Financing and Government Grants for your Small Business

Inherently when an entrepreneur enters our office, financing and grants are of particular interest to them. We will often direct them to the business planning tools that are available on our website; introduce them the reference library available at our office and the other services we provide at The Business Centre. Whether from a bank or government body the business plan is a must, more on that in another entry.


Financing a Start-up Business

Questions:

• How much money is required?
• How much of your own money do you have for this business?
• Do you already own any of the assets needed to start this business?
• Do you have family, friends, acquaintances, or others who are willing and able to invest in this business?
• Do you have a strong personal credit rating or lines of credit available?

Equity Investment

Equity means ownership. Equity investment includes any money from individuals, including yourself, or other companies in your business. This money may be from personal savings, inheritance, personal loans, friends or relatives, business partners, or stockholders. These funds are not secured on any of your business assets. The more equity in a venture the less of a business risk exists and the more likely a bank will be willing to lend the venture additional funds.

Debt Financing

1. Government Funding

Typically, the most sought-after type of financing is government grants because it’s free money that you don't have to pay back. Unfortunately, a grant might not be an option for your business because not only are there very few grants available, most are geared towards specific industries or groups of people such as youth, women, or new business. Be careful of on-line businesses offering to sell you lists of government grants. In Northern Ontario there are a few options that we can help clients apply to.

2. Commercial Loans

• Long-term loans. Use long-term loans for larger expenses or for fixed assets that you expect to use for more than one year, such as property, buildings, vehicles, machinery, and equipment. These loans are generally secured by new assets, other unencumbered physical business assets, and/or additional stakeholder funds or personal guarantees.

• Short-term loans. Short-term loans are usually for a one-year term or less, and can include revolving lines of credit or credit cards. These are generally used to finance day-to-day expenses such as inventory, payroll, and unexpected or emergency items, and can be subject to a higher base interest rate.

I have touched on a few important aspects of financing here today. Please feel free to contact The Business Centre or myself  should you have any other questions.

All the best,

Tony