Small Business Funding Ontario (2023): 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 financing for Ontario businesses.

We cover 27 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-Financing
  • Free Financing (Grants & 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 (click on a type to go straight to the section):

Complete List of Small Business Funding Types for Ontario Businesses

Self-Financing Free Financing Debt Financing Equity Financing
Savings Crowdfunding (Donations) Loans Angel Investors
Retirement Accounts Grants Lines of Credit Venture Capitalists
Personal Assets Wage Subsidies Credit cards Crowdfunding (Equity)
3Fs Tax Incentives Crowdfunding (Debt)
Side Hustles Rebates Equipment financing
Bartering Services Business Plan Competitions & Pitch Contests Purchase order financing
Crowdfunding (Pre-Sales Incubators Invoice financing
Accelerators Invoice factoring
SR&ED financing

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

Canadian Business Funding Universe: 27 Distinct Types of Funding for Entrepreneurs

In the following sections I describe each of the four categories of funding, along with the types of funding in each category.

Self-Funding (Bootstrapping a Business in Ontario)

Bootstrapping a business involves starting and growing a business using your own money or revenue from the business.

We cover these bootstrapping methods in this section:

  • Savings
  • Retirement Accounts
  • Personal Assets
  • The “3Fs” (family, friends, and fools)
  • Side hustles
  • Barter services
  • Crowdfunding


Using personal savings is the most straightforward way of funding a small business. You can dip into your savings to cover start-up costs and operating expenses.

There are some distinct pros and cons to using your personal savings to start a business:

Pros of using personal savings to start a business:

  • Control

Using personal savings to start a business gives you complete control over the company’s finances. You don’t have to answer to investors or worry about loan repayment deadlines.

  • Flexibility

When you use personal savings to fund your business, you have the flexibility to spend the money on whatever you need. You can invest in equipment, marketing, or any other necessary expenses without restrictions.

  • No interest payments

When you use personal savings, you don’t have to pay interest on loans, so you can keep more of the profits you make from your business.

  • No debt

Starting a business with personal savings means you don’t have to go into debt, which can be a significant advantage if your business takes longer than expected to become profitable.


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    Cons of using personal savings to start a business:

    • Limited funds

    Depending on your personal savings, you may not have enough money to fully fund your business. This could limit your growth potential or force you to seek outside funding later.

    • Risk

    Using personal savings to start a business is a significant financial risk, and if the business fails, you could lose your entire investment.

    • Opportunity cost

    If you invest your personal savings in your business, you are giving up the opportunity to use that money for other investments, such as retirement savings or other personal goals.

    • Lack of diversification

    Investing all your savings into one business can lead to a lack of diversification in your portfolio, which can increase your overall investment risk.


    Using retirement accounts, like RRSPs or TFSAs, to fund a small business is a riskier option than using savings, but it can potentially provide access to larger amounts of capital (if you have large retirement accounts, of course).

    Here are a few types of retirement accounts to fund a start-up:

    Tax-Free Savings Account (TFSA)

    Tax-Free Savings Account (TFSA): The TFSA is a flexible savings account that allows Canadians to save and invest their money tax-free. Any funds withdrawn from a TFSA are also tax-free, making it a popular choice for individuals looking to start a business.

    Registered Retirement Savings Plan (RRSP):

    Registered Retirement Savings Plan (RRSP): The RRSP is a retirement savings account that allows Canadians to contribute a portion of their income tax-free. Any funds withdrawn from an RRSP are taxed as income, but individuals can withdraw up to $35,000 tax-free under the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP) to finance a business.

    Individual Pension Plan (IPP)

    Individual Pension Plan (IPP): An IPP is a registered pension plan designed for small business owners and incorporated professionals. It allows individuals to make tax-deductible contributions to a pension plan that can be used to fund their retirement or to finance their business.

    Retirement Compensation Arrangement (RCA)

    Retirement Compensation Arrangement (RCA): An RCA is a type of executive retirement plan that allows high-income earners to save more for retirement than they can with an RRSP. Any funds withdrawn from an RCA are taxed as income, but they can be used to finance a business.

