Show Me the Money: 5 Funding Sources for Newcomers

Canada offers plenty of money to launch your business—providing you know where to look and what to expect from these different sources of cash

Written by Roger Pierce

One of the great ironies in life is that it’s easier for people who have money to get money. When compared to our American neighbours, Canada’s financial system and business culture have been described as risk-averse and somewhat conservative. And that’s not great news for newcomer entrepreneurs yet to establish themselves here.

Despite these possible challenges, rest assured that money is available for your startup.

You’ll achieve funding success if you do two things: combine funding sources and persevere in your search. For example, you may not get a bank to fund your entire startup budget. But you may get the money you seek by taking one amount from a government program, another from an investor and a little bit of money from the bank.

Perseverance is probably the most important part of your search. Pledge to see the process through no matter how many obstacles or people who say “no” you may encounter. Perseverance pays off.

First, know how much money you’ll need

Preparing a startup budget is the first step, because it’s a danger to “estimate” your financial needs (and no lender or investor will take you seriously).

A common formula used to determine the amount of money you’ll need to get your business up and running involves calculating your “fixed” capital expenditures and “soft” operating costs. Capital costs tend to involve hard, more permanent assets that you won’t likely purchase again for a long time €“ think buildings, vehicles and equipment. Operating, or working capital, will include expenses incurred to run the business on a day-to-day basis, such as rent, telephone, employee wages and marketing.

A reasonable startup budget combines all your one-time capital costs with six months of operating costs. Add 10% for unexpected expenses. Be sure to keep (or attach) all supplier quotes and sources to back up your numbers.

Funding source # 1: Your money!

The most common source of startup money is the entrepreneur’s pocket. Using your own money accomplishes two things: it shows your commitment to other funding partners because you’re willing to invest some of your own money, and it makes you commit to your own business. You’ll often hear people ask about your “skin in the game,” which refers to the amount of money you’ve personally staked.

Find that money from your personal savings (consult a financial advisor to determine an amount that’s safe), a part-time or full-time job, or from personal credit (be careful here €“ interest rates can be high on personal-credit products like credit cards or lines of credit).

Funding source # 2: Loved ones

Another popular source of startup money is family and friends. Often called “love capital”, taking money from people who know you is usually easier than trying to get funds from banks, investors or government programs. That’s because it’s a reflection of your personal reputation, rather than formal credit or business-plan worthiness.

Still, borrowing money from family or friends carries its own risk. What if the business fails? How will you repay the money? Will the lender have a say in your operations or be entitled to any benefits? And how will the transaction of money affect your personal relationship? Explore these and other issues carefully before deciding to accept money from people who love you; otherwise their love may not last forever.

Funding source # 3: Banks

The bank is a natural choice for money, but not one that guarantees a successful result.

Here’s what the bank wants from your new business: a plan, a credit rating, a personal guarantee, loan security and a reasonable loan request (don’t ask the bank to fund 100% of your startup budget because they’ll rightfully expect you to contribute some of that money).

People new to Canada find it difficult to satisfy a bank’s requirements for an established credit rating and assets to secure the loan because they’ve yet to establish either. You can fix the first problem by immediately obtaining a credit card upon arriving in Canada. Use it sparingly and make all the required payments to establish a credit history in this country. Unfortunately, your previous credit history in your country of origin won’t apply here.

To secure loans, investigate government programs such as the Canada Small Business Financing Program. Under this program, the federal government guarantees a loan made by the bank to the entrepreneur—up to a maximum of $500,000 for any one borrower—to do things such as purchase land, a building, vehicles or equipment.

Most chartered banks offer programs specifically for newcomers, so be sure to ask around. Include the government-owned Business Development Bank of Canada in your research, as the BDC offers a variety of flexible financing solutions.

Funding source # 4: Government and Non-Profit Programs

The three levels of government (federal, provincial and municipal) offer a mind-numbing array of programs, grants and contributions designed to support new entrepreneurs.

For example, if you have worked for a period of time here in Canada and are eligible to receive Employment Insurance (EI) benefits, you could qualify for the Self-Employment Program (it’s called different names in different provinces). Under that program, entrepreneurs receive professional business training, coaching and income support to help them get their businesses launched.

Non-profit organizations are also an excellent source of startup assistance for newcomers. If you are new to Canada, are between the ages of 18 and 39 and have a business idea, the Canadian Youth Business Foundation (CYBF) has a Newcomer Program offering startup coaching, financing, mentoring and business resources. Even if you don’t have a credit history, CYBF offers flexible financing of up to $15,000 in startup money. Visit

To find out more about government and non-profit organization programs available in your area, contact your local Small Business Enterprise Centre. The federal government website also offers connections to these resources.

Funding source # 5: Investors

It’s fun to play with other people’s money €“ if you can get it.

Investors typically fall into two categories: angel investors and venture capitalists. Playing with the latter group usually involves millions of dollars and a proven growth business.

Angel investors are simply businesspeople who like your business and want to contribute money and possibly some advice. They are most likely middle-aged businesspeople with experience in your industry. For a reasonable investment under $100,000, most angels are willing to keep their money in your business for about five years €“ but may expect up to a five-fold return on their investment within that timeline. To get their money, you’ll need a great pitch and a great business plan.

The best way for a newcomer to find angel investors is by searching online (try sites like that connect entrepreneurs with investors) or attending networking events set up specifically to connect moneyed people with those who want it. Ask your local Chamber of Commerce or Board of Trade.

Remember, when it comes to fundraising, perseverance pays. That means staying the course until you raise the money you seek. Like most aspects of running a small business, nothing comes easily. Success often comes to those people who simply sweat it out.

Roger Pierce is the founder of, co-author of the book Thriving Solo: How to Grow a Successful Business and one of Canada’s top experts on starting up. Pierce helps others get into business by sharing what he’s learned from launching 12 companies.

New to Canada? This is Part 5 of startup expert Roger Pierce’s 7-part series on how to make your venture a true Canadian success story. Read his earlier posts here

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