It's no secret that venture capital in Canada is hard to come by, and as Canadian small businesses struggle to find investors, entrepreneurs need to consider non-traditional financing options.
The investment landscape is competitive; venture capitalists are looking for very specific companies to add to their portfolio and those fortunate enough to raise a funding round are forced to part ways with a large chunk of the company they've worked so hard to build.
Though venture capital funding is often seen as the most desirable method for securing the capital necessary to move a business forward, there are a variety of options Canadian entrepreneurs should consider at various stages of their development as well.
Futurpreneur Canada, for example, is a not-for-profit organization that helps Canadians between the ages of 18 and 39 launch new businesses through mentoring, coaching, online resources and financing.
"We provide a loan of up to $15,000 that's based on the strength of the business plan and the character of the founder, not based on collateral or guarantee," said Julia Deans, CEO of Futurpreneur Canada, adding that the Business Development Bank of Canada will add up to $30,000, based on Futurpreneur's approval. "For one application, a young entrepreneur who can't get traditional financing from a bank can get up to $45,000 on an up to five year basis at lower than bank rates."
Futurpreneur is often a first-stop for early stage companies raising seed funding after a friends and family round, which is why Ms. Deans finds that only 10 per cent arrive with a strong business plan.
"The rest need a lot of coaching, and we provide that," she said. "We also have an online business plan writer that's really fantastic, last year it had about 26,000 people use it, and we funded just a bit over 800 businesses."
The Canadian government also provides a number of opportunities for businesses of all sizes to secure grants, loans and resources that stimulate economic development.
Often facilitated through one of six regional development programs across Canada — such as the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) or the Canadian Northern Economic Development Agency (CanNor) — these agencies provide grants to non-profits that stimulate business development like incubators, and provide repayable loans to Canadian organizations that meet a number of criteria.
"If you're a brand new entrepreneur and want to start a company with a great idea, go look at what FedDev is offering, because we have programs for entrepreneurs starting new businesses," said Gary Goodyear, the minister of state for FedDev Ontario. "If you're an existing business but want to grow, purchase equipment, train your staff or buy new software to enter a global supply chain or something like that, than we have support for existing businesses that want to expand."
Some of the areas where FedDev Ontario invests most heavily are organizations that can help stimulate economic development in small communities and companies that might provide Canada with a competitive advantage in the global marketplace.
Economic development agencies like FedDev Ontario also help businesses partner with post-secondary education institutions to help the private sector develop and test new innovations.
"The first they would want to do is go to FedDevOntario.gc.ca and have a look at what the programs are intended to do, because obviously we have our goals," said Minister Goodyear. "This isn't just for small businesses that require large amount of cash, this is also for mom and pop operations that have an expansion idea that will help the economy in their local area, or will hire folks in a quality way, and provide some economic stability to their local community. We really tackle everyone from the mom and pop organizations to the big companies, as needed."
There are a wide variety of government agencies and programs that exist to spurn innovation and economic development — so many that it can be overwhelming for entrepreneurs to navigate their way through the various programs.
"You can spend the entire staff's every waking hour applying to grants," said Bryan Watson, director of strategic projects at INcubes, a Toronto-based business incubator. "In the end you need to pick those that are high probability, that have the money, and actually fit what you are trying to do."
Working with a wide variety of entrepreneurs over the years, both at INcubes and as the former executive director of the National Angel Capital Organization, Mr. Watson has seen a lot of companies spend what he perceives as wasted time applying for grants and loans when they could use those resources to earn revenue.
"I see a lot of companies killing themselves trying to raise money when a few strategic introductions to the right customers would solve all of their financing problems," he said. "My recommendation for companies is to stay as lean as possible and leverage government programs as much as possible, because you can get quite a ways down the road by leveraging the various different types of small grants and loans available."