You’ve wanted to get into business for yourself for a long time now, and have the ideas and experience and a ready market to make it work.
The problem is, all that won’t pay the rent on your storefront or office space or any of the other costs that are entailed when you decide to launch a new business. According to an Industry Canada study, 30 percent of new businesses don’t make it past the two-year mark. Only half make it to five.
You surely intend to buck the odds. And a good place to start is by ensuring you have sufficient financing to keep you going until revenues start growing.
LaMar Van Dusen, director and founder of Phoenix Management in Mississauga, Ontario, points out that there are many options open to new business owners. While 80 percent of startups use personal financing to get up and running because they lack both a credit history and collateral, he recommends that new business owners not keep their sights limited.
“There are more options out there than ever before,” says LaMar Van Dusen. “Many entrepreneurs will limit themselves to their personal resources or ‘love’ money that family and relatives invest. But, we’ve seen tremendous growth in alternative lenders, and the Ontario government has also become very creative with its grants and loan programs.”
A full-service financial and accounting firm that has also become known recently for providing flat-fee service programs to its clients, Phoenix Management also helps its business clients position themselves to successfully secure the financing they need. The firm guides clients on the types of private and government loans and grants available and those that are relevant to their specific industries; Phoenix Management also provides guidance on the application process.
LaMar Van Dusen explains some of the options that startups should consider on the financing front, starting with traditional bank loans. If you qualify for a bank loan, he says, you will get the benefit of lower interest rates. However, the approval process can be slow, so if your financing needs are urgent, this might not be the best solution. In addition, a little less than half of small business loan applications are approved by smaller banks — that shrinks to 20 percent at major financial centers.
Alternative or online lenders are another financing source, with Van Dusen explaining they have two advantages over traditional banks: less stringent loan requirements and a faster turnaround on approvals.
“But you pay for those advantages with higher interest rates, so I advise clients to step carefully here,” he adds.
Venture capital and angel investors are financing options for certain types of firms – not all of them. Venture firms, for example, tend to focus on tech-driven, high-growth investment opportunities. They also take a stake in your company in return for the risk a startup, especially in this space, represents. Angel investors are usually wealthy individuals who invest $25,000 to $100,000 in businesses’ early stages. Both will usually want some level of involvement in the concern, so Van Dusen says this makes due diligence into their relevant areas of expertise important.
One additional funding opportunity to consider are business incubators. These are set up to share working space and certain resources, which keeps costs down during the initial testing phases common to high-tech, the focus of most incubators. But, Van Dusen notes that some cities have specialized incubators focused more generally on job creation and economic development that might prove a fit.
The government is a very important resource to consider, as well. In Canada, the Ontario government offers 35 grant and five business loan programs with funding potential of up to $25 million. Some 22 provincial programs offer other forms of assistance to small business owners.
Ontario is also rich with other supporters of the startup community. The Strategic Community Entrepreneurship Projects program, for example, offers Ontarians between 15 and 29 both training and $3,000 to get started. Futurpreneur Canada offers financial resources, mentoring and resources to assist in everything from planning to cash flow.
“Canada has a great environment for entrepreneurs and a great variety of public and private resources and programs to help them succeed,” adds Van Dusen. “It makes that dream of business ownership all that more attainable.”