Applying for Commercial Loans

As an established business, you may have more success with banks. Make sure your business plan is up to date, shows your ability to manage your loan payments, and includes a clear description of your business and contingency plans. Be aware that banks are usually reluctant to make unsecured loans, so you must be willing to put up the collateral needed to get the loan.

Above all, make sure you maintain a good relationship with your lenders by always meeting your current loan obligations so that they are willing to loan you more money on good terms when you need it.

e. Factoring

You might want to consider factoring, which is a financing method in which a business sells its accounts receivable at a discount to a third-party funding source to raise capital. Factoring is very common in certain industries, such as the clothing industry, where long receivables are part of the business cycle.

In a typical factoring arrangement, you would make a sale, deliver your product or service, and generate an invoice. The factor would buy the right to collect on that invoice by agreeing to pay you the invoice's face value less a discount–typically 2% to 6%. The factor pays 75% to 80% of the face value of the receivable immediately, and forwards the balance to you (less the discount) when your customer pays the invoice.

You can find factors listed in the telephone directory and in industry trade publications.

f. Finding Investors or Other Equity Partners

Are you willing to share the ownership of your business? If so, you can look into finding equity investors to finance your business growth.

Angel investors are high net worth individuals who ideally have knowledge or expertise to complement your own, and who have money to invest.

• The B.C. Angel Forum introduces established companies to private equity investors. If you’re seeking equity financing of $100,000 to $1 million, you can apply to present your business and your growth strategy to pre-screened private and corporate investors. Contact the B.C. Angel Forum to see if your business would qualify.

Venture capitalists are professional managers that manage venture funds from high net worth individuals and corporations, or from institutional investors and government funds. 

• The Canadian Venture Capital & Private Equity Association (CVCA)represents the majority of private equity companies in Canada. The CVCA provides venture capital through investment in early stage companies, mostly in technology businesses. Contact the CVCA to learn more about what they have to offer and to find out if your business would qualify.
• The Canadian Financing Forum matches North American venture capitalists and corporate investors with serious entrepreneurs looking to build world-class technology companies. Visit their website for more information.
• The B.C. Government Venture Capital Program allows a small business to accept equity capital directly from investors, and enables investors to be actively involved in the growth of the small business. Refer to the Ministry of Jobs, Tourism and Innovation website for more information and to see if your business would qualify.

Financing is Available to You

You can raise new capital to grow your business in several ways:

a. Bootstrapping

Bootstrapping means finding the means within your company to come up with additional funding. For example, you can look at ways at reducing your expenses so that you can use your profits or retained earnings to grow your business, instead of borrowed money.

You can also find new revenue streams and direct the additional profits to your growth initiatives.

• If you own your facilities, consider earning passive revenue by renting out your facility when it’s not in use.
• Allow other companies to advertise on your website.
• Re-position your products or services to appeal to new markets to increase sales.
• Use a discounted pricing strategy or a promotional campaign to increase sales.

The main advantage of bootstrapping is your business will have more equity (as defined by assets minus liabilities) because of your lower debt obligations. A lower debt load also makes it easier to raise additional capital should you need it. However, you want to be careful that you don’t get into a negative cash position by being undercapitalized.

b. Tapping into Private Sources

You can use your personal savings, credit cards, lines of credit, or personal loans to finance your growth, as you might have done during start-up. You can also ask friends and family to help finance your expansion plans. Be sure to keep them informed of how you are using their funds, and set up a repayment schedule.

c. Taking Advantage of Tax Breaks, Subsidies, and Incentives

The provincial and federal governments offer tax breaks, subsidies, and incentives to businesses for initiatives that they feel are priorities. The Government of B.C. tax incentives for small business can be found on the Ministry of Finance website. You can find information on federal programs at the Canada Business website.

You might be eligible for federal and provincial government programs to help you finance your growth. Refer to our Overview of Government Financing document, which provides a description of the funding programs available to B.C. businesses, eligibility criteria, and contact information.

Since the application process varies from program to program, you should contact the coordinator of the program that you’re interested in to find out what the specific application requirements and process are.

d. Applying for Commercial Loans

As an established business, you may have more success with banks. Make sure your business plan is up to date, shows your ability to manage your loan payments, and includes a clear description of your business and contingency plans. Be aware that banks are usually reluctant to make unsecured loans, so you must be willing to put up the collateral needed to get the loan.

HOW TO EXPAND YOUR BUSINESS WITH NEW CAPITAL

As your business grows, your need for funding doesn’t diminish. Chances are, you’ll need some form of capital to introduce new products or services, expand into new markets, hire or contract additional help, expand your facilities, or purchase new equipment and machinery.

Finding growth financing for your business should be easier than start-up financing because your business has a demonstrable history of success. Where you’ll find the financing you need will depend on:

• Your business objectives
• The health of your business
• Business ownership structure
• Your ability to plan
• Your ability to convince lenders to believe in you and your vision for your business

Steps to Secure Growth Financing

Follow these three steps to improve your chances of successfully securing the financing you seek.

Step 1: Have a Written Business Plan

Very few lenders, including banks, the government, or even friends or family members, will lend you or give you money if you don’t have an updated business plan that clearly explains how you’ll use the money and how you’ll pay it back.

A viable business plan is the foundation for securing financing for your business.Refer to our Business Planning-Starting section if you need some help getting started. If you already have a business plan, make sure it’s up to date and that it explains why you need additional financing. Refer to our Business Planning-Growing section for guidance.

Step 2: Know What Type of Financing is Available to You

You can raise new capital to grow your business in several ways:

Succession Planning

Succession Planning

If you decide to transfer your business to family members, friends, or other parties, the financial implications will depend on your business structure and the method you choose to transfer your ownership.

The common ways to transfer ownership of a company to family members include:

• Through joint ownership, either using a share transfer (if the business is incorporated) or using a partnership (if the business is an unlimited company)
• Through a sale, wherein your heirs would purchase the business outright, or over a period of time
• Through your will or living trust
• Through gifting, wherein you would give parts of your business to your heirs gradually over several years

Due to the complexities of succession, we recommend that you draft a formal succession plan for a smooth transition, and that you retain the services of a lawyer and an accountant to help you sort through the legal and tax implications. Refer to our Operations Management-Exiting section for guidance.

Closing Your Business

You might need to shut down your business permanently—even if you don’t want to—due to extenuating circumstances, such as a personal or family crisis, health issues, faltering revenues, or bankruptcy.

In this case, the dissolution of your business might result in financial hardship. Refer to our Operations Management-Exiting section for information on what you might expect in this situation and some possible mitigation strategies.

When bankruptcy is your only option, it might feel like failure, but it can also provide relief. When you’re in bankruptcy, your financial obligations can diminish because no unsecured creditor can garnishee your wages or initiate any other collection action against you.

However, you will be required to pay:

• Any outstanding taxes and payroll remittances to Canada Revenue Agency
• Any wages or salaries owed to your employees
• Any secured debt. Your secured creditors can repossess any property or collateral you had secured against a loan, such as your car or house.

HOW TO EXIT YOUR BUSINESS: THE FINANCIAL IMPLICATIONS

Selling your business, transferring it on to your family members or others, or closing for good (either by dissolution or bankruptcy), triggers a number of financial events that you’ll need to resolve.

An accountant and a lawyer can assist you with most aspects of exiting your business, and should be consulted before you make any decisions.

Selling Your Business

When selling, enlist the help of an accountant, broker, or business valuator to ensure your business is properly priced. These professionals can help you get the best price possible for your business, without leaving any money on the table.

You can also use market research to understand and prove the value your company might bring when you put it up for sale. Refer to our Market Research-Exiting section for more information.

If you are incorporated, you can sell all or part of your business through a share transfer, or by going public. You can raise capital through issuing an Initial Public Offering (IPO), which is selling shares to the public and your corporation changes its status from a private to a public company. If you’re interested in this option, it’s highly recommended that you seek legal counsel. If you don’t have a lawyer, you can contact the B.C. Lawyer Referral service.

Succession Planning

If you decide to transfer your business to family members, friends, or other parties, the financial implications will depend on your business structure and the method you choose to transfer your ownership.

The common ways to transfer ownership of a company to family members include:

• Through joint ownership, either using a share transfer (if the business is incorporated) or using a partnership (if the business is an unlimited company)
• Through a sale, wherein your heirs would purchase the business outright, or over a period of time
• Through your will or living trust
• Through gifting, wherein you would give parts of your business to your heirs gradually over several years

Due to the complexities of succession, we recommend that you draft a formal succession plan for a smooth transition, and that you retain the services of a lawyer and an accountant to help you sort through the legal and tax implications. Refer to our Operations Management-Exiting section for guidance.

If you want to wake

If you want to wake up in the city that never sleeps, the Canadian Technology Accelerator (CTA) might have a solution for you.

What is CTA @ NYC?

Modelled on the CTA’s previous Silicon Valley initiative, the Canadian Trade Commissioner Service and Canadian Consulate General in New York City have joined together to seek digital media companies.  If you have an online-based company and are interested in gaining access to unique contacts and resources in New York, to accelerate the growth of your business on a global scale, this program is for you.

What’s in it for You?

Over the last five years New York City has become centre stage for online based technology entrepreneurship. With its huge media and advertising industries there are plenty of important customers and investors looking for the next big internet-based company. 

 

This three month program offers you a chance to become part of this growing industry. It provides introductions to experienced mentors and investor contacts, as well as providing you with access to the General Assembly, a 20,000 square foot campus for technology, design and entrepreneurship located in Manhattan.   

How to Apply

Applications are being accepted now. To apply, submit a completedapplication form via e-mail to venturenorth@international.gc.ca, before April 9, 2012. An external selection committee will then review your application and assess whether you will be one of the lucky applicants who will be offered this opportunity.

 

As part of the process the selection committee may conduct a video interview, however will contact you directly to arrange so. 

 

If successful you will then be invited to New York from May 21 to August 19, 2012. However, please note that if successful you will be responsible for obtaining all required visas, as well as expenses related to travel, living/lodging and business operations in the US. 

 

For more information visit the Canadian Technology Accelerator websitetoday.