    It’s important to note that withdrawing funds from locked retirement accounts to start a business can have significant tax implications. It’s a good idea to check with an accountant before making a withdrawal from a retirement account.


    Entrepreneurs can also use their personal assets, like your home or car, as collateral to secure loans, or to provide side hustle services.

    Using Your Home to Fund Your Start-Up

    There are several ways an entrepreneur in Canada can use their home to fund their start-up business. Here are some options:

    1. Home Equity Line of Credit (HELOC)

    Home Equity Line of Credit (HELOC): A HELOC is a line of credit that allows you to borrow against the equity in your home. This can be a good option for entrepreneurs who have built up significant equity in their home and need to access funds for their start-up.

    2. Second Mortgage

    Second Mortgage: A second mortgage is a loan that is secured against your home, similar to a primary mortgage. This can be a good option for entrepreneurs who need a lump sum of cash to fund their start-up.

    3. Reverse Mortgage

    Reverse Mortgage: A reverse mortgage is a financial product available to Canadian homeowners aged 55 or older, which allows them to borrow money against the equity in their home without having to sell the property or make regular loan payments. Instead, the loan balance and accumulated interest are repaid when the homeowner dies, sells the property, or permanently moves out.

    4. Sale-Leaseback

    Sale-Leaseback: This involves selling your home to a buyer who then leases it back to you. This can generate immediate cash that can be used to fund your start-up, while allowing you to remain in your home as a tenant.

    5. Renting out part of your home

    Renting out part of your home: If you have extra space in your home, you can consider renting it out to generate additional income to fund your start-up. This could include renting out a spare room on Airbnb or renting out your basement as a separate apartment. (Keep in mind the tax implications of renting out part or all of your home.)

    Using Your Car to Fund Your Start-Up

    There are several creative ways you can use your car to fund your business start-up:

    1. Rent out your car

    Rent out your car: You can rent out your car on platforms like Turo or RentYourRide to earn extra income. This can help fund your business start-up.

    2. Become an Uber driver

    Become an Uber driver: this is one of many side hustles you can do to raise money (see below).

    3. Delivery services

    Delivery services: Become a part-time driver for Uber Eats, DoorDash, or SkipTheDishes.

    4. Advertising

    Advertising: You can place advertisements on your car for companies who want to promote their products or services. This can be a great way to earn some extra money while you’re driving around.

    “3Fs” (FAMILY, FRIENDS, and FOOLS)

    Family might be the first people you think of when trying to raise money, and they have been a crucial source of funds for some companies that are now household names.

    Here are some creative ways to convince your family members to invest in your new business:

    Show them a demo

    Show them a demo: Create a demo or prototype of your product or service and give them a hands-on experience. Let them see and touch your product, so they can visualize its potential.

    Share your business plan

    Share your business plan: Share your business plan with your family members, including financial projections and potential return on investment. Make sure to answer any questions or concerns they may have.

    Offer them equity

    Offer them equity: Offer your family members equity in your business in exchange for their investment. This can be an attractive option if they believe in your business and want to share in its success.

    Provide regular updates

    Provide regular updates: Keep your family members informed about the progress of your business. Share updates on sales, revenue, and any other relevant metrics. This can help build trust and confidence in your business.

    Offer perks or rewards

    Offer perks or rewards: Offer your family members perks or rewards for investing in your business, such as early access to products or services, discounted rates, or exclusive merchandise.

    Appeal to their emotions

    Appeal to their emotions: Explain to your family members how their investment can help support your dreams and aspirations. Share how important their support is to you and how it can help make a positive impact on your life.

    Friends can not only invest money in your venture, but they can also contribute their “sweat equity” and/or partner with you. In fact, some successful start-ups got their start by friends partnering up. Finally, “fools” might seem like it’s tongue-in-cheek, but sometimes an entrepreneur just needs someone with the means (i.e., money) to take a leap of faith and invest in their idea.

    Personal Story

    I once met an entrepreneur who was very personable and a great talker. His enthusiasm for business was infectious, and he was a fountain of new business ideas.

