For immigrant entrepreneurs, financing is a big problem

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The Globe and Mail | CAMILLA CORNELL  | June 6, 2016

Chizma Tea Company

When Ralston De Zilva moved to Winnipeg from Sri Lanka eight years ago, he longed to start his own business. But he had no credit history in Canada, and little in the way of assets.

“There’s a huge initial expenditure associated with moving your whole family to Canada,” he says. “It takes you quite a number of years to again build your capital.”

It wasn’t until a year and a half ago, when Mr. De Zilva’s sister, Amanda, arrived that he felt ready to launch launch Chizma Tea Company – a retail shop and online purveyor of premium Ceylon teas.

Amanda had contacts with several large tea companies in Sri Lanka, and Mr. De Zilva had a good grasp of the business culture here. Together, the pair began to seek out financing.

The problem: like many immigrants to this country, the De Zilvas had nothing to use as collateral for a loan. Even a bank Mr. De Zilva had worked for in the past was only willing to pony up $2,000. “That would not have taken me anywhere,” he says.

Statistics Canada figures indicate newcomers tend to be drawn to entrepreneurial activity. By the end of the 2000s, about 19 per cent of immigrant workers were self-employed, compared with 15 per cent of those born in Canada. And a 2013 Government of Canada report shows 21. 7 per cent of small to mid-sized enterprises had a majority owner or CEO born outside of Canada.

Yet they face some unique barriers to getting their businesses off the ground. Apart from the fact that English may not be their first language and they may be unfamiliar with the business culture here, they often have a tough time getting financing, says Julia Deans, CEO of Futurpreneur Canada.

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“They may not have a network of friends and family to help them get the ball rolling,” says Ms. Deans. “That’s often the first port of call when you’re setting up a business.”

On top of that, they usually don’t have a Canadian credit history. And if they haven’t yet found a permanent place to live, they can’t even get a bank account, she adds. “That makes them pretty high-risk in the view of traditional lenders.”

Nonetheless, there are funding options that lend themselves particularly well to new Canadians: Here are four of them:

1. Look for government loans. After several banks turned Mr. De Zilva down for a loan, he came across Futurpreneur Canada’s Newcomer Program through an online search. Not only did the De Zilvas get help honing their business plan and access to a business mentor for two years, they snagged a $15,000 collateral-free loan.

That enabled them to create a professional website, do some marketing and stock the shelves of their first shop. In March, they opened Chizma Tea Collections at Winnipeg’s downtown Cityplace mall.

Applicants for the Newcomer Program must be 25 to 39 and have been in Canada for less than 60 months (Amanda De Zilva qualified). They’re eligible for $15,000 loans, or as much as $45,000 if they already have a credit history in Canada.

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Loans can be repaid at any time, usually over a five-year term and the interest rate “is slightly lower than the bank rate,” says Ms. Deans. “Because we are a not-for-profit, we can take a greater risk.”

To find other helpful government programs, do a search of 15,000 funding sources at fundingportal.com, suggests Teri Kirk, CEO of Funding Portal Inc. Plug in a few details about yourself and your business and Funding Portal turns up provincial and federal government funding sources.

2. Build a network. Ms. Deans suggests reaching out to the chamber of commerce in your home city, as well as ethnic chambers of commerce (most have national offices), such as the Indo Canadian Chamber of Commerce or the Chinese Professionals Association.

The latter, in particular, “understands the transition you’re making and they can help build your network right away,” she says. “They may even be sources of financing.”

You can also search out angel investors or venture capital firms who may be able to provide financing through websites such as the Canadian Investment Network (which offers an online matching service for entrepreneurs and investors) and through Funding Portal (which keeps information on private funding sources as well).

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3. Get a crowd on your side. When Jamil Kahn of Toronto designed a new kind of parka with gloves, hat and scarf built right in, he didn’t even consider going to the banks for funding. “They want to see three years of cash flow,” he says.

Instead Mr. Kahn, a computer programmer who came to Canada from Pakistan in 2009, launched a Kickstarter crowd funding campaign. Apart from the Kickstarter fees of 8 to 10 per cent (payable only at the end of successful funding campaigns), it cost less than $1,500 to develop a catchy video of a few friends in the prototype.

As a result, Mr. Kahn was able to presell his SmartParkas for $320 each (they will retail for $600 to $750), raising almost $3.26-million to get his company, North Aware Inc., off the ground.

“Crowdfunding is an enabler to many underserviced populations, including newcomers to Canada,” says Craig Asano, founder and executive director of the National Crowd Funding Association of Canada (NCFAC).

“It allows you to showcase your product or service to the market and get on the first step of the funding escalator. And it offers a choice for resourceful entrepreneurs who are often turned down by the banks.”

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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