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Financing for Starting a Business Info-Guide

Last Verified: 2010-06-30

Basics to Getting Started
Overview of Business Financing
Business Planning
Financing Programs for Starting a Business
Financing Programs for Youth Starting a Business
Financing Programs for People with a Disability
Other Resources

1. Basics to Getting Started

Starting a business can be a rewarding undertaking but it comes with challenges. Before starting a business in Ontario, it is wise to do your research. There are several issues to consider such as regulations, financing, taxation, managing your business, advertising and much more.

For further information:
see the documents:

For regulatory or legal questions, it may be useful to contact a lawyer that deals with business regulations through the Law Society of Upper Canada's Lawyer Referral Service.

For further information:
call 1-800-268-8326
visit the website: Law Society of Upper Canada's Lawyer Referral Service

General Information

The success of your business depends on you having enough capital to purchase the equipment needed, buy the inventory you will have to carry, pay overhead costs such as rents and salaries, and have a large enough amount set aside for additional working capital and to enable you to take advantage of opportunities or survive temporary setbacks. It is essential to assess the costs of start-up and doing business, and determine the capital required before you begin. This is an integral part of the initial business planning process. Your financial requirements will generally fall into two main categories:

1. Initial costs: land, building, fixtures, equipment, supplies, vehicles, pre-opening expenses and opening inventory;

2. Daily operating costs: rising inventories, payroll, rents, taxes, advertising, accounts receivable, etc.

For further information:
visit the website: Key Small Business Financing Statistics

2. Overview of Business Financing

In the early stages, the most important financial sources will probably be yourself, friends, relatives and financial institutions. When you are looking into applying for a loan for your business, it is important to study different avenues of financing. We have included here a few brief definitions of various sources of financing.

Banks and Other Financial Institutions

The most common source of financing for small businesses is the chartered bank. Banks can provide a number of financing options, such as short-term loans, long-term mortgage loans and, in some cases, loans against inventory or accounts receivable. Other important sources of financing in this category include trust companies and credit unions.

Credit Cards and Personal Lines of Credit

For very small firms and home-based businesses, credit cards and lines of credit often provide a ready means of obtaining small scale debt capital. While convenient, they bear relatively high rates of interest and limit the amount of capital available.

Partners and Business Angels

Angels are simply wealthy individuals who invest directly in small firms owned by others. Angels tend to finance the early stages of the business. Attracting partners who make an investment in the business is also an option.

Venture Capitalists

Institutional venture capitalists are among the more important sources of risk capital. Venture capitalists are usually private or publicly-sponsored pools of capital that acquire a level of participation in the firm applying for financing. Venture capital can be an effective means of enabling the growth potential of the firm.

For further information on business financing:
see the document: Private Sector Financing

3. Business Planning

A business plan is often a key component of your application for financing. The plan describes who you are, what you plan to achieve, where your business will be located, when you expect to get under way, how you will overcome the risks involved and how you will generate your profits.

For further information:
visit the website: Business Planning

Business Plans - Templates and Samples

There are many organizations and business websites that provide free templates, writing guides and sample plans. You can also find companies that sell business plan software to assist you in preparing your plan.

For further information:
see the document: Business Plans - Templates and Samples

4. Financing Programs for Starting a Business

Canada Small Business Financing (CSBF) Program

The Canadian Small Business Financing Program, under the Canada Small Business Financing Act, can help businesses obtain term loans of up to $500,000 to help finance fixed assets, necessary for the operation of the business including:

the purchase or improvement of real property or immovables
the purchase of leasehold improvements or improvements to leased property; and
the purchase or improvement of new or used equipment necessary for the operation of the business.

The loans are made directly by approved lenders to businesses (excluding farming) operating for profit. CSBF loans proceeds cannot be used to:

improve a family dwelling for non-commercial purposes;
purchase shares;
finance working capital (finance inventory, accounts receivable, etc.);
permits and licenses used in the operation of eligible assets;
franchise fees;
feasibility studies;
professional fees (e.g. legal, accounting and appraisal);
survey costs;
building permits;
vehicle for personal use;
intangibles (i.e research and development costs, prepaid expenses, good will, etc,);
or purchase real estate for resale.