    At one point in his business career (over a period of years) this entrepreneur was backed by a much older, wealthy businessman who seemed to view the younger entrepreneur as a son. The wealthy businessman invested a significant amount of money in his protégé’s ventures but didn’t see much of a return on his investment. He seemed happy to just be supporting the business ideas of his “son figure”.

    Moral of the story: making money isn’t the only reason people invest. It’s possible to get funding for your business simply by developing a relationship with someone who has the funds and who likes you.


    Starting a side hustle, like freelance work, can provide extra income that can be used to start your business (or invested in your existing business):

    Here are some of the most lucrative side hustles in Canada:

    Freelance writing

    Freelance writing: Freelance writing can be a profitable side hustle, especially if you have expertise in a particular area or can write in-demand content like copywriting, technical writing or content marketing.

    Online tutoring

    Online tutoring: With the rise of online learning, tutoring services are in high demand. You can provide online tutoring services in subjects like math, science, English, and languages.

    Web design and development

    Web design and development: If you have web design or development skills, you can offer your services to businesses or individuals who need a website or online presence.


    Photography: Photography is a popular side hustle that can be lucrative if you have a good eye and talent for capturing images. You can offer your services for events like weddings, birthdays, and corporate events.

    Social media management

    Social media management: Social media management involves managing social media accounts for businesses or individuals. This includes creating content, scheduling posts, and engaging with followers.

    Pet care services

    Pet care services: Pet care services like dog walking, pet sitting, and pet grooming are in high demand, especially in urban areas.


    Bartering means exchanging services (or goods) without the use of money. It can be a useful tool to fund a start-up in the following ways:

    Trading skills

    Trading skills: You can offer your skills or services in exchange for goods or services you need for your start-up business. For example, if you are a graphic designer, you can offer your services to a web developer in exchange for website development services.

    Trading products

    Trading products: You can also trade products or inventory in exchange for the products or services you need for your business. For example, if you have a surplus of inventory or products that you cannot sell, you can trade them for products or services you need for your start-up.


    Co-marketing: You can also partner with other businesses to co-market your products or services. This can include cross-promotion, joint advertising or even bundling your products or services together to create a package deal.


    Collaborations: Collaborating with other businesses or individuals can also be a great way to fund your start-up. For example, you can offer your expertise or services to a non-profit organization in exchange for exposure or promotion.


    There are four ways that entrepreneurs can use crowdfunding to fund their business:

    • Pre-sales crowdfunding
    • Donation crowdfunding
    • Debt (loan) crowdfunding
    • Equity (investing) crowdfunding

    With pre-sales crowdfunding, entrepreneurs can use crowdfunding platforms to pre-sell products and generate capital for manufacturing and production.

    Here are the steps to follow:

    1. Identify your product or service: You need to have a clear understanding of what you want to offer and how it will benefit potential customers. This is crucial for creating a compelling crowdfunding campaign.

    2. Choose a crowdfunding platform: There are several crowdfunding platforms in Canada like Kickstarter, Indiegogo, and GoFundMe that allow you to create a campaign and showcase your product or service.

    3. Set a funding goal: You need to set a funding goal that covers the costs of starting your business, including production, marketing, and other expenses.

    4. Create your campaign: You need to create a compelling campaign that includes product or service details, images, and videos. It’s important to be transparent about the risks involved and what backers can expect.

    5. Launch your campaign: Once your campaign is ready, you can launch it and start promoting it to your network and potential backers.

    6. Offer incentives: You can offer incentives to backers who contribute to your campaign. This can include discounts, early access to the product or service, or other exclusive perks.

    7. Fulfill your obligations: Once the campaign ends and you reach your funding goal, you need to fulfill your obligations to backers by delivering the product or service as promised.

    FREE MONEY to Start a Business in Ontario (Grants & More)

    This section covers all the free-money programs to start and grow a business in Ontario. In other words, they’re financial incentives available to Ontario entrepreneurs that don’t need to be paid back.

    We cover commonly known types of funding, as well as some little-known types that most entrepreneurs have never heard about.

