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7 Ways to Raise Funds for Your Startup in Canada

In choosing a source of funds for your business, don’t forget to consider the terms and conditions. This will help you choose the best option that aligns with your business objectives. 

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Ways to raise funds for your startup in Canada
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After conceiving and developing a business idea, the next real issue is to raise funds. There are plethoras of ways entrepreneurs raise funds for their business. I have compiled a list of 7 possible ways you can raise funds for your startup in Canada. 

Guaranteed Ways to Raise Capital to Start a Business

Table of Contents

So if you are thinking of how to raise funds for your startup in Canada, consider the following methods:

1. Personal Savings

This might not seem like the best idea. A 2023 Federal Reserve report found that new businesses often use personal savings or leftover money instead of bank loans. If you’ve saved a lot over time, it’s better to use that for your business. This way, borrowing and paying interest can be avoided. Using your personal savings is safer. 

Since it’s your money, you won’t feel pressured. A loan facility will put you under pressure but using your savings won’t. But if you choose to use your savings, you must set aside some funds for emergencies. This will help you to avoid the temptation of touching your startup capital. 

Additionally, using personal savings instills a strong sense of commitment. Leveraging personal funds offers a solid foundation for launching and sustaining a successful business.

2. Bank Loan

After personal savings as a way of raising funds, acquiring loans from banks comes to mind. In Canada and most countries, banks, credit facilities and lenders give out loans to entrepreneurs. These are often small business loans given to help entrepreneurs start or scale up their businesses. Bank loans are usually given in lump sum or whatever method the lender agrees on. 

The funds serve as startup capital for new businesses. They also cover other expenses, especially for existing ones. Take a look at different types of business loans to know the one that’s most suitable for you.

How do you qualify for a bank loan?

I will give you a rundown of what you need to do or have to qualify for a bank loan in Canada.

  •  As expected, you must register your startup in Canada. Register and certify your business with the appropriate authority before you access loans.
  • You must have been in business for a year. This makes accessing bank loans difficult for startups. Yet, they are lenders that are often willing to work with startups.
  • You must provide a personal guarantee. You will be liable to pay the loan if your business can’t.

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3. Grants

The good news about funding your business through grants is that you don’t have to pay back. Unlike loans that come with interest, grants are free so to speak. Most grants aim to assist less privileged individuals. 

Grant-giving organizations provide support to women and minorities. They also focus on individuals with disabilities and entrepreneurs in economically disadvantaged regions. 

Accessing grants is particularly difficult for new businesses. The process involves rigorous proposal writing and presentations. But you can research and see if you qualify for any of them. 

To see a list of available grants in Canada, you can check a database of federal government grants.

4. Raise Funds for Your Startup in Canada from Friends and Family

Another good way of raising funds for your startup is to borrow money from friends and family. If you don’t have personal savings and your business doesn’t qualify for bank loans, you can ask friends and family members to lend you money. 

This method is very flexible and there are no interests. Loans from friends and family must not necessarily follow any loan pattern. Friends could choose to leave the money with you until your business can stand on its own. While this is an easy method, it could lead to a break in a relationship, especially if the terms of the loans are not explicit or you fail to repay.

If you must take this as a way of financing your business, you should share your business plan and discuss expectations in advance. This ensures everyone is on the same page about whether the money is a gift or a loan. 

Define also if it involves interest and any other terms. Sorting this out in writing and signing will avert misunderstanding and conflict.

5. Crowdfunding

Crowdfunding involves getting money from a large number of people. These people are donors. You can access them via platforms like GoFundMe, Kickstarter, Indiegogo, etc. These are unarguably the biggest crowdfunding platforms in the world today. 

To use crowdfunding, you will need to set up a profile on any of the websites mentioned above. What comes after that is sharing your story with the prospective donors. You will tell them how much you need and give them a detailed outline of your business.

Raising money through this method may be tricky but you can try. To appreciate donors, you may choose to send thank you notes. Another way you can motivate donors to give is through equity crowdfunding. This entails giving your donors a stake in your business.

6. Venture capitalists and Angel investors

Venture capitalists provide funds for the early stages. Angel Investors also provide funds but they are different from Venture capitalists. Venture capitalists invest in businesses on behalf of private venture capital firms. Angel investors are rich individuals who give out funds to startups from their own money.

Despite the difference, both get an equity stake or partial ownership in startups. This becomes the reward for their money. This method is a good way of raising funds for business because it doesn’t involve paying back any type of loan.

Check AngelList to learn more about Angel Investors and Venture capitalists. You can also ask others in the same line of business for references. Your business will wear a new look the moment you understand how to attract the perfect angel investors for your startup.

7. Partnership

Partnership is also a good means of raising funds. Your partner could be someone who has money and wants to work with you. You can also partner with existing businesses. One of the advantages of partnering is that it gives you access to more funds. 

In the case of established businesses, it gives you access to customer base and expertise.

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Conclusion

In choosing a source of funds for your business, don’t forget to consider the terms and conditions. This will help you choose the best option that aligns with your business objectives. 

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Ode Daniel Iji is an SEO content writer and contributor at EntrepreneurBusinessBlog.com. You can connect with him via [email protected].

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