Small Business Funding Ontario: Complete Guide to Small Business Financing in Ontario -

If you’re looking for funding for small business in Ontario, you’re in the right place!

Because this is the ultimate, most comprehensive guide to small business funding for Ontario businesses.

We cover 47 distinct types of business funding in Ontario, comprising hundreds of government, non-profit, and private sector programs. These sources include money to start a new business (start-up funding), and money to operate and grow an existing business.

We’ve organized the types of funding into four categories:

Self-Funding (using your own money)
Free Funding (grants, subsidies, and more)
Debt Financing (business loans & other types of credit)
Equity Financing (selling a stake in your business)

Note: we use the term “financial incentive” throughout this guide. A financial incentive is a catchall term for any type of funding program available to business owners.

Here’s the complete list of types of small business funding for Ontario businesses:

Types of Funding for Ontario Businesses

Self-Funding	Free Funding	Debt Financing	Equity Financing
Personal Savings	Grants	Government Loans/Credit	Accelerators
Personal Assets	Subsidies	Traditional Loans/Credit	Crowdfunding (Equity)
Side Hustles	Rebates	Asst-Backed Financing	Angel Investment
Bartering	Tax Credits	Revenue-Based Financing	Impact Investment
Crowdfunding (Rewards)	Pitch Competitions	Alternative Financing	Venture Capital
Bootstrapping	Incubators		Family Offices
	Crowdfunding (Donations)		Syndicate Investment
	Sponsorships		Corporate Investment
	Partnerships		Private Placement
	Community Support

I call this the “business funding universe” for Canadian entrepreneurs. Here’s a graphic to show how the types of funding are grouped:

Business Funding Universe: 47 Distinct Types of Funding for Entrepreneurs

In the sections that follow I cover all 47 types of funding, and I provide the following information on each:

Description
Pros & Cons
When to Use It

But before I get into the types of funding, here’s an extremely important concept to understand:

Key Concept: “Stacking”

When you’re looking for funding for a business – whether it’s for a new startup or an existing business – remember that there are hundreds of funding programs available for Ontario entrepreneurs.

So instead of looking for only one program, you want to gather every program your business is eligible for and “stack” those programs. In some cases, it’s possible to pay for 100% of a business expense or asset by stacking multiple funding programs.

Now let’s get into the 47 types of funding!

Self-Funding Your Canadian Business: 6 Strategies to Pay Your Own Way

When you’re starting out, your business is your baby, and you might decide to fund it yourself. This can mean tapping into your personal savings, considering the use of your retirement accounts, selling or leveraging personal assets, asking friends and family to chip in, or even starting a side hustle to drum up extra cash.

In the following sections we cover these 6 different types of self-funding that can be used for your business:

Personal Savings
Crowdfunding (Rewards)
Personal Assets
Bootstrapping
Bartering
Side Hustles

Personal Savings

Using your personal savings to fund your business is a straightforward approach. It’s like giving your business a loan from your own pocket. You won’t have to pay interest to a bank, but you’re taking on all the risk yourself.

Pros & Cons of Using Personal Savings for Your Business:

Pros: Full control over your business, no debt or interest payments
Cons: High personal financial risk, potential depletion of your financial safety net

When to Use It: Use personal savings when you want to maintain complete control over your business and avoid debt, and when you have sufficient funds that won’t jeopardize your personal financial stability.

Personal Assets

Personal assets funding involves selling or leveraging valuable personal property, such as real estate, vehicles, or other significant possessions, to finance your business.

Pros & Cons of Using Personal Assets for Your Business:

Pros: Provides substantial capital without incurring debt, maintains business ownership and control
Cons: Risk of losing valuable personal property, potential long-term personal financial impact

When to Use It: Use personal assets when you need a large sum of capital quickly and are willing to risk or part with personal property to avoid taking on debt or outside investors.

Bartering

Bartering involves exchanging goods or services with another business or individual without the use of cash, allowing both parties to benefit from each other’s resources.

Pros & Cons of Using Bartering in Your Business:

Pros: Conserves cash, builds strong business relationships, can access needed goods or services without spending money
Cons: Finding a suitable barter partner can be challenging, ensuring fair value exchange may be difficult, and may not fully meet your business needs

When to Use It: Use bartering when you have valuable goods or services to offer and need to conserve cash while still acquiring necessary resources for your business.

Learn More About Bartering for Business

Side Hustles

Side hustles involve doing additional jobs or freelance work alongside your primary business to earn extra income, which can be reinvested into your main venture.

Pros & Cons of Side Hustles (When Combined with Your Business):

Pros: Generates extra income without incurring debt, allows for flexible work arrangements and testing business ideas on a smaller scale
Cons: Time-consuming and potentially exhausting, may detract focus and energy from your primary business

When to Use It: Use side hustles when you need supplementary income to fund your business and can balance the additional workload without compromising the growth and management of your main business.

Explore the Best Side Hustles in Ontario

Crowdfunding (Rewards)

Rewards crowdfunding involves raising small amounts of money from a large number of people through platforms like Kickstarter, offering backers non-monetary rewards such as products or services in return.

Pros & Cons of Using Rewards Crowdfunding for Your Business:

Pros: No repayment required, can validate business ideas and generate early customer interest, builds a community of supporters
Cons: Requires a compelling campaign and significant marketing effort, potential failure to meet funding goals, often subject to platform fees

When to Use It: Use rewards crowdfunding when you have a marketable product or service and need to raise funds without taking on debt, while also seeking to build a loyal customer base and gain early market validation.