    These are the types of free money for business we cover in this section:

    • Crowdfunding (donations)
    • Grants (government, non-profit, and corporate)
    • Wage subsidies
    • Tax incentives (rebates, refunds, and credits)
    • Rebates
    • Business plan competitions & Pitch contests
    • Incubators
    • Accelerators

    Let’s cover each one:


    As mentioned in the previous section, there are four different ways entrepreneurs can use crowdfunding for their business: pre-sales (which we covered in the previous section); donation; loans; and equity investing.

    Donation crowdfunding is a type of crowdfunding where individuals donate money to support a specific cause or project. This type of crowdfunding is typically used for non-profit organizations, charities, or personal causes like medical expenses, education, or disaster relief. Donations are typically made in exchange for perks or rewards, such as a shoutout on social media or exclusive access to the product or service being created.

    For an entrepreneur looking to start a new business, donation crowdfunding can be a helpful way to raise initial funds and generate support for their idea. By creating a crowdfunding campaign, the entrepreneur can share their vision for the business with a wider audience and inspire others to contribute to their cause.

    To be successful with donation crowdfunding, the entrepreneur will need to create a compelling story that resonates with potential donors. This can include information about the product or service being created, the mission of the business, and the impact it will have on the community. The campaign should also include clear and transparent information about how the funds will be used and what donors can expect in return for their donation.

    One key benefit of donation crowdfunding for entrepreneurs is that it can help them build a community of supporters and early adopters for their business. By involving donors in the early stages of the business, entrepreneurs can create a sense of ownership and buy-in that can lead to long-term loyalty and advocacy.

    GRANTS (Government, Non-Profit, Corporate)

    There are many small business grants for Ontario businesses, including:

    Government of Canada business grants

    Government of Canada business grants: The federal government gives out billions of dollars every year in grant money (not to mention loans, wage subsidies, tax incentives, and in-kind support), across dozens of industries. There are also programs to support specific demographic groups, such as Indigenous entrepreneurs, black entrepreneurs, immigrants, and women entrepreneurs.

    Government of Ontario small business grants

    Government of Ontario small business grants: While not quite as extensive as the support provided by the federal government, the Ontario provincial government also supports specific industries with grant money, along with providing grants for businesses in various regions of the province.

    Non-profit grants for businesses

    Non-profit grants for businesses: There are hundreds of non-profit organizations across Canada that help businesses. In addition to grants, these organizations often have extensive “in-kind” services, such as mentoring and networking events. 

    Corporate grants for businesses

    Corporate grants for businesses: While corporations are more likely to provide debt financing (e.g., loans) or equity investments in Canadian businesses, there are some small private sector grant programs also available.  


    A wage subsidy is a type of financial assistance provided by governments to businesses to help them cover the cost of employee wages. The subsidy can be a percentage of the employee’s wages or a lump-sum amount.

    Wage subsidies are designed to encourage employers to retain their existing employees and/or hire new ones, by making it more financially viable for them to do so.

    Wage subsidies in Canada come in a few different flavours:


    Canadian entrepreneurs can take advantage of tax credits, rebates, and refunds to reduce their tax burden:

    1. Tax Credit

    A tax credit is an amount that reduces the tax a business pays on its taxable income. There are many tax credits available to Canadian businesses. Here are two examples:

    2. Tax Rebate

    A tax rebate is a reimbursement a business can get for taxes properly paid. For example, Ontario’s Ministry of Finance provides a partial rebate of the provincial land tax and education tax to the owners of a commercial or industrial property that is partially or entirely vacant

    3. Tax Refund

    A tax refund is money that is returned to a business under a taxing statute or regulation for a tax that has been overpaid or incorrectly paid. For example, businesses in Ontario that buy gasoline for unlicensed equipment – such as equipment for farming, construction or manufacturing – may apply for a refund of the gas tax.

    One of the best “combo” tax incentive programs is the Government of Canada’s SR&ED (Scientific Research and Experimental Development) program, which combines a tax deduction, an investment tax credit (ITC), and, in certain circumstances, a refund. Don’t let the bureaucratic name fool you – this is an excellent tax incentive for any business to check out!


