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Owning a small business can be exciting. In fact, it can be very rewarding if it is gone about the right way. This means securing the right amount of financing from the right sources and then using that money to make a profit.
Canada's economy relies on the power of the small business, as, according to a study by Intuit Canada, small business employs nearly half of the country's private sector workforce. If you are one of the many individuals looking to start a small business, there is a lot involved with launching a startup. The most important part of it, however, is the financing needed to get it started. Most individuals rely on a loan to get that money and that means relying on credit.
Before you go on the search for financing, there are some questions that you need to ask yourself. By carefully evaluating what you need, how much you need, and where you currently stand, you can make the right decisions regarding your startup cash and that will give you a firmer foundation.
Where Do I Currently Stand Financially?
This is the most important question you are going to ask yourself. If you want to borrow money from a financial institution, you have to have good credit. You will need to take a look at your credit score and you can do this by obtaining your credit reports from TransUnion and Equifax. Banks usually favor individuals who have a personal credit score in the mid- to upper-600s or even higher.
You also have to look at your personal financial situation and determine whether or not you have any money that you can put into your startup cash so you can minimize the loan. The faster you can pay off the loan, the better.
Where Will Your Startup Capital Come From?
This is something you need to look at after you have determined your financial standing. There are many ways you can raise the funds you need to start your business. Most entrepreneurs use a combination of these methods in order to get the funds they need. For instance, you can use your own cash or assets. You can even ask for loans from family and friends that you can pay back when your business starts to make a profit. You could even give them a little bit of a return so that they are making an investment rather than giving you a loan. In regards to investment, you can approach venture capitalists and angel investors. There are also government grants and subsidies.
Some new small business owners turn to credit cards to fund at least the post-launch operations. According to Profit Magazine, only 4 percent of startups use credit cards before business launch. After business launch 26 percent use credit cards to fund the company's growth later. Still, one of the most popular forms of financing is the credit union or bank loan. Both of these tend to charge lower interest than the credit card companies, so it is something that is worth turning to. Credit cards should be the last resort.
Should I Consider The Canada Small Business Financing Program?
This is something you should definitely check out. It is one of the best finance programs available for small businesses. The program is administered by the Canadian government, which makes it easier for businesses to get the loans they need to finance their businesses.
Under this program, the government contributes one dollar for every dollar you are able to bring to the table. If you invest $200,000 in your business, the government is going to match it. The only time that you are liable for a portion of the loan is if your business goes bankrupt.
In the end, no one loses their home or their car. The financial institutions throughout the country deliver the program, so all a person has to do is visit their credit union or bank to get started. Just make sure you have all of the information about your business that the financial institution requires. You will need to show them your business idea, a business plan, and any other relevant information. The fact that you are putting your own money into the business shows that you are dedicated to making it work and that is promising to the financial institution.
What Does My Banker Require From Me?
Be prepared for your banker to ask you a lot of questions and to have all of the documentation to back up your answers. The best thing to do is create a proposal, which will include information about your business experience, information about your skills, and will contain a complete business plan. You will also need to present the bank with a full business idea. Furthermore, you will need to include information about your business and personal net worth and pass the credit history check. You may also need to list the collateral and investments that you are able to offer. Lenders want to see that you are putting some of your own money or assets into the business. It is a sign that you are committed to your business and banks want their borrowers to be committed.
Most of all, you have to be realistic about the amount of money that you need. Many times, small business owners ask for too much money. This causes them to get in deeper than they intended and then they can't pay it back. It is important to realize that a loan is not free money. At some point it has to be repaid.
When you want to start a new business, you have to fund it. There are a number of funding options available to you so that you can make your dream a reality. It is best to explore every option and utilize as many resources as you can so you can get the money you need.