Canadian Alternative Financing

Statistics Canada reports 75% of job creation is through small businesses. Getting a traditional loan is one of the biggest challenges.  Canada’s major banks have big profits, yet are not supportive of small businesses.  Venture capital is scarce.

Working Ventures, sponsored by the Canadian Federation of Labor, is the first national, labor-sponsored investment fund in the world.  Its goal is long-term capital appreciation for shareholders, providing risk capital (between $250,000 and $10 million) to high-growth and medium-sized Canadian businesses.  All Canadians who invest in Working Fund receive tax credits.
 
Alternative funding can be easier to obtain.  From customers and suppliers to corporate lenders and government programs, customer financing has minimal paperwork.

Human Resources Development Canada offers self-employment assistance to employment insurance recipients who want to start their own business.  There are Community Loan Associations in each province.

Canadian Alternative Investment Co-operative in Toronto, Ontario, was formed in the early 1980’s by a number of religious communities pooling resources to make investments towards positive social change.  CAIC offers loans, mortgages, and equity investments for  community-based projects.

Suppliers Inventory Buying Plans:  Supplier financing occurs when suppliers are willing to extend payment terms, offer discounts for early payment, offer floor planning or factoring options to assist dealers.  Often a supplier promotion plan enables a dealer to pay for items as they are sold.

Most leasing companies are willing to offer lengthy leases on equipment and computers, with an option to purchase, a fixed rate and no down payment.  This can free up equity capital and borrowing power while you deduct the full expense from your taxable income.  A long-term lease gives more negotiation for leasehold improvements, and may represent $30 - $50,000 of start-up expenditure, which can help a balance sheet appear healthier.

Negotiating for partial or full payment in advance helps to finance projects and reduce the need for a line of credit. 

A factoring company will discount receivables as well as offering credit management expertise.  You receive the money right away while the factoring company awaits payment.  Due to the added 3 – 5%, you will need to add this expense into your pricing.

For help with questions about altenative financing in Canada, please contact us.