Many Entrepreneurs know all too well that having a good business idea is only a small part of launching a successful business. They will tell you that funding and start-up capital is one of the most significant challenges they face in the early days of their business. At the MaRS Discovery District in Toronto, North America’s largest urban innovation hub, they list “capital requirements” as one of the key barriers to entry—a critical factor preventing startups from entering a market. To overcome this challenge, let’s look at some basic strategies for securing funding for your business idea.
Where to Begin?
The importance of a good business plan cannot be overstated. Every attempt to secure funding will involve you having to articulate your business idea and how you intend to grow and make money. Having said that, a good place to begin financing your business plan is to take stock of your ability to “bootstrap” your business. Bootstrapping means bringing together all of the personal funds you can find. This would include your savings account, lines of credit, and any home equity lines you may be able to access. The benefit to this type of funding is, often, you won’t be hampered by extensive loans and large monthly payments to outside sources while you work toward profitability in your business.
Those Who Believe in You
Asking friends and family for money can be an uncomfortable proposition, but it is a good option for young entrepreneurs prior to seeking external funding. Approach this as you would a business transaction: present your business plan and how you will become profitable and explain your plan for repaying the money. Of course, money from friends and family will not carry the high repayment percentages of traditional loans.
Micro-Loans and Alternative Lending
Many small business owners and young entrepreneurs are not aware of the number of organizations that are looking to provide business support and help to new ventures. Micro-loan organizations such as Kiva and Accion are non-profit entities that seek to support low-income entrepreneurs and ventures that focus on socially positive outcomes. Additionally, there are a number of crowd-sourced and peer-to-peer lending services, such as Kickstarter, Indiegogo and GoPeer. Each of these alternative sources have different methods of enabling you to reach out to potential investors to fund your business. Research the platforms and choose the one that best aligns with you, your goals, and the message or focus of your business.
Small Business Development and Support
Entrepreneurs should be sure to thoroughly research all of the support options available to small business owners. Local chambers of commerce will often feature programs that offer low-cost loans to small businesses. The Ontario Chamber of Commerce also runs a variety of programs that fund and support small business growth in Ontario. The Government of Canada, through the Canada Small Business Financing Program, makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders.
Obviously, traditional bank loans are another potential source of funding capital. Many of the big banks have programs that will allow small businesses and entrepreneurs borrow start-up capital. This is an area where banks have become more creative with the way they make money available to businesses, but be sure to talk through all of the details and have a realistic re-payment plan as part of your business development strategy.
Many high net worth individuals and successful business people seek to either recreate the success that they built with their own companies or look to capitalize on the good ideas of others. The benefit to Angel investors is you can often get insight and advice along with their initial investments in your company. Networking is the key to finding good Angel investors for your business. Angel investing groups often host networking events where they are on the lookout for quality entrepreneurs who are ready to take the next step in their business development.
At ACCES, in the past year alone we’ve provided support to more than 195 newcomer entrepreneurs to start their businesses in Canada. The Entrepreneurship Connections program at ACCES not only helps you develop a viable business plan, but also includes guidance on how to secure funding for your business and connects you with a variety of potential sources for start-up capital.
There is no question that securing and maintaining funding for your business is an ongoing challenge. Hopefully these general tips help. If you have more questions about this and about ACCES’s Entrepreneurship Connections program, please contact us today!