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The Green
If your business is ready to grow, it can mark the beginning of an exciting new chapter. But growth often requires upfront investment—whether it’s hiring staff, upgrading equipment, purchasing inventory, or extending your hours. And that means you’ll likely need access to capital.
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The good news? Canadian small businesses have a wide range of financing options. The challenge is choosing the one that fits your needs. Here are seven common ways to fund your next phase of growth:
A term loan is a traditional bank loan. Much like a mortgage, if approved, the bank will give you a repayment period, an interest rate, and a monthly payment. In most cases, getting a loan from a bank will be one of your cheaper options, but it can also be a slow and paperwork-intensive process, and you’ll need to have good credit. Some online lenders also offer term loans, but make sure you check the fine print. Often, you pay for the convenience of getting your cash quickly with a very high interest rate.
The Canada Small Business Financing Program (CSBFP) helps small businesses get loans of up to $1 million through participating Canadian banks and credit unions. Funds can be used for equipment, leasehold improvements, or working capital. Since the federal government backs a portion of the loan, it’s often easier to qualify and access better terms. However, like other government-backed loans, the application process can take time, so it may not be ideal if you need funds immediately
A line of credit is one of the more flexible options for small businesses. Once approved by a bank or online lender, you have the option to draw up to the maximum limit set, and you pay interest on whatever amount you draw. Typically, a bank will review your financials every year in order to renew the line of credit. Much like a term loan, going through a traditional bank will cost less in terms of interest rates but generally take longer and have stricter requirements. By contrast, an online lender is generally more likely to approve you and lend quickly, but may charge you more for that privilege via higher interest rates.
For some businesses, a credit card can work like a line of credit, but with even more flexibility. You’ll need to prove that your business is creditworthy, but there’s less paperwork required for a credit card than for a line of credit. This also makes the process of getting access to capital faster. Of course, just like with your personal credit card, using it responsibly will help you build a sound credit history, but if you’re not careful, you can rack up a lot of debt quickly and tank your business’s credit profile.
An equipment loan is a loan provided by a bank or other lender that’s specifically structured to allow you to buy new equipment crucial to your operations. With a loan like this, the equipment itself typically serves as collateral, so you’re able to borrow a significant portion of the cost of the purchase. And of course, as with a mortgage or a car loan, once you’ve paid off your equipment loan, you own the equipment.
Equity financing means selling shares of your business. You can either sell to individuals (known as ‘angel investors’) or to venture capital firms, investment banks, or other companies that invest in startups and small businesses. In order to invest in a private company, individuals typically must be accredited investors, meaning they have to meet certain minimums for income or net worth. If done right, equity financing can be a great way to get not just cash but also outside expertise for your business. But because you’re giving up partial control of your business, you’ll want to make sure you’re very comfortable with anyone you take on as an investor. This also a much higher-consideration process. Be sure to consult with a lawyer and an accountant to structure this correctly and ensure you have the right paperwork in place.
One of the fastest ways to get cash is through a cash advance. This is essentially financing secured by your future sales. For example, if you’re a Clover merchant, you can get working capital for your business based on your average credit card sales. Repayment is automatically pegged to your credit card receipts, so you won’t be stuck with an unsustainable loan payment on the heels of a slow week. And it’s fast–approved merchants typically receive their funds in five to seven business days.
Deciding that you’re ready to grow is an exciting milestone in your business journey. Don’t let a lack of cash keep your business from growing. Whatever your business needs, there are plenty of ways to get financing that can help you meet your goals.
If you want to learn more about how Clover can help you accept payments, run your business and sell more, please contact your Clover Business Consultant. You can also follow us on Facebook and Instagram.
This information is intended solely for informational purposes and should not be interpreted as legal, financial, or tax advice. Readers are strongly advised to consult with their attorneys, financial advisors, or tax professionals to obtain guidance tailored to their specific circumstances.
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