For further information:
see the document: Canada Small Business Financing (CSBF) Program

Business Development Bank of Canada (BDC)

The Business Development Bank of Canada is Canada's bank for small and medium-sized enterprises (SMEs), delivering financial and management services, with a particular focus on the emerging and exporting sectors of the economy. The BDC has a number of financing programs for a variety of business needs.

For further information:
please call 1-877-232-2269
visit these websites:
BDC Financing
Financial ratio savvy

Starting a business program

The Business Development Bank of Canada offers business loans that can help you in starting or buying a business.

For further information:
visit the website: Financing for starting a business
see the document: BDC Term Loans

BDC Consulting

The Business Development Bank of Canada's experienced business consultants can help you plan your business venture.

For further information:
see the document: BDC Consulting

Innovation Financing Solution

A new product designed to fund projects to develop e-business, explore new export markets, and to cover the costs of R & D associated with the introduction of new products and services.

For further information:
visit the website: Financing for Innovation

Ontario Community Futures Development Corporations (CFDCs)

Through federal support, the Ontario Community Futures Development Corporations administer local investment funds to help finance new or existing small businesses for start-up, expansion or stabilization plans that help maintain or create jobs. Repayable financing of up to $150,000 on commercial terms through loans, loan guarantees or equity investments is available when financing from other sources is insufficient. All CFDC financing decisions are made at the community level by the local boards of directors.

The CFDCs provide important services to businesses that include:

business advice, counselling, information and referrals;
help with business plans;
export support;
entrepreneurial training; and
information on relevant federal and provincial programs and services.

For further information:
see the document: Community Futures Program
please call 1-866-668-2332

Ontario Self-Employment Benefit (OSEB)

The Ontario Self-Employment Benefit provides unemployed people who are or have recently been eligible for Employment Insurance with income and entrepreneurial support while they develop and start their business.

Job seekers who are unemployed can apply to participate if they meet one of the following conditions:

They established a claim for Employment Insurance benefits or their Employment Insurance benefit period ended within the past three years.
They established a claim for Employment Insurance maternity or paternity benefits and were paid benefits within the past five years, and are re-entering the labour force after having left it to care for newborn or newly adopted children

For the purpose of determining whether an individual qualifies as a participant, the date the completed application is received by Employment Ontario is the date when he or she is considered to have requested assistance.

Other criteria may apply.

For further information:
please call the Employment Ontario hotline at 1-800-387-5656
visit the website: Ontario Self-Employment Benefit

5. Financing Programs for Youth Starting a Business

Summer Company

The Summer Company program provides hands-on business coaching and mentoring, and awards of up to $3,000, to help enterprising young people start up and run their own summer businesses. In order to be eligible you must be:

between 15-29 years of age;
a student returning to school full-time in the fall;
a resident of Ontario;
a Canadian citizen or a Landed Immigrant;
not operating an existing business or employed elsewhere full-time during the term of the operation of the Summer Company program; and
prepared to commit a minimum of 8-12 consecutive weeks full-time to the experience.

For further information:
please call 1-800-387-5656
see the document: Summer Company

Canadian Youth Business Foundation (CYBF) Loan Program

The Canadian Youth Business Foundation provides loans of up to $15,000 to aspiring young entrepreneurs who are between 18 and 34 and are most likely to succeed in creating a business and for whom financial assistance is critical. It is expected that the business will provide full-time employment for yourself and others. To ease the early stages of business growth, loan repayments of three or five years are available so that you can stay focused on getting established.

For further information:
please call 1-800-464-2923
see the document: CYBF Start-Up Loan

6. Financing Programs for People with Disabilities

Ontario Disability Support Program: Employment Supports

Are you a person with a disability looking to start your own business in Ontario? The Ontario Disability Support Program: Employment Supports could offer you a mix of services including funding assistance, mentoring and business skills training.

For further information:
contact the office nearest you : Employment Supports: Who to contact for more information
visit the websites:
Employment Supports: What is available
Employment Supports: How to apply

7. Other Resources

Need more information?

Click: Canada Business
Call: The Business Info Line, a collaboration between ServiceOntario and Industry Canada, at 1-888-745-8888
Visit: Find a Community Partner Location near you

DISCLAIMERS

Information contained in this document is of a general nature only and is not intended to constitute advice for any specific situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Some of the organizations listed above are not subject to the federal Official Languages Act or the French Language Services Act of Ontario. Their services may not be available in both official languages.