Learn More About Rewards Crowdfunding for Business

Bootstrapping

Bootstrapping involves funding your business through its own revenue streams without external financing.

For an online business, bootstrapping can involve selling products or services on social media, setting up an ecommerce website, and utilizing affiliate sales.

For an offline (i.e. in-person) business, this can involve doing local pop-ups and markets, selling your products through consignment in existing retail stores, or attending trade shows and expos.

Pros & Cons of Bootstrapping Your Business:

Pros: Maintains full ownership and control, encourages disciplined financial management, and minimizes debt
Cons: Growth may be slower due to limited initial capital, relies heavily on immediate sales and revenue generation

When to Use It: Use bootstrapping when you prefer to retain full control and ownership of your business and have a viable product or service that can generate revenue from the start.

Learn More About Bootstrapping a Business

Free Funding for Your Canadian Business: 10 Types of Free Money

To state the obvious: free money programs can offset your costs and help your business grow! And “free money” for businesses isn’t a myth – there are many programs and opportunities specifically designed to support small businesses in Canada.

Let’s get into these 10 free money programs:

Grants
Incubators
Rebates
Crowdfunding (Donations)
Subsidies
Sponsorships
Tax Credits
Partnerships
Pitch Competitions
Community Support (In-Kind)

Grants

Grants are non-repayable funds provided by government agencies, private organizations, or non-profits to support specific business activities or projects, such as research and development, innovation, exporting, and many other business activities.

Pros & Cons of Business Grants:

Pros: No repayment required, can significantly reduce financial burden, and often comes with additional support and resources
Cons: Highly competitive, strict eligibility criteria, and time-consuming application and reporting processes

When to Use It: Use grants when you have a project or initiative that aligns with the funding organization’s goals, and you can meet the eligibility requirements and commit to the application and reporting process.

Learn More About Small Business Grants in Ontario

Subsidies

Subsidies are financial assistance programs provided by the government to support specific business activities, such as wage support, employee training, export activities, or energy efficiency improvements.

Pros & Cons of Business Subsidies:

Pros: Reduces operational costs, encourages business growth and sustainability, and may improve competitiveness
Cons: Can come with compliance requirements and regulations, may be subject to changes in government policy, and often requires detailed documentation

When to Use It: Use subsidies when you need to offset specific costs, such as wages, training, exporting, or implementing energy-efficient practices, and can comply with the associated regulations and reporting requirements.

Learn More About Wage Subsidies in Ontario

Rebates

Rebates are partial refunds provided to businesses after the purchase of specific goods or services, often aimed at encouraging investment in particular areas, such as energy efficiency, technology adoption, or environmental sustainability.

Pros & Cons of Business Rebates:

Pros: Reduces the effective cost of purchases, incentivizes investments in beneficial technologies or practices, and can improve cash flow
Cons: Requires upfront payment, can involve complex application processes, and often requires detailed documentation and proof of purchase

When to Use It: Use rebates when making investments in areas eligible for rebate programs, such as energy-efficient equipment or environmentally friendly technologies, and when you can afford the initial expenditure and navigate the rebate application process.

Learn More About Business Rebates in Ontario

Tax Credits

Tax credits are financial benefits provided by the government that directly reduce the amount of taxes owed.

Pros & Cons of Business Tax Credits:

Pros: Lowers overall tax burden, can free up capital for reinvestment in the business, and encourages activities aligned with government priorities (such as research and development or eco-friendly practices)
Cons: Requires a thorough understanding of tax laws, may involve complex documentation and reporting, and eligibility criteria can be strict

When to Use It: Use tax credits when you are undertaking eligible activities like research and development, capital investments, or environmentally sustainable projects, and can ensure proper documentation and compliance with tax regulations.

Learn About Business Tax Credits in Ontario

Pitch Competitions

Pitch competitions are events where entrepreneurs present their business ideas to a panel of judges, often comprising investors or industry experts, for a chance to win funding, mentorship, or other resources.

Pros & Cons of Pitch Competitions:

Pros: Opportunity to secure funding without giving up equity, valuable exposure and networking opportunities, feedback from experts can refine business ideas
Cons: Highly competitive, requires significant preparation and strong presentation skills, winnings may not be guaranteed or may be less than needed

When to Use It: Use pitch competitions when you have a well-developed business idea or product and are looking for funding, exposure, or mentorship. They are particularly beneficial if you’re confident in your ability to present and defend your business concept in front of an audience and panel.

Learn More About Pitch Competitions in Ontario

Incubators

A business incubator is a program designed to support early-stage startups by providing resources such as office space, mentorship, networking opportunities, and sometimes funding, to help them grow and succeed.

Pros & Cons of Business Incubators:

Pros: Access to valuable resources and expert mentorship, networking with other entrepreneurs and potential investors, often includes office space and other logistical support
Cons: May require equity stake or fees, can be competitive to join, and program benefits can vary widely depending on the incubator

When to Use It: Use a business incubator when you are an early-stage startup needing guidance, resources, and a supportive environment to develop your business idea, especially if you lack initial capital or industry connections.

Learn More About Business Incubators

Crowdfunding (Donations)

Donations crowdfunding involves raising funds from a large number of people, typically via online platforms like GoFundMe, where backers contribute without expecting any financial return. This approach is often used for businesses with a strong community or social impact focus.

