start-up companyGiven the current global COVID-19 crisis, Canadian businesses of all scales have been significantly affected. From vast store shutdowns, to shifting all possible operations to work from home, to extensive layoffs, businesses nationwide are dealing with the consequences of this disease now more than ever. While larger corporations are finding it easier to keep afloat, smaller independent businesses specifically start-ups are struggling to make ends meet. A large portion of funding for these firms is typically generated from start-up company grants.  

The Canadian Venture Capital and Private Equity Association (CVCA) has addressed the same issue in an open letter to Canada’s Minister of Small Business, Mary Ng asking for increased support for the national start-up community. The organization, spanning over 2,090 individual and member organizations, shed light on the requirements of start-ups with high growth potentials and the innovation sector of Canada in general. They recommended that officials could provide additional support for this hard-hit cluster of businesses. The organization regularly works to bring its community members together to enable partnerships and increase knowledge sharing proving to be a resource for Canada on private capital investments.  

Within this letter, three main potential pathways for additional support were listed. It was suggested that those firms subject to a Scientific Research & Experimental Development tax credit or any CRA funded innovation grants, be paid out their claimed amount as a liquid refund in addition to SR&ED reviews being passed on altogether, speeding approval process. Potentially required audits could then be completed at a later date once the economy is operational close to regular standards. By by-passing audits and reviews, the CRA could offer SR&ED funding based on the firms’ prior year filling at no additional cost to the CRA. This action can then in effect offer immediate liquidity for businesses and start-ups who require it the most to keep their staff on their payroll, keep operational and avoid increased unemployment in the country. Included in this call to action, CVCA also requested an improvement in the wage subsidy currently offered to Canadians after Prime Minister Trudeau announced it to be increased to 75% on March 27, 2020.  

As a second step, CVCA suggested that the Business Development Bank of Canada (BDC) increase their contribution of injecting liquidity into the Canadian economy. In addition to the BDC’s current role in the government’s emergency loan program, they are being called upon for additional capital for investors and funds stating that those reliant on foreign investors have also been drastically impacted as the foreign investors have retreated given current circumstances.  

CVCA suggests that BDC award matching convertible note loans with no payment obligations for up to 36 months after which the note can be converted to equity at BDC’s discretion. They also requested for BDC to temporarily ease the criteria for qualifications of lending measures to allow for start-ups who wouldn’t typically qualify, to also have access to liquidity in these tough times.  

The CVCA urged the idea that current measures assume pre-existing relationships with financial institutions which are relationships most start-ups lack undermining their need for assistance. The letter pushes the government to take more inclusive actions that increase liquidity for all types of businesses and firms within our nation given how critical of a role private equity and venture capital have within the regular Canadian economy. All assistance measures should take into account the need to also address this now missing element amidst the COVID-19 crisis.

So you have a small business up and running, but there are uncalled expenditures that are piling up on you. Whether you are looking for funding to take care of your additional expenditures or contribute to the growth of your brand, here are four financing options available to Canadian small business owners:

 1. Loans

While it’s harder to get loans from Canadian banks as a small business, there are several alternatives that are available to you.

  • Canada Small Businesses Financing Program: Any starts-ups, for-profit small businesses in Canada with gross revenues of $10 million or less are eligible to apply for loans under this program. The program can offer up to $1 million for a single small business. 
  • BDC Xpansion Loan and Startup Financing Program: For the Xpansion loan your business can receive up to $100,000 in long-term financing, with eligible expenditures including e-commerce, marketing plan, certifications and more. The Startup Financing program is designed to support small businesses during the start or early growth phase. Funding provided can be up to $100,000, which can be used for working capital, marketing, fixed assets. 
  • Community Development Financial Institutions: Microloans can be obtained from local financial institution. The Wester Economic Diversification Canada offers a microloan program that small businesses can get up to $15,000. 
  • Loans for Entrepreneurs who identify as minorities: For Women – The Atlantic Canada Opportunities Agency Women in Business InitiativesParo Centre for Women’s Enterprise, Women’s Enterprise Initiative Loan Program. For Indigenous communities: BDC Indigenous entrepreneur, Aboriginal Entrepreneurship Program Canada and Certified Aboriginal Business Program.

2. Grants

The Government of Canada provides numerous generous grants for business owners, particularly niche small business owners. Finding a grant that your small business is eligible can be overwhelming, try using this new tool on the Government of Canada website that allows you to streamline your hunt for funding.

Here are funding options that the Grants Specialists at EVAMAX focus on:

  • Basic Research
  • Experimental Development
  • Applied Research
  • Small + Mid-sized Technology Innovation Programs
  • Alberta Innovates – Product Demonstration Program
  • Support Alberta-based companies with the opportunity to develop novel and innovative technologies
    • Strategic Innovation Fund
    • Provides repayable + non-repayable contribution to support R&D. growth + expansion of firms in Canada, attract + retain large-scale investments in Canada, advance industrial research through collaboration between academia, non-profit organizations and the private sector

3. Debt or Equity Financing 

Debt financing include the owner or borrower accepts funds from an external source and commits to pay the principal and interest back after a certain period of time. The interest represents the ‘cost’ of money you borrowed. Often there’s monthly payments, for the both the principal and interest and place assets for collateral as reassurance for the lender. This is where debt-financing can be intertwined with equity-financing – putting up assets for collateral can include selling a stake in your company to your investors who plan to receive future profits. Business owners are involved with equity financing, means their investors are entitled to a portion of company profits. The investors may also have control in core business decisions. 

Related: 5 TIPS IN IDENTIFYING SMALL BUSINESS GRANTS IN CANADA

4. Angel Investors + Venture Capitalists  

Angel investors and venture capitalists are types of equity investors that support small businesses that have potential for growth but lack the adequate financial resources to grow and develop. Both these investors are often highly experienced and have expertise in investments within the industry your business exists. They will require pro forma with clear financials, demonstration of working product/service and a qualified management team, to consider investing in your small business. 

Throughout these financing options, small businesses are often still looking for ‘free money’ or grants they can collect to best develop their brand. If you are looking for support during your application process for grants + tax incentives or simply looking for what your small business is eligible for, contact a Grants Specialist at EVAMAX’s team today. You never know what funding you are bound to receive!