A good business project usually has no difficulty in finding financing. This generally implies that the company is not in a competitive sector of activity, that it offers something new and innovative, that it is not dependent on economic cycles and that it creates wealth (creation of quality jobs, exports, R&D, etc.).
Whether your request for funding is made to a financial institution, an organization responsible for government programs, angel investors or simply to a member of your family, the secret to increasing your chances of success is one word: PREPARATION.
Identify precisely the amount needed to finance your business project, the nature of the expenses and the target market. In addition, sales confirmations or proof of orders will demonstrate your seriousness to investors and increase your chances of obtaining financing.
In this article, we will introduce you to eight sources of financing for your company.
Would you be willing to invest in your brother-in-law’s business project if he or she did not make a financial commitment? In short, would you be willing to finance 100% of his business? The answer is probably no.
Regardless of the source of financing you want for your business, you will need to invest a certain amount of money yourself (between 5% and 25% of the project cost) to demonstrate the seriousness of your approach to potential investors. These can be personal savings or collateral, such as your home.
When Nicolas Duvernois, CEO and founder of PUR vodka, sought financing to start his business, he hit a wall. Believing in his chances of success, he decided to finance himself by working nights in a hospital, as he explains in this interview.
The people around you
Family, friends and relatives are often the primary source of funding. Jeff Bezos, for example, called on his parents when he founded the online business Amazon, as Brad Stone explains in his book Amazon: The all-rounder shop.
Financial institutions offer loans to businesses with varying interest rates. They take assets as collateral, such as equipment, buildings or personal guarantees.
The Government of Canada and Investissement Québec can help small businesses obtain loans from financial institutions by sharing the risks with lenders.
Government programmes have a limited budget and are subject to investment policies. You can visit the Canada Business Network and Entreprises Québec websites to learn about the various forms of grants, contributions and government loan guarantees offered by our partners.
Our organization has funds to support companies that wish to carry out a business project in Gatineau. Visit the financing section of our website for more information.
Leasing is a contractual technique by which a company acquires, at the request of a customer, ownership of equipment for the purpose of leasing it. At the end of the contract, the beneficiary can either acquire the equipment, return the asset or renew its lease.
The financial angels
Angels financiers are privately financed. An individual lends you money in return for a higher return than financial institutions. This investor generally has market knowledge.
There are investor groups, including Anges Québec, which is looking for innovative companies, particularly in the following sectors: medical devices, retail and distribution, industrial and manufacturing, Internet, information and communication technologies, optics and electronics, innovative services and clean technologies. The average investment is $450,000 involving one or more angels.
Venture capital is an institutional investment with a high interest rate, but without guarantees. The rate of return normally varies between 20% and 30%. To access it, your company must be in a high-potential market and generate annual sales growth of more than 20%.
What are the different sources of funding for an association?
Creating an association is relatively simple; the biggest challenge is to keep it alive and cover its expenses. Many NPOs are trying to operate with their own resources. Unfortunately, this is not always enough….
To ensure its sustainability, an association must therefore often call on other sources of funding. It is still necessary to know and understand them.
These sources can be grouped into three main categories:
- Funding from members and third parties;
- Funding from public subsidies;
- Funding from the activities of the associations themselves.
- Funding by members and third parties
The membership fee is a financial contribution that an association may request from all or some of its members in order to finance the association’s operating costs.
The donation can be defined as an advantage (financial, material…) received by the association without having done anything to obtain it. There can be no counterpart to a donation but the donor can benefit from a tax exemption, provided that the donation is at least 40 euros for the current calendar year and that the non-profit association is approved by the Federal Public Finance Service.
Sponsorship is the granting of financial support to an organization or event, in return for a particular visibility given to the sponsor’s name or logo. The sponsor always intends to win something, for example a surplus of notoriety or a strengthening of its internal or external brand image. The general idea behind this approach is that the more the company is known and appreciated by the public, the more sympathetic it is to potential customers…