If you’re wondering how to get business funding for your business, then you have come to the right place. It’s important to keep in mind that as business owners, you already have all of the answers. It’s just a matter of collecting all of the documents and then start applying! Planning, preparing and applying for business funding can be a daunting task when you still have all of your other work to do. By following the five steps below, ensure that you get funded fast and easy!
1. Prepare bank statements
When it comes to receiving business funding, regardless of your industry or time in business, start by looking at your business finances. To get business funding, you need to show how you can generate profit with the borrowed money. Most accurately, this information can be found on your up to date financial statements and bank statements. See our quick guide to financial statements to get a high-level understanding of what financial statements are.
Financial statements contain a lot of information but can be time-consuming to put together. At Thinking Capital, all you need are your business bank statements to begin your business funding process. These indicate the quantity and consistency of your monthly revenues.
Your revenue provides substantial evidence to your lenders; it proves that your business is generating revenue. If you can provide this proof, then you have completed the first step of getting small business financing from a lending institution of your choosing.
Financial statements equip you with powerful business insights, allowing for informed business decisions. Once you have your financial statements, you can determine whether you can use money from within your business, or if you need external business funding.
2. Consider your business industry
Now that you have your financial statements, it’s time to start collecting other pieces of information when considering external business funding. Your business industry can impact your financing rates, or whether you get funding at all. As a Canadian small business owner, you can go to the Canadian Industry Statistics webpage to identify your industry and sub-industry. It is important to identify your business industry because some of the external funding options automatically disqualify certain industries.
Let’s take the government program, Canadian Small Business Finance Program, as an example of a financing source. According to their online brochure, they do not give out funds to farming business or not-for-profit organizations. This exclusion may narrow your focus on the borrowing institutions available for your business funding needs.
3. State your purpose for the funds
In other words be honest with what the borrowed money will be spent on. Remember the reason why lending institutions give out money – to make some money back through interest charges and fees. If you are borrowing cash for purposes other than generating revenue, then the chances of you getting financed are slim. Some companies are more strict than others on their conditions for lending money. Again, using the Canadian Small Business Finance Program as an example, they strictly state that they will not lend funds for the following purposes
- Working capital
- Franchise fees
- Research and development (R&D)
After you have identified your reason for borrowing money, move on to being honest with how much amount you are going to need. To obtain this information, talk to your accountant. They have access to your financial statements and can give you the appropriate guidance.
4. Estimate the required amount
You can refer to your financial statements and with your accountant’s help, can predict the amount of money you are going to need for your business. If you would like to prepare these yourselves, here’s a guide for making financial statements. When estimating an amount, consider both your short-term and long-term funding needs.
Usually, it is in your best interest to apply for the loan and see the maximum you qualify for. Sometimes borrowing a little more than what you need can end up being more beneficial in the long term. Having cash on hand allows you a bit more flexibility and peace of mind when making crucial business decisions. Once you are sure about the amount you are looking to borrow, it is time to consider the type of lenders available to you.
5. Consider your borrowing options
By following the above steps, you should have a clear picture of your funding requirements. Now it is time to match your requirements to that of a lender’s. Each step in this above process narrows down the number of lenders that can match your specific requirements.
As a Canadian small business owner, you have two main options:
- Traditional Banks
- Private Lenders
BONUS: How to get funding from the right lender!
Make sure that the lender lists their requirements up front with you. Avoid wasting time with lenders that do not fund your industry or size of business. Business lenders make these exclusions for businesses that they deem as “too risky” or “not profitable for them”. These risk decisions are rooted deep in the company’s operations, and expecting the salesperson to make an exception is not going to work.
Additional things to consider when deciding on a lender:
- Application Process (online, over the phone, in person, or in the mail)
- Time needed to complete the application
- The time it takes to get your funds approved
- Amount of financing offered
- Repayment Terms
To learn about all of your funding options, read our post about different funding options available for business owners in Canada.
Before you begin, go to your bank website and download your bank statements. Next, figure out your business industry. You now have all of the information to start applying! Once you have the documents, give a reason to the lenders to give you money (cash flow, advertising, equipment, etc.). Prepare an estimate of the total amount you need and then choose a lender that will give you that amount.
Looking to get funded?
Thinking Capital can begin, process, and approve your business funding in under 2 days.Apply now!
The best part is, with Thinking Capital, you only have to understand and go through this process once, allowing you to receive business funding more quickly the next time. It all begins with your bank statements, and filling out the first part of our funding application!