Pros & Cons of Donations Crowdfunding for Business:

Pros: No repayment or equity loss, builds a supportive community around your business, and can generate publicity and awareness
Cons: Uncertain funding amounts, often requires a compelling story or cause, and can involve significant effort in marketing and campaign management

When to Use It: Use donations crowdfunding when your business has a strong social or community aspect that resonates with potential donors, and when you’re able to create a compelling narrative to engage supporters. It’s particularly useful for early-stage businesses or projects that may not yet be attractive to traditional investors.

Learn More About Donations Crowdfunding for Business

Sponsorships

Sponsorships involve partnering with other businesses or organizations that provide financial or in-kind support in exchange for promotional opportunities, brand visibility, or other benefits.

Pros & Cons of Business Sponsorships:

Pros: Provides funding or resources without debt or equity loss, enhances brand credibility, and can lead to valuable partnerships and networking opportunities
Cons: Requires alignment with the sponsor’s brand and values, potential for obligations that may limit your business’s independence, and negotiations can be time-consuming

When to Use It: Use sponsorships when your business can offer visibility or marketing benefits to sponsors, such as events, media coverage, or audience access, and when you’re looking for funding or resources without taking on debt or giving up equity. It’s particularly effective for businesses in industries like sports, entertainment, or community events.

Learn More About Business Sponsorships

Partnerships

Partnerships involve collaborating with other businesses or individuals to share resources, expertise, or market access for mutual benefit. These can take the form of formal joint ventures or informal collaborations.

Pros & Cons of Business Partnerships:

Pros: Shared resources and costs, access to new markets and expertise, and can lead to innovative solutions and increased competitive advantage
Cons: Potential for conflicts if goals are not aligned, requires strong communication and trust, and may involve sharing profits or control

When to Use It: Use partnerships when your business can benefit from the complementary strengths of another entity, such as entering new markets, sharing costs for large projects, or enhancing your product or service offerings. It’s ideal when both parties have clearly defined roles and a shared vision for the partnership’s goals.

Learn More About Business Partnerships

Community Support (In-Kind)

In-kind community support involves receiving non-monetary assistance from local supporters, businesses, or organizations. This can include donated goods, services, volunteer time, or expertise.

There are four organizations that provide significant in-kind support to businesses in Ontario: are Business Improvement Areas (BIAs) and Chambers of Commerce.

Pros & Cons of In-Kind Community Support for Business:

Pros: Reduces expenses, builds strong community relationships, and can provide essential resources without financial cost
Cons: May be limited in scope and availability, depends on community goodwill, and can require time and effort to organize and manage

When to Use It: Use community support in-kind when you’re looking to reduce costs and build strong ties with the local community, especially for businesses with a community or social impact focus. It’s particularly useful for startups or small businesses that may not have the budget for certain resources or services.

Learn More About Business Improvements Areas (BIAs), Chambers of Commerce, Small Business Enterprise Centres, and Community Futures Development Corporations

Debt Financing for Your Canadian Business: 22 Types of Loans & Credit

When you’re looking for money to grow your business, debt financing can be a viable route. It’s all about borrowing funds and paying them back over time, usually with interest. Think of it as getting a loan that you’ll budget for and repay as your business earns.

We’ve identified 22 types of debt financing for Canadian businesses. To understand them better, we’ve grouped them into 5 sub-categories:

Government Loan & Credit Programs
Traditional (Bank) Loan & Credit Products
Asset-Backed Financing
Revenue-Based Financing
Alternative Financing

In the sections below we cover each of the 5 sub-categories, along with the types of debt financing that fall into each:

Government Loan & Credit Programs

Government loan and credit programs…

We’ve identified 5 types of government loan and credit programs for Ontario entrepreneurs, and cover each below:

Direct Loan
Community-Based Loan
Loan Guarantee
Credit Insurance
Micro Loan

Direct Government Loan (Term)

Direct government business loans are funds provided straight from federal or provincial government agencies such as BDC (Business Development Bank of Canada), EDC (Export Development Canada), or FCC (Farm Credit Canada). These loans support Canadian businesses with financing for growth, equipment, exports, working capital, and sector-specific needs..

Pros & Cons of Direct Government Loans for Business:

Pros: Competitive interest rates, tailored repayment terms, access to advisory services, and more flexibility than many private lenders. Often designed specifically for small businesses, exporters, or agricultural producers
Cons: Application and approval process can be detailed and time-consuming, strict eligibility requirements, and funding is generally limited to specific uses or sectors

When to Use It: Use direct government loans when you’re looking for patient capital to support growth, innovation, or expansion, especially if you’re in sectors like manufacturing, exporting, or agriculture. They’re ideal for businesses that may not meet commercial bank criteria but have a strong business plan and need strategic, long-term support.

Learn More About Using Government Term Loans for Ontario Business

Government-Guaranteed Loan

A government-guaranteed loan is a loan in which the government promises to repay a portion or the entirety of the loan if the borrower defaults. These loans are often provided through financial institutions and are designed to help businesses access funding with more favourable terms.

