As a small business owner you have a lot of options available when you need a loan. Not all small businesses can or want to get a bank loan, so you will need to do your research to find what is best for you and your business. Read on to discover some options you may want to consider.
1. Bank Loans
Business loans from a bank can be used to upgrade business assets or help with expansion. You can get unsecured or secured loans and a choice in how you repay the loan. Banks can, however, have tight restrictions like a certain debt-to-equity ratio or can dictate how you can spend the money. Bank loans can also be more difficult to obtain than other options.
2. Personal Loans from Family or Friends
Logistically, borrowing from family or friends is easy. You don’t have to deal with any paperwork or strangers who don’t know your story, won’t have to pay high interest rates, and the process itself can be fairly quick. Getting a personal loan from a family member or friend, though, can come with a cost: if you can’t pay it back within the agreed-upon terms, your relationship may be put at risk. Another tip: make sure you get it all in writing as you still need to protect yourself to prevent any liabilities.
3. Government Grants
Government grants are a great option for small businesses. You can typically apply for them online, and it doesn’t take a long time to apply. There’s no guarantee that you will qualify for a grant, and the process definitely isn’t fast. Definitely apply for all the grants your business may qualify for, but do not count on them for fast cash.
Bootstrapping is when you use your own personal funds or revenue from the business. This allows you to do what you need without any external debt; however, if you have limited cash on hand, or something happens to your business, your financial risk is placed on yourself.
Crowdfunding sites like Indiegogo and Kickstarter collect capital from a variety of investors, who in turn get some kind of perk. It can take a while to set up a successful crowdfunding campaign, but if you do it right, it’s a great way to raise money.
6. Angel Investors
Angel investors are people who give your business some capital when you first start out, with the intention of helping it grow. Angels will typically give you capital in exchange for equity in your business. When your business does well, the angels profit from your success.
Angel investors are like those you see on the show Dragon’s Den. There are quite a few angel investors in Canada so if that’s something that interests you, definitely check out those options.
7. Alternative Financing
There are many online loan solutions you can try, and with these, you usually have a few different options, like fixed financing or flexible payment solutions. With a small business loan, your small- or medium-sized business will benefit from fast funding, high approval rate, no collateral loans. You can also use the funds how you want.
If you need to make renovations, invest in marketing, buy more inventory, or upgrade your facilities or equipment, you can do this with a small business loan. There are a few requirements: you have to be a Canadian-based business, you have to have the average monthly sales of at least $7,000, and you have to have been in business for at least six months.