    Many utility companies in Canada (including Ontario) offer rebates for businesses that adopt energy-efficient practices.

    A utility rebate is a usually a program that provides financial incentives to businesses for implementing energy-efficient upgrades or making changes that reduce their energy consumption.

    Utility rebates can vary depending on the utility company and the specific program, but they typically offer a percentage of the total cost of an energy-efficient upgrade, such as LED lighting or energy-efficient HVAC systems. In some cases, the rebate may also cover the cost of an energy audit to identify potential areas for improvement.

    To qualify for a utility rebate, businesses typically need to meet certain criteria, such as having a valid business account with the utility company and meeting specific energy efficiency standards. Businesses may also be required to submit an application and provide documentation of the energy-efficient upgrades or changes made.

    An excellent rebate program run by Ontario utilities is Save On Energy.


    One often-overlooked way to fund a start-up is to participate in pitch contests or business plan competitions.

    Business competitions and pitch contests are both events where entrepreneurs present their ideas, but they have different goals, formats, and outcomes.

    A business plan competition is usually a broader event where participants compete for a prize, which could be funding, mentorship, or other types of support. The competition may have multiple stages, including:

    • Application submissions
    • Screening
    • Training
    • Final presentations

    Participants in a business plan competition are evaluated based on various criteria, such as the feasibility of their business plan, innovation, market potential, social impact, and scalability. Competitions are typically organized by universities, business incubators, accelerators, venture capital firms, or government agencies. The ultimate goal of a business competition is to support the growth and success of the winning start-up.

    A pitch contest is a more focused event where entrepreneurs pitch their ideas to a panel of judges or investors in a short amount of time, usually a few minutes.

    The pitch format is designed to quickly grab the attention of the audience and convince them of the value of the start-up. The judges may ask questions and provide feedback to help the entrepreneurs refine their pitch and business model. Pitch contests are often part of larger events, such as start-up conferences, hackathons, or demo days. The goal of a pitch contest is to showcase the start-ups and potentially attract investors, customers, or partners.


    A business incubator is an organization that provides resources, mentorship, and support to new and early-stage businesses. Incubators typically offer a range of services, such as office space, access to funding, networking opportunities, training and coaching, legal and accounting services, and access to business tools and technologies.

    The primary goal of a business incubator is to help new businesses grow and succeed by providing a supportive environment that allows entrepreneurs to focus on building their products, services, and customer base. The incubator serves as a hub for entrepreneurs to connect, collaborate, and learn from each other, as well as from experienced mentors and industry experts.

    The benefits of joining an incubator include having access to resources and expertise, shared services and cost savings, networking opportunities, and (potentially) increased chances of your business succeeding because of the supportive environment and access to resources that incubators provide.


    A business accelerator is a program designed to help early-stage companies grow and achieve their potential. The accelerator provides entrepreneurs with access to resources, mentorship, and networking opportunities to help them develop their products or services and build a sustainable business.

    Accelerators typically accept applications from start-ups and select a cohort of companies to participate in the program for a set period of time, usually around three to six months. During this time, start-ups receive support in various forms, including mentorship, funding (in the form of seed capital or access to investment opportunities), education and training, and networking opportunities

    The benefits of joining an accelerator for entrepreneurs include access to resources such as funding, mentorship, and business support services; faster growth, because accelerators provide start-ups with the tools and resources to scale their business more quickly than they would be able to do on their own; networking opportunities; and increased visibility by being part of the accelerator program, which can be critical for attracting investment and customers.

    DEBT FINANCING (Business Loans & Other Types of Credit)

    These are the types of debt financing we cover in this section:

    • Loans (government; bank; alternative lenders)
    • Lines of Credit
    • Credit cards
    • Crowdfunding (debt)
    • Equipment financing
    • Purchase order financing
    • Invoice financing
    • Invoice factoring
    • SR&ED financing


    Loans are what most entrepreneurs think of when they’re brainstorming how to fund their business.