Pros & Cons of Government-Guaranteed Loans for Business:

Pros: Easier qualification criteria compared to traditional loans, potentially lower interest rates, and reduced risk for lenders which can result in better loan terms for the borrower
Cons: May involve lengthy application processes and strict eligibility requirements, could include restrictions on how funds can be used, and may require personal guarantees or collateral

When to Use It: Use a government-guaranteed loan when your business needs funding but may not qualify for traditional loans due to limited credit history or other factors. It’s ideal for businesses looking to expand, purchase equipment, or manage cash flow, especially in sectors that the government wants to support or stimulate.

Learn About Government-Guaranteed Loans for Ontario Business

Micro Loan

Government micro loans are small loans—typically under $50,000—provided directly by government agencies or through non-profit partners to help startups, small businesses, and underrepresented entrepreneurs access early-stage capital. In Canada, programs like those from Futurpreneur Canada, Community Futures, and BDC offer this type of support.

Pros & Cons of Government Micro Loans for Business:

Pros: Accessible to new or small businesses, often paired with mentorship or advisory services, flexible repayment terms, and lower barriers to entry than traditional financing
Cons: Smaller loan amounts may not meet all business needs, may still require a solid business plan and personal guarantees, and can involve detailed application and reporting requirements

When to Use It: Use a government micro loan when you’re launching or growing a small business and need modest capital for things like inventory, equipment, or marketing. It’s especially useful for first-time entrepreneurs, rural businesses, or those from equity-deserving communities who need funding plus hands-on support.

Learn About Government Micro Loans for Business

Community-Based Loan (Government-Supported)

Government community-based loans are small business loans provided by federally funded, locally managed organizations such as Community Futures. These loans are designed to support rural and regional economic development by offering accessible financing to local entrepreneurs who may not qualify for traditional loans.

Pros & Cons of Government Community-Based Loans for Business:

Pros: Flexible eligibility criteria, local decision-making, personalized support and mentorship, and often more willing to work with startups or businesses with limited credit history
Cons: Loan amounts may be limited, availability can vary by region, and application processes can still require detailed business plans and documentation

When to Use It: Use a community-based loan when you’re starting or growing a business in a rural or underserved area and need financing from a lender that understands local economic conditions. It’s ideal for entrepreneurs who need both funding and hands-on business development support in their community.

Learn About Government Community-Based Loans for Business

Credit Insurance

Government credit insurance, primarily offered in Canada through Export Development Canada (EDC), protects businesses against the risk of non-payment by customers—especially in international trade. It ensures that if a buyer defaults due to bankruptcy, political instability, or other covered reasons, the business still gets paid.

Pros & Cons of Government Credit Insurance for Business:

Pros: Protects cash flow from customer non-payment, enables safer expansion into new or higher-risk markets, can help secure financing by making receivables more attractive to lenders
Cons: Premiums and fees apply, may not cover all types of non-payment or customers, and requires proper documentation and claim processes

When to Use It: Use credit insurance when extending payment terms to customers—particularly international ones—and you want to reduce the risk of financial loss from defaults. It’s ideal for exporters, manufacturers, or any business with large accounts receivable and exposure to customer payment risk.

Learn About Government Credit Insurance for Business

Traditional (Bank) Loan & Credit Products

When most business owners think of debt financing, this is often what they have in mind: the conventional loans and credit products offered by banks and credit unions.

We’ve identified 4 types of traditional loans and credit products for Canadian entrepreneurs, and cover each below:

Direct Loan
Commercial Mortgage
Line of Credit
Trade Finance
Credit Card

Direct Loan (Term)

A term loan is a lump sum of money borrowed from a lender that is repaid over a fixed period with regular payments, including interest. It’s typically used for significant investments like equipment purchases, expansion, or other capital expenditures.

Pros & Cons of Term Loans for Business:

Pros: Provides immediate access to substantial capital, fixed repayment schedule, and interest rates are often lower than other types of financing
Cons: Requires collateral, can add a significant long-term financial obligation, and failure to repay can lead to loss of assets or damage to credit

When to Use It: Use a term loan when you need a large amount of capital for specific long-term investments and have a clear plan for generating the revenue needed to repay the loan. It’s suitable for established businesses with strong credit and predictable cash flow.

Learn More About Using Traditional Term Loans for Business

Business Line of Credit

A business line of credit is a flexible financing option that provides access to a predetermined amount of funds, which a business can draw from as needed. Interest is only charged on the amount borrowed, not the entire credit limit, and funds can be reused as they are repaid.

Pros & Cons of Business Lines of Credit:

Pros: Flexible access to funds, interest is only paid on the amount used, can help manage cash flow and cover unexpected expenses
Cons: Can have variable interest rates, may require collateral, and over-reliance can lead to financial instability

When to Use It: Use a business line of credit when you need flexible, short-term funding to manage cash flow, cover operational expenses, or take advantage of unexpected opportunities. It’s ideal for businesses with fluctuating capital needs and those that can manage regular repayments.

Learn More About Business Lines of Credit

Business Credit Card

A business credit card provides a revolving line of credit that can be used to cover day-to-day business expenses, similar to a personal credit card. It offers convenience for managing expenses and often includes rewards programs or cashback offers tailored to business needs.

Pros & Cons of Business Credit Cards:

Pros: Easy access to credit for everyday purchases, builds business credit history, often comes with rewards and perks like cashback or travel points
Cons: High-interest rates if the balance is not paid in full each month, can lead to overspending, and may have fees for late payments or exceeding the credit limit

When to Use It: Use a business credit card for short-term financing of daily expenses, such as office supplies, travel, or minor equipment purchases, especially if you can pay off the balance each month to avoid interest charges. It’s also useful for tracking and managing business expenses and building credit.

