly attractive small business financing option for financing a new business because the federal government sponsors programs that make funding start-up businesses a priority such as the Canada Small Business Financing Program. Learn about this and other possible loan sources in Where to Get Small Business Loans in Canada.

Between the ages of 18 and 39? Futurpreneur Canada provides funding (and more) for aspiring business owners. See Startup Funding for Young Entrepreneurs in Canada.

And if you need $20,000 or less to get your new business going, a microloan might be the answer; here's a list of Canadian microloan sources.

If you are a woman starting a business (and more women are starting their own businesses all the time), you’ll definitely want to look into small business loans for women in Canada, which presents small business loan programs that only Canadian women are eligible for.

When you think about getting a small business loan, the names of traditional banks and credit unions probably pop into your head. But they're not the only lenders out there. What About a Private Lender? presents another source of small business financing that you may want to look into.

No matter what lender you’re dealing with, though, there are things that you can do to make your loan proposal more attractive. Read How to Get a Small Business Loan to learn how to increase your chances of getting the start up business financing you're looking for.

Angel Investors

Angel investors are another source of small business financing that is worth investigating for many small businesses. Does your new small business have the potential for a solid return? Then angel investors might be interested in providing start up business financing.

Find out more about what angel investors look for when choosing businesses to fund in Attracting Angel Investors. Then read How to Find an Angel Investor for tips on finding angel investors for your business.

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