    What most entrepreneurs don’t know, however, is that there are literally hundreds of loans in Canada for businesses, provided by multiple types of business lenders:

    • Commercial Banks

    Canadian banks are some of the largest providers of business loans in the country. They offer a range of financing options, including term loans, lines of credit, and commercial mortgages.

    • Credit Unions

    Credit unions are not-for-profit financial institutions that offer a range of financial services, including business loans. They are typically more community-focused than banks and may offer more flexible lending terms.

    • Government Agencies

    The Canadian federal government and provincial governments have dozens of programs that provide government business loans, government business loan guarantees and other forms of financing to small and medium-sized businesses. These programs are often designed to support specific industries or regions of a province, as well as specific regions of the country.

    • Alternative Lenders

    There are many alternative lenders in Canada that specialize in providing business loans to small and medium-sized businesses. These lenders may offer faster approval times and more flexible lending terms than traditional lenders.

    Here are some of the types of alternative business lenders in Canada:

    • Peer-to-peer (P2P) lending platforms: These are online platforms that connect borrowers directly with investors who fund their loans.
    • Crowdfunding platforms: These platforms allow individuals or businesses to raise funds from many people, often through social media and other online channels.
    • Invoice financing companies: These lenders provide short-term loans based on unpaid invoices or accounts receivable.
    • Merchant cash advance providers: These lenders offer advances on future credit card sales to small businesses.
    • Equipment financing companies: These lenders specialize in financing the purchase or lease of equipment, such as machinery or vehicles.
    • Factoring companies: These lenders purchase outstanding invoices from businesses at a discount, providing immediate cash flow.
    • Microfinance institutions: These lenders provide small loans to low-income individuals or businesses that may not qualify for traditional bank loans.
    • Online lenders: These lenders offer loans entirely online, with faster processing times and more flexible lending criteria than traditional banks.
    • Community development financial institutions (CDFIs): These non-profit lenders provide financing to underserved communities and businesses.
    • Private lenders: These individuals or institutions provide loans to borrowers who do not meet traditional lending criteria or who need more flexible repayment terms.
    • Venture Capital Firms: Venture capital firms provide financing to early-stage start-ups and other high-growth businesses. In exchange for their investment, they typically take an equity stake in the company.


    A business line of credit is a flexible form of financing that provides businesses with access to a pool of funds that they can draw on as needed. It’s like a credit card, but for businesses instead of individuals.

    With a business line of credit, a lender approves a maximum credit limit for the business, and the business can borrow up to that limit as needed, paying interest only on the amount borrowed. The business can repay the borrowed amount and then borrow again, up to the maximum limit, without needing to reapply for a new loan. This makes a line of credit ideal for businesses that need to cover short-term expenses or manage cash flow fluctuations.

    A business line of credit is different from a business loan in that a loan is a lump sum of money that a business borrows and repays over a fixed period of time, typically with a fixed interest rate. Business loans are often used for larger, one-time expenses, such as purchasing equipment or real estate, or for funding long-term projects.

    Overall, the main differences between a business line of credit and a business loan are:

    • Flexibility. A line of credit provides ongoing access to funds, whereas a loan is a one-time lump sum.
    • Usage. A line of credit is often used for short-term needs, while a loan is often used for long-term investments.

    While there aren’t as many business line of credit programs in Canada as there are loan programs, there are still hundreds of LoCs available through banks, credit unions, and government agencies.


    A business credit card is a credit card that is specifically designed for business expenses. It allows business owners to separate their personal expenses from their business expenses, which can make it easier to manage their finances and track their business expenses. Business credit cards can also offer perks and rewards that are tailored to the needs of businesses, such as discounts on office supplies or travel expenses.

    The main differences between a business credit card and a personal credit card are:


    Liability: With a personal credit card, the cardholder is personally liable for any debt incurred on the card. With a business credit card, the business is typically liable for any debt incurred on the card.

    Credit reporting

    Credit reporting: Business credit cards may or may not report to the owner’s personal credit report, while personal credit cards always do.