Learn More About Business Credit Cards

Trade Finance

Trade finance includes a range of financial products and services designed to facilitate international and domestic trade. It includes instruments like letters of credit, export credit, and factoring, which help manage the risks and provide the necessary capital for buying and selling goods and services across borders.

Pros & Cons of Trade Finance:

Pros: Mitigates risks associated with international trade, improves cash flow by providing immediate payment for goods or services, and can help secure better trading terms with suppliers and customers
Cons: Can be complex to set up and manage, involves fees and costs that can reduce profitability, and requires thorough understanding and compliance with international trade regulations

When to Use It: Use trade finance when engaging in international trade to ensure smooth transactions and manage risks associated with cross-border commerce, such as currency fluctuations, non-payment, or geopolitical issues. It’s particularly useful for businesses looking to expand into new markets or requiring capital to fulfill large orders.

Learn More About Trade Finance

Commercial Mortgage

A commercial mortgage is a loan secured by commercial property, such as an office building, warehouse, or retail space, used to purchase, refinance, or redevelop the property.

Pros & Cons of Commercial Mortgages:

Pros: Lower interest rates compared to unsecured loans, can provide substantial capital for large property investments, and the property can appreciate in value over time
Cons: Requires a significant down payment and collateral (the property itself), long-term financial commitment, and risk of property loss if the loan cannot be repaid

When to Use It: Use a commercial mortgage when you need to purchase or refinance commercial real estate and have the financial stability to handle the long-term commitment. It’s suitable for businesses looking to expand their physical presence or invest in property as part of their growth strategy.

Learn More About Commercial Mortgages

Asset-Backed Financing

Asset-backed financing means you’re borrowing against the value of your company’s assets. Your equipment, inventory, or property can secure your loan, potentially getting you more capital based on their worth.

The four main types of asset-backed financing are the following:

Equipment Financing
AR (Accounts Receivable) Factoring & Financing
Inventory Financing
Purchase Order (PO) Financing

Equipment Financing

Equipment financing involves obtaining a loan or lease to purchase business-related equipment, such as machinery, vehicles, or technology. The equipment itself often serves as collateral for the loan.

Pros & Cons of Equipment Financing:

Pros: Preserves cash flow by spreading the cost of equipment over time, access to the latest equipment, potential tax benefits, and the equipment serves as collateral
Cons: Can be more expensive over time due to interest, risk of losing equipment if unable to make payments, and possible depreciation of equipment value

When to Use It: Use equipment financing when you need to acquire expensive equipment crucial for business operations but prefer to preserve cash flow by spreading the payments over time. It’s ideal for businesses requiring significant machinery, technology, or vehicles to grow and operate efficiently.

Learn More About Equipment Financing

Accounts Receivable (AR) Factoring and Financing

Accounts receivable (AR) factoring and financing (also called invoice factoring and financing) are two ways to use your outstanding customer invoices to generate cash.

Accounts receivable financing allows a business to borrow money against its outstanding invoices. The business retains ownership of the invoices and is responsible for collecting payments from customers, repaying the lender as the invoices are paid.

Pros & Cons of Accounts Receivable Financing:

Pros: Quick access to working capital, retains control over customer relationships, improves cash flow without giving up equity or taking on long-term debt.
Cons: Can come with higher interest rates and fees, borrowing is limited to the value of your receivables, and requires strong invoicing and bookkeeping practices

When to Use It: Use accounts receivable financing when you need short-term funding to cover operational costs but want to maintain control over your billing and collections. It’s ideal for businesses with reliable customers and predictable invoice payments but slow cash conversion cycles.

Accounts receivable factoring involves selling your outstanding invoices at a discount to a factoring company. The company pays you a percentage of the invoice amount upfront and takes responsibility for collecting the full invoice amount from the customer.

Pros & Cons of Accounts Receivable Factoring:

Pros: Fast access to cash, offloads the burden of collections, improves cash flow without taking on debt, and doesn’t require strong credit since risk is based on your customers’ reliability
Cons: More expensive than other financing options due to fees and discount rates, potential impact on customer relationships, and loss of control over the collections process

When to Use It: Use accounts receivable factoring when you need immediate working capital and have reliable customers but can’t wait for standard payment terms. It’s especially useful for businesses with long invoice cycles or limited access to traditional financing.

Learn More About AR Factoring or Accounts Receivable Financing

Inventory Financing

Inventory financing is a type of short-term loan or line of credit used to purchase inventory. The inventory itself often serves as collateral for the loan, enabling businesses to buy stock without immediately depleting cash reserves.

Pros & Cons of Inventory Financing:

Pros: Helps maintain cash flow, enables businesses to purchase large quantities of inventory to meet demand, and often easier to obtain than other types of financing
Cons: Can come with higher interest rates, risk of overstocking, and if inventory doesn’t sell as expected, it may be difficult to repay the loan

When to Use It: Use inventory financing when you need to purchase large quantities of inventory to prepare for high-demand periods or seasonal sales, and when maintaining cash flow is essential. It’s particularly useful for retail and wholesale businesses that need to keep shelves stocked but prefer to avoid upfront costs.

