NCFA guest Post | December 20, 2017

Running an SME is riddled with many challenging pitfalls. One of the biggest challenges that entrepreneurs and small business owners face in their line of business relates to business financing and funding. A small business, irrespective of whether it is a startup, sole proprietorship, or partnership will occasional run into situations when it has less money than it needs. Running a business is hard; getting the funds to keep the business afloat doesn’t have to unnecessarily difficult. This piece provides insight into four sources of funding for Canadian entrepreneurs.

Government grants and loans

The Canadian government is playing a commendable role in supporting the funding of the SME industry in the forms of grants and loans. The Canada Small Business Financing Program (CSBFP) for instance provides financing for startups or existing businesses who don't have more than $10 million in annual revenue.

However, you'll be required to provide documentation such as a business plan, accounted audited financial statements, and a proper tax record among others. In addition, the kind of SME funding available from the government might vary from one province to the other; yet, government funding for SME (either grants or loans) still remains the cheapest form of funding that you'll find.

Peer to peer lending

Banks have largely dominated the Canadian lending market and businesses or ventures that they deem not to be desirable customers might find it somewhat to obtain funding from conventional sources. P2P lenders are however passive investors and they don't see the personal information of borrowers; hence, you'll find it easier to get financing from social lending platforms if you satisfy creditworthiness requirements.

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Canadians generally seem to have some reservations about getting involved in the peer-to-peer (P2P) lending industry, because the industry is yet to be properly regulated. Of course, borrowers don't have problems with borrowing money from peers, but lenders seem to be wary of taking such risks. Nonetheless, a number of startups and existing financial companies are pushing for the growth of the P2P ecosystem.

Online lenders

Online lenders are gradually making inroads into the Canadian financial markets as the fintech industry continues to drive change. Online lending service, which are already popular in the U.S. and the EU provide individual and businesses an alternative source of funding on the pillars of speed, convenience, efficiency and value.

OnDeck Capital is one of the major online lending platforms available to small businesses in Canada. The firm provides small businesses with term loans of up to $250,000 and Lines of Credit of up to $50,000; yet, you can get a decision on your loan application in a matter of minutes. You may want to read some ondeck reviews online to have a feel of the experience of other business owners that have used the platform in the past.

Crowdfunding

Startups, innovative small businesses, and creatives may want to consider the possibility of raising funds via crowdfunding platforms. Crowdfunding allows you to sell your idea to a diverse audience who in turn supports you financially if they buy into your vision. The good thing about crowdfunding is that the money you raise is not necessarily a loan – you can choose to send some incentive to your backers after your project kicks off.

However, you need to understand the operations of different crowdfunding platforms so that you can make educated decisions. Some platforms have an all-or-nothing model where you must reach your funding goals otherwise the funds raised will be returned to your backers.  Some platforms offer a flexible plan where they charge an amount if you reach your goal or charge a relatively higher fee if you don't reach the goal.

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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, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ 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.  For more information, please visit:  ncfacanada.org