    Rewards: Business credit cards often offer rewards or cash back that is tailored to the needs of businesses, such as discounts on office supplies, travel expenses, and business services.

    Common uses of a business credit card include:

    • Managing cash flow: Business credit cards can help businesses manage their cash flow by providing a flexible source of credit to pay for expenses.
    • Separating business and personal expenses: Business credit cards can help business owners separate their personal expenses from their business expenses, which can make it easier to track and manage their finances.
    • Earning rewards: Business credit cards often offer rewards or cash back that is tailored to the needs of businesses, such as discounts on office supplies, travel expenses, and business services.
    • Building credit: Using a business credit card responsibly can help businesses build credit and establish a credit history, which can be important when applying for loans or other types of financing.


    Debt crowdfunding is a type of crowdfunding where individuals or businesses can raise funds from a large number of people, often through an online platform, by offering debt-based investments.

    In debt crowdfunding, investors lend money to the borrower and receive interest on their investment over a specified period of time, typically with a fixed repayment schedule.

    Debt crowdfunding can be an attractive option for businesses or individuals looking to raise capital without the need for traditional bank loans or other forms of financing. It can also be a useful tool for investors looking for a steady stream of income, as debt crowdfunding investments often provide a predictable return on investment.

    The process of debt crowdfunding typically involves:

    • The borrower submitting a proposal on a crowdfunding platform, outlining their business plan and financial needs
    • Investors then review the proposal and decide whether to invest based on their risk appetite and the potential return on investment
    • If the campaign is successful, the borrower receives the funds raised, and investors receive regular interest payments over the term of the investment

    It’s important for aspiring entrepreneurs to carefully review the terms of any debt crowdfunding campaign before participating, as they can vary significantly depending on the crowdfunding platform.


    Equipment financing is a type of financing that allows businesses to purchase equipment or machinery without paying the full cost upfront. Instead, the lender provides funds to the borrower to purchase the equipment, and the borrower repays the loan over a set period of time, usually with interest.

    This type of financing is often used by businesses that need to purchase expensive equipment, such as construction companies, manufacturers, and medical practices. Equipment financing can be used for a wide range of equipment, including vehicles, machinery, computers, and office equipment.

    Compared to other similar types of financing, equipment financing is focused on the specific purchase of equipment, while other types of financing, such as term loans or lines of credit, can be used for a variety of purposes, including equipment purchases.

    Equipment leasing is a similar option to equipment financing, but it differs in that the borrower is essentially renting the equipment rather than owning it, with the option to purchase it at the end of the lease term. Equipment financing also typically requires the equipment to be used as collateral, whereas other types of financing may not require collateral.


    Purchase order financing is a type of short-term funding that helps businesses fulfill large orders from customers or clients. It works by providing businesses with the necessary cash flow to purchase the goods and materials required to fulfill an order. The lender advances funds to the business based on the value of the purchase order, and the borrower uses those funds to purchase the required goods and materials.

    Purchase order financing is different from other types of financing, such as traditional bank loans or lines of credit. In a traditional bank loan, the borrower must provide collateral and have a good credit history to qualify for the loan. In contrast, purchase order financing is based on the creditworthiness of the borrower’s customer or client, rather than the borrower’s creditworthiness.

    Another similar type of financing is invoice financing or factoring. With invoice financing, businesses receive funding based on the value of their outstanding invoices. The lender advances a percentage of the invoice value, and the borrower pays a fee for the service. Like purchase order financing, invoice financing is based on the creditworthiness of the borrower’s customers.

    Bottom line: purchase order financing can be particularly helpful for businesses that need short-term funding to fulfill large orders. It provides a way for businesses to access the necessary capital without relying on their own creditworthiness or collateral.


    Invoice factoring (also called accounts receivable factoring) is a financing solution where a business sells its outstanding invoices to a third-party financing company, also known as a factor. The factor provides the business with a cash advance, typically around 80% of the invoice value, while assuming the risk of collecting payment from the customers. Once the customers pay the factor, the remaining balance is returned to the business, minus the factor’s fees.