Learn More About Inventory Financing

Purchase Order (PO) Financing

Purchase order (PO) financing provides short-term funding to help businesses pay suppliers for goods needed to fulfill large customer orders. The financing company pays the supplier directly, and is repaid once the customer receives the order and makes payment.

Pros & Cons of Using Purchase Order (PO) Financing for Your Business:

Pros: Enables fulfillment of large or unexpected orders without upfront capital, improves cash flow, and helps grow sales without taking on traditional debt
Cons: Typically limited to product-based businesses (not services), can be expensive due to fees and interest, and requires creditworthy customers and reliable suppliers

When to Use It: Use PO financing when you receive a large customer order but lack the cash to cover production or inventory costs. It’s ideal for wholesalers, manufacturers, or importers that need to bridge the gap between receiving an order and getting paid.

Learn More About Purchase Order (PO) Financing for Business

Revenue-Based Financing

With revenue-based financing, you borrow against future revenues, paying back a percentage of your sales. This is less about collateral and more about cash flow—a good fit if your sales are solid but unpredictable.

The four main types of revenue-based financing are:

Merchant Cash Advance
Tax Credit Financing
Supply Chain Financing
Royalty Financing

Merchant Cash Advance

A merchant cash advance (MCA) provides businesses with a lump sum of cash in exchange for a percentage of future credit card sales. Repayments are typically made daily or weekly based on sales volume.

Pros & Cons of Merchant Cash Advance:

Pros: Quick access to cash, flexible repayment tied to sales, no fixed monthly payments, and typically does not require collateral
Cons: High cost of capital with high fees and interest rates, can strain cash flow due to frequent repayments, and less regulatory oversight compared to traditional loans

When to Use It: Use a merchant cash advance when you need fast funding for short-term expenses, emergencies, or opportunities and have a consistent volume of credit card sales to manage flexible repayments. It’s suitable for businesses that may not qualify for traditional loans but need immediate working capital.

Learn More About Merchant Cash Advance

Tax Credit Financing

Tax credit financing involves obtaining a loan or line of credit against future tax credits your business expects to receive, such as Scientific Research and Experimental Development (SR&ED) credits or film production tax credits.

Pros & Cons of Tax Credit Financing:

Pros: Immediate access to funds, improves cash flow, and leverages anticipated tax credits without waiting for government processing
Cons: Interest and fees can reduce the overall benefit, relies on accurate calculation and receipt of tax credits, and potential complexity in arranging the financing

When to Use It: Use tax credit financing when your business has earned or expects to earn significant tax credits and needs immediate capital for ongoing operations or new projects. It’s suitable for businesses in industries like research and development or film production, where tax credits are substantial but disbursements are delayed.

Learn More About Tax Credit Financing

Supply Chain Financing

Supply chain financing, also known as reverse factoring, is a financial arrangement where a buyer works with a financial institution to allow its suppliers to receive early payment on their invoices—typically at a lower cost due to the buyer’s stronger credit profile. The buyer pays the financer later, on the original due date.

Pros & Cons of Supply Chain Financing:

Pros: Improves suppliers’ cash flow without impacting the buyer’s working capital, strengthens supplier relationships, and can stabilize the supply chain. For buyers, it can also extend payment terms
Cons: Requires a well-structured supply chain and strong buyer credit, setup and integration can be complex, and may not be accessible for smaller or newer businesses

When to Use It: Use supply chain financing when you’re a buyer with strong credit looking to support your suppliers and optimize working capital. It’s also valuable for suppliers working with large buyers who offer this program, as it provides faster access to cash at a lower financing cost.

Learn More About Supply Chain Financing

Royalty Financing

Royalty financing provides capital to a business in exchange for a percentage of future revenues, typically until a predetermined return is paid back. Unlike equity financing, the investor doesn’t take ownership, and unlike a loan, repayments are tied to business performance.

Pros & Cons of Royalty Financing:

Pros: No equity dilution, flexible repayments based on revenue, investor has a vested interest in your success without direct control
Cons: Can become expensive over time if revenues grow quickly, reduces available cash flow during repayment period, and may require detailed revenue reporting

When to Use It: Use royalty financing when you want to retain full ownership of your business, expect consistent revenue, and prefer performance-based repayments over fixed loan schedules. It’s particularly suitable for businesses with strong margins and predictable sales, such as consumer products or subscription services.

Learn More About Royalty Financing

Alternative Financing

Alternative financing for is a category that is growing in popularity for Canadian businesses (and I personally think crowdfunding is an area that has huge potential and will grow in coming years). This type of financing is a good option when you’re seeking flexibility or when conventional banks aren’t an option.

There are 5 main types of alternative debt financing:

Crowdfunding (Debt/Loan)
Peer-to-Peer Loan
Microfinance/Community Loan
Private Loan
Community Bond

Crowdfunding (Debt/Loan)

Debt crowdfunding involves raising funds from a large number of individual investors through online platforms. Businesses receive a loan and repay it with interest over time, similar to traditional loans but funded by multiple investors.

Pros & Cons of Debt Crowdfunding for Business:

Pros: Access to capital without traditional bank loans, often quicker and with less stringent requirements, and can build a network of supporters and potential customers
Cons: Interest rates can be high, requires a strong online presence and compelling campaign, and managing many investors can be complex.

When to Use It: Use debt crowdfunding when you need to raise funds quickly and may not qualify for traditional bank loans, especially if you can leverage a strong network or community of supporters. It’s suitable for businesses that can attract individual investors with a compelling story and clear repayment plan.

