Small Business Week Series: Funding Your Business (Part 2)

We’re doing a Small Business Week mini series featuring insights and advice from small business professionals and industry experts. Small Business Week, which is from Oct. 21 to 25, is an annual celebration of entrepreneurship that has been celebrated in Canada for 34 years.

The City of Vaughan has a strong and vibrant small business community of 9,900 businesses. Small business is the backbone of a successful city, and Vaughan proudly supports the growth and entrepreneurial spirit of this community.

Here is the second post in the series:

Funding Your Business

Every business is born with an idea — a seed of possibility rooted in inspiration. In order to let ideas flourish they must be nourished. A seed can only grow into a plant if it is provided with enough energy, water and carbon dioxide.

Similarly, a business flourishes only when the founding body invests enough time, effort, foresight, care and funding. For small business owners, financing can be both the most important and challenging aspect of business startup or expansion. There are options available to companies for both startup capital requirements and funds needed for companies that are ready to expand their scope.

Most small business owners fear making an investor pitch and opt for self-financing their businesses through leveraging personal assets or accessing savings. While the interest rates are lower when personal equity is on the line, there are also significant risks.

The transition from working for someone to working for yourself involves understanding that you no longer have a stable income. You no longer have the luxury of diversifying your capital among different streams that vary in risk. But when you cash in all your investments — strip your house of its equity, invest all you have into your business and take away the safety net — you’re essentially putting all of your eggs into one basket. Investing all your assets into your business is hardly a diverse portfolio and exposes your business to significant risk. 

The Canada Small Business Financing Loan is a great option for businesses that require funds for lease-hold improvements or equipment purchasing. Administered through Chartered Banks, the CSBFL loan is 75 per cent government guaranteed and 25 per cent guaranteed by the borrower, providing access for individuals who may not have personal assets representing 100 per cent of borrowing value. This loan allows companies to do quality renovations, purchase efficient equipment and even build a state-of-art competitive website. It’s the jolt a company needs to succeed. This loan is available for both startup companies and expanding companies. 

It’s quite unrealistic to assume that as soon as a company’s doors open, business starts flowing. As a business owner you understand that you have made commitments from day one in anticipation of business picking up. From rent, to utilities, to employees, the expenses quickly accumulate faster than revenue has a chance to reach that pivotal break-even point that every business owner must cross before making profit.

This is why it is highly advisable to include six months of working capital to withstand the startup lull when completing financial projections. Moreover, business owners are encouraged to take into account that while their business is not yet in full-swing, their personal expenses remain. Budgeting for a salary as part of the working capital is a smart way to plan for the stressful time that awaits every entrepreneur at the starting line of their journey.

While the concept of working capital is grossly underestimated by the majority of small business owners, the Business Development Bank of Canada continues to stress the importance of working capital. Through BDC, entrepreneurs have access to $150,000 in working capital, alleviating some of the stress of living within a budget that has been severely compromised. It also allows business owners to make necessary investments, ensuring the success and longevity of their businesses. 

While grants for small businesses are few and far between, there are great incentives for companies that either innovate or export. Through the Scientific Research and Experimental Development Tax Incentive program (SRED), businesses are able to reclaim some of the expenses incurred while developing new products or processes to become more competitive. For businesses looking to export a product or service (for example to our neighbours in the U.S.), Export Development Canada offers tremendous opportunities that protect Canadian companies and open the doors to worldwide markets.

Join us during Vaughan’s Small Business Week for Finance Night, an evening event where business owners will learn about these and other programs available for their entrepreneurial pursuits. Keynote speaker Suzanna Keselman, a chartered accountant and partner at inNumbers Inc., will demystify the world of SRED:

Event: Finance Night

Date: Tuesday, Oct. 22, 2013

Time: 6:30 p.m.

Location: City Hall – Multipurpose Room, 2141 Major Mackenzie Dr.

Keynote Speaker: Suzanna Keselman

Click here to register for this free event.
Click here to learn more about other free seminars taking place during Small Business Week.

See you at Small Business Week!

Julia Pronin
Funding Specialist at Bull’s Eye Business Consulting
Guest blogger on behalf of Vaughan Business Enterprise Centre (VBEC)

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