    Invoice factoring in Canada is a popular form of financing for small to medium-sized businesses that have outstanding invoices with payment terms ranging from 30 to 90 days. The business can use the cash advance from the factor to cover immediate expenses such as payroll, inventory, or equipment purchases.

    Compared to traditional bank loans, invoice factoring offers several advantages:

    • Faster access to cash
    • A more flexible borrowing limit
    • No collateral requirements
    • No need for a high credit score (as required for a loan)

    Additionally, invoice factoring does not affect the business’s credit score since it is not considered a loan.

    Another type of financing that is similar to invoice financing is invoice financing (also called accounts receivable financing). With invoice financing, the business pledges its accounts receivable as collateral for a loan. Unlike invoice financing, the business is still responsible for collecting payment from the customers, and the lender does not assume the collection risk.


    The SR&ED (Scientific Research and Experimental Development) program is a tax incentive program provided by the Canadian government to support research and development activities. The program is administered by the Canada Revenue Agency (CRA) and is available to companies of all sizes, as well as to individuals and partnerships.

    SR&ED financing is provided by private sector companies in Canada. With this type of financing, companies can access capital based on the expected or actual SR&ED tax credits they will receive from the government.

    SR&ED financing can be beneficial for companies that don’t have sufficient cash flow to fund their R&D activities on their own. It allows companies to receive funding in advance of receiving their SR&ED tax credits, which can help them to accelerate their R&D activities and bring new products or services to market more quickly.

    There are different types of SR&ED financing options available to companies, including loans, lines of credit, and factoring arrangements. In a factoring arrangement, a company sells its expected SR&ED tax credit to a financing company at a discount in exchange for immediate cash.

    It’s important to note that not all SR&ED financing options are created equal, and companies should carefully evaluate the terms and conditions of any financing arrangement before committing to it. Some financing companies may charge high fees or require onerous repayment terms, which could put a strain on a company’s finances in the long run.

    Overall, SR&ED financing can be a useful tool for companies that need funding to support their research and development activities. By accessing capital based on their expected SR&ED tax credits, companies can accelerate their R&D efforts and bring innovative products or services to market more quickly.

    EQUITY FINANCING (Selling a Stake in Your Business)

    These are the types of equity financing we cover in this section:

    • Angel Investors
    • Venture Capitalists
    • Crowdfunding (Equity)


    An angel investor is a high-net-worth individual who invests in early-stage or start-up companies in exchange for an ownership stake in the business. Angel investors are typically individuals who have accumulated wealth through their own businesses, and they are often willing to provide funding and guidance to promising new businesses.

    Angel investors can offer several types of financing to businesses, including the following:

    1. Seed funding

    Seed funding: Seed funding is an initial round of funding provided to a start-up company to help it get off the ground. Angel investors often provide seed funding to businesses in exchange for an ownership stake in the company.

    2. Equity financing

    Equity financing: Equity financing involves the sale of ownership shares in a company in exchange for funding. Angel investors may provide equity financing to start-ups or early-stage businesses to help them grow and expand their operations.

    3. Convertible debt

    Convertible debt: Convertible debt is a type of financing that can be converted into equity at a later date. Angel investors may provide convertible debt financing to start-ups or early-stage businesses as a way to provide short-term funding while allowing the company to defer a decision about equity ownership.

    4. Bridge financing

    Bridge financing: Bridge financing is a short-term loan or investment provided to a company to help it bridge a funding gap between two rounds of financing. Angel investors may provide bridge financing to start-ups or early-stage businesses to help them stay afloat while they seek additional funding.

    Bottom line: angel investors can provide valuable funding and support to start-ups and early-stage businesses that may not be able to obtain financing from traditional sources. Angel investors typically invest in businesses that they believe have high growth potential and can provide them with a return on their investment over time.


    A venture capital investor is an individual or firm that invests money in start-ups or early-stage companies with high growth potential. Venture capital investors typically provide financing in exchange for equity in the company, which means that they become part owners of the business.

    In Canada, there are several types of financing that venture capital investors offer to businesses, including:

    • Seed funding