Learn More About Debt/Loan Crowdfunding for Business

Peer-to-Peer Loan

Peer-to-peer (P2P) loans are obtained through online platforms that connect businesses directly with individual lenders. These loans typically offer a range of terms and interest rates, depending on the business’s creditworthiness and the lender’s criteria.

Pros & Cons of Peer-to-Peer Loans for Business:

Pros: Easier access to funds compared to traditional bank loans, potentially lower interest rates, and faster approval processes
Cons: Interest rates can be high for businesses with lower credit scores, may require detailed financial information, and terms can vary significantly between lenders

When to Use It: Use peer-to-peer loans when you need quick access to capital and have a reasonably good credit score, but prefer a more flexible and accessible option than traditional bank loans. It’s suitable for small to medium-sized businesses looking for alternative financing solutions.

Learn More About Peer-to-Peer Loans for Business

Microfinance/Community Loan (Private & Non-Profit)

Microfinance/community loans are small loans offered by non-profit organizations, community lenders, or mission-driven private institutions to help underserved entrepreneurs and small businesses access capital. These lenders often focus on inclusion, supporting women, newcomers, Indigenous entrepreneurs, or those with limited credit history.

Pros & Cons of Microfinance/Community Loans for Business:

Pros: Accessible to businesses that may not qualify for traditional loans, lower borrowing thresholds, flexible terms, and often paired with mentorship or training
Cons: Smaller loan amounts may not cover all needs, application processes can be rigorous despite the loan size, and interest rates may still be higher than government-backed programs

When to Use It: Use private/non-profit sector microfinance or community loans when you’re starting or growing a small business and need modest capital but face barriers accessing traditional financing. These loans are especially valuable for entrepreneurs in marginalized communities or those needing both funding and support.

Learn More About Microfinance/Community Loans for Business

Private Loan

Private loans for business include funds provided by family, friends, and private lenders (such as wealthy individuals) or through private loan brokers. These loans offer more personalized and flexible terms compared to traditional banking systems

Pros & Cons of Private Loans for Business:

Pros: Greater flexibility in terms and conditions, faster approval processes, and often less stringent credit requirements. Personal relationships may also lead to more favourable terms
Cons: Higher interest rates, potential strain on personal relationships if not repaid, and less regulatory oversight and consumer protection

When to Use It: Use private loans when you need quick and flexible financing, especially if you do not qualify for traditional bank loans or need customized terms. They are ideal for businesses looking for alternative funding options and willing to manage personal dynamics and potentially higher costs.

Learn More About Private Loans for Business

Community Bond

A community bond is an investment tool that allows businesses—typically social enterprises or community-focused ventures—to raise capital from local supporters. Investors purchase the bond, and the business repays it over time with interest, similar to a traditional loan but with a community-driven focus.

Pros & Cons of Community Bonds for Business:

Pros: Builds strong community support and engagement, flexible terms, no equity dilution, and can attract mission-aligned investors
Cons: Requires time and effort to build trust and market the bond, legal and regulatory setup can be complex, and repayment obligations still apply regardless of business performance

When to Use It: Use a community bond when your business has a strong local or social impact and you want to raise capital from people who care about your mission. It’s ideal for cooperatives, nonprofits with revenue-generating activities, and socially minded small businesses looking to finance a specific project or expansion.

Learn More About Community Bonds for Business

Equity Financing for Your Canadian Business: 9 Ways to Sell a Stake in Your Business

Equity financing invites investors to fund your company in exchange for a piece of ownership. This can be a pivotal step in your business growth, offering capital while avoiding debt.

There are 9 main types of equity financing that entrepreneurs can access in Canada, which we cover below:

Accelerator
Family Office
Crowdfunding (Equity)
Syndicate Investment
Angel Investment
Strategic Corporate Investment
Impact Investment
Private Placement
Venture Capital

Accelerator

A business accelerator that provides equity investment offers startups intensive, short-term support and funding in exchange for an ownership stake. These programs typically include mentorship, networking opportunities, and resources designed to rapidly scale the business.

Pros & Cons of Business Accelerators:

Pros: Access to capital, structured and intensive support, valuable mentorship, increased visibility, and strong networking opportunities
Cons: Requires giving up a portion of equity, high-pressure environment, and the program is time-limited and highly competitive

When to Use It: Use a business accelerator for equity investment when you have a validated business model and are ready to scale quickly, seeking both financial investment and expert guidance. It’s ideal for startups looking to grow rapidly and gain access to a robust network of mentors, investors, and industry connections.

Learn the Top 10 Business Accelerators in Ontario

Crowdfunding (Equity)

Equity crowdfunding involves raising capital from a large number of investors through online platforms in exchange for shares in the company. This method allows businesses to access funds from both accredited and non-accredited investors who gain equity ownership.

Pros & Cons of Equity Crowdfunding:

Pros: Access to a wide pool of investors, maintains control over the amount of capital raised, potential for significant funding, and helps build a community of supporters and brand advocates
Cons: Requires rigorous preparation and regulatory compliance, potential dilution of ownership, can be time-consuming to manage the campaign and investor relations, and success is not guaranteed

When to Use It: Use equity crowdfunding when you have a compelling business idea or product and need to raise capital from a broad audience. It’s suitable for startups and growing businesses looking to build a large community of investors and gain substantial funding without relying solely on traditional venture capital.

