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How to Finance a Start Up Business in Canada

Guest post by: Stan Prokop

Article Overview: The article provides insights as to how business owners and new entrepreneurs can generate capital and working capital savings via non traditional financing strategies .

How to Finance a Start Up Business in Canada

Financing a start up business is a huge challenge in the current economy. New entrepreneurs have business ideas and they wish to monetize those ideas into a real business. In the current environment, more than ever, traditional financing is difficult to achieve for a start up.

There are however a number of strategies that the business owner can utilize to either replace or augment traditional financing.

We would point out those traditional financing typically involved banks via new business loans, and, most commonly, the Government Small Business loan, more commonly known as an SBL loan.

Let's look at some financing options, somewhat non-traditional in nature, to assist the new entrepreneur.

Many customers have not completed their development for their final product or service. Additional capital can be brought into the new business by considering such strategies as customer down payments, use of ' try and buy ' programs from manufacturers , or simply maintaining a current employment until the product is completed - we would point out that many people entertain ' consulting engagements ' during this time period .

As the product /service is completed, and is ready to be marketed the entrepreneur could consider such financial strategies such as delayed commissions to sales personnel , utilizing temporary office space, and temporarily subsidizing the business via credit cards . We caution owners not to max out on cards, or default in payments, as this will have a long term effect on the owners overall credit worthiness. For the next several years to come banks and other lenders will be looking for a 'clean credit scores 'to augment any business borrowing - so don't destroy your personal credit rating too early in the game. Fortunately or unfortunately credit cards have become a major source of small business financing - if utilized properly it is certainly an option. Key word: Utilized properly!

Typically as the customer enters the revenue phase of business is an excellent time to start talking to banks about small business loans, as well as the government loans available.

The owner can at this point utilize a number of other strategies to reduce cash outflows and financing needs - these include utilizing or purchasing used equipment in stead of new, or entering to equipment leasing arrangements which typically provide close to 100% financing.

Customers are cautioned at this point in the business to stay totally on top of invoicing (Invoice promptly!); owners should also be establishing trade credit with suppliers, and in instances where possible negotiating higher credit limits and extended terms. Suppliers will consider this for the right future customers!

Business owners are also encouraged to investigate factoring - which is the immediate payment of your receivables by a third party. Solid partners in this area at reasonable rates (typically 2%/mo) can be the life blood of a business for an intermediate amount of time prior to negotiating full fledged bank financing.

In summary, non traditional financing will not finance all of a new start up, but it sure can help. Customers are encouraged to get their operation up and running as quickly as possible, focus on sales and collections, and work towards growth at a reasonable rate. Business owners who exhibit these qualities in their business model will find proper bank financing and other business financing just around the corner.

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Article Tags: business start up, start up business, start up financing Canada



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BDC - [quote="IWDCanada":jib6tqt9]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:jib6tqt9] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.
Clothing Niche - Yasunori, can you dig deeper into the clothing niche? e.g. Business Casual for people 6ft and taller (men only, women only or both). Victoria Secret is big in Canada because they don't have retail Stores here and the only way to get their product in Canada is thru online purchases. They have a great Hassle-free return policy too.
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
canada resources - I used to have a connection to a franchise consultant in Canada at "Franchise Officer" in Toronto. I wish I could remember his name ( but I can check my files at the office tomorrow). Anyway, he had a lot of connections to banks in Canada. He may know of them and may be able to offer some feedback. If you are looking for a business loan, Canada has similar business loan programs to that of the USA's Small Business Administration (SBA). I think its SLBS in Cananda, and I probably have the list of it's lenders in my office also. Do you think either can be helpful? If so, I can get back to you with this information tomorrow. Let me know!
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.


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