Finding Small Business Financing in Canada

Aug 16, 2023


Where to Find the Money You Need to Start a Business in Canada

Do you have enough money to start your business? While some new small businesses are funded by their owners, many others require funding from external sources to begin. This page outlines the primary financing options available for starting a new business in Canada.

However, before we delve into that, it’s important to be aware of the two fundamental types of financing.


Understanding the Terminology of Small Business Funding: Debt versus Equity Financing

There are two main types of financing available: debt financing and equity financing. When you invest your own money to fund your new business, it falls under equity financing. Alternatively, you can obtain equity financing from other sources such as private investors (like your family or an angel investor) or public investors (by making your company public or through equity crowdfunding).

On the other hand, debt financing involves borrowing money. Typically, you would borrow from your family, friends, or financial institutions like banks.

If you’re seeking debt financing, it’s likely that you’ll be required to provide equity financing as well. The amount of equity financing you can contribute relative to the loan amount determines the debt-to-equity ratio (also known as leverage), which is an important factor considered by potential lenders.

So, what sets debt financing apart from equity financing? Well, with equity financing, you need to relinquish a portion of your company’s ownership in exchange for the funds invested by the investor or investors.


The Most Common Sources of Small Business Financing

As you may have already surmised, the majority of new small enterprises are financed by the owners themselves. Following that, family and friends represent the next frequently utilized sources for startup business funding. If you wish to explore additional avenues for financing a new business, I encourage you to learn more by referring to “Sources of Business Start Up Money.”


Small Business Grants in Canada

Many people who are launching small businesses in Canada believe that they can secure a government grant to fund their startup plan. However, for most small businesses in Canada, small business grants are not a practical option for financing. All About Small Business Grants in Canada is provides details about various small business grants that are accessible to small businesses.

Didn’t find anything suitable here? Make your search easier with Tips for Finding Small Business Grants in Canada.


Small Business Loans in Canada

Many small businesses in Canada that do not have self-funding or support from family and friends typically obtain their financing through small business loans.

Small business loans can be an appealing option for financing a new business, especially because the government offers programs like the Canada Small Business Financing Program, which prioritizes funding for start-up businesses. For more information on small business loan options in Canada, you can refer to the article “Where to Get Small Business Loans in Canada”.

If you’re between the ages of 18 and 39 and aspire to become a business owner, Futurpreneur Canada offers funding and other resources specifically tailored for young entrepreneurs in Canada. Check out the details in the article “Startup Funding for Young Entrepreneurs in Canada”.

In case you require $20,000 or less to get your new business off the ground, a microloan could be a suitable solution. The article provides a list of microloan sources available in Canada.

For women starting their own businesses (as more women are doing nowadays), exploring small business loans designed for women in Canada is highly recommended. These programs cater exclusively to Canadian women.

While traditional banks and credit unions may come to mind when considering a small business loan, it’s important to note that they are not the sole lenders available. “What About a Private Lender?” introduces an alternative source of small business financing worth exploring.

Regardless of the lender you choose, there are actions you can take to enhance the appeal of your loan proposal. The article “How to Get a Small Business Loan” offers valuable insights on increasing your chances of obtaining the start-up business financing you seek.


Angel Investors in Canada

For small businesses, exploring Angel Investors is a valuable option for obtaining financing. If your new small business has the potential for a promising return, angel investors could be intrigued and willing to offer startup funding. To gain insight into the criteria angel investors consider when selecting businesses to support, refer to the resource “Attracting Angel Investors.” Additionally, you can find practical advice on locating angel investors for your business in the guide “How to Find an Angel Investor.”


CBES is here to assist you; feel free to contact us for expert guidance.



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