Learn More About Equity Crowdfunding

Angel Investment

Angel investment involves receiving capital from wealthy individuals, known as angel investors, who provide funding in exchange for equity ownership in the business. These investors often bring valuable expertise and mentorship along with their financial support.

Pros & Cons of Angel Investment:

Pros: Access to significant funding, mentorship and expertise, networking opportunities, and generally more favorable terms than traditional venture capital
Cons: Requires giving up equity, potential influence from investors on business decisions, and possible dilution of ownership with additional funding rounds

When to Use It: Use angel investment when you need substantial capital to grow your business and can benefit from the investor’s experience and network. It’s suitable for early-stage startups with high growth potential that are willing to exchange equity for both financial support and strategic guidance.

Learn More About Angel Investment

Impact Investment

Impact investment involves receiving funding from investors who seek both financial returns and positive social or environmental impact. These investors prioritize businesses that address significant societal challenges while maintaining profitability.

Pros & Cons of Impact Investment:

Pros: Access to capital from socially conscious investors, alignment with mission-driven goals, and potential for positive publicity and brand reputation
Cons: Requires demonstrating measurable social or environmental impact, potential for more stringent reporting requirements, and balancing financial returns with impact goals

When to Use It: Use impact investment when your business aims to address social or environmental issues and you need capital to scale these efforts while maintaining financial sustainability. It’s ideal for businesses committed to making a positive impact and attracting investors aligned with their mission.

Learn More About Impact Investment

Venture Capital

Venture capital (VC) involves receiving funding from professional investment firms that specialize in high-risk, high-reward startups. In exchange for significant capital, these firms receive equity stakes in the business and often play an active role in its strategic direction.

Pros & Cons of Venture Capital:

Pros: Access to substantial funding, expert guidance and mentorship, extensive networking opportunities, and credibility boost from being backed by reputable investors
Cons: Requires giving up significant equity, potential loss of some control over business decisions, high expectations for rapid growth, and possible dilution in future funding rounds

When to Use It: Use venture capital when your business has high growth potential and you need substantial funding to scale rapidly. It’s suitable for startups in technology or innovative sectors that require large capital investments and can benefit from strategic partnerships and expertise from experienced investors.

Learn More About Venture Capital

Family Office Investment

Family office investment involves securing funding from family offices, which are private wealth management firms that handle the investments and financial affairs of affluent families. These investments can offer flexible terms and substantial capital, often with a long-term perspective.

Pros & Cons of Family Office Investment:

Pros: Access to significant and patient capital, flexible investment terms, potential for long-term partnership, and can provide strategic guidance and resources
Cons: Potentially less structured than traditional venture capital firms, investment decisions may be influenced by family interests, and may involve less industry-specific expertise

When to Use It: Use family office investment when you need substantial funding and prefer a long-term investment perspective with flexible terms. It’s suitable for businesses that can benefit from strategic support and patient capital, particularly in industries that align with the family office’s interests and values.

Learn More About Family Office Investment

Syndicate Investment

Syndicate investment is a type of equity financing where a lead investor pools capital from a group of co-investors (the syndicate) to invest in a single business. The lead investor typically conducts due diligence, negotiates terms, and manages the relationship with the business on behalf of the group.

Pros & Cons of Syndicate Investment:

Pros: Access to a larger pool of capital through a single deal, benefit from the lead investor’s expertise and network, and reduced pressure from having multiple small investors instead of one large backer
Cons: Requires giving up equity, possible dilution in future funding rounds, and investor expectations can vary, especially in larger syndicates

When to Use It: Use syndicate investment when you’re raising a substantial funding round and want the credibility and strategic value of a lead investor, along with access to multiple co-investors. It’s especially suitable for startups seeking capital from angel networks or platforms like AngelList, where syndicate investing is common.

Learn More About Syndicate Investment

Strategic Corporate Investment

Strategic corporate investment involves receiving funding from established companies that are looking to invest in startups or smaller businesses that complement their own operations. These investments can include capital, resources, and expertise, often with the intent of forming a strategic partnership.

Pros & Cons of Strategic Corporate Investment:

Pros: Access to significant capital, industry expertise, and resources, potential for strategic partnerships and collaborations, and increased credibility and market reach
Cons: May involve giving up equity and some control, potential for conflicts of interest, and alignment with corporate investor’s strategic goals, which might limit business flexibility

When to Use It: Use strategic corporate investment when your business can benefit from the resources, expertise, and market position of a larger corporate partner, and when there is a clear alignment of strategic goals. It’s suitable for businesses looking to scale rapidly and willing to collaborate closely with an established company in their industry.

Learn More About Strategic Corporate Investment

Private Placement

Private placement is a method of raising capital by selling equity or debt securities directly to a select group of investors—such as accredited individuals, institutional investors, or private funds—rather than through a public offering.

Pros & Cons of Private Placement:

Pros: Access to significant funding with fewer regulatory requirements than a public offering, faster and more confidential process, and flexibility in negotiating terms.
Cons: Typically limited to accredited investors, may require giving up equity or offering favorable terms, and investors may expect a higher return or influence in business decisions

When to Use It: Use private placement when your business is ready to raise a sizable round of funding from sophisticated investors but wants to avoid the complexity and cost of going public. It’s ideal for growth-stage companies looking for strategic capital with more flexibility than traditional public markets allow.

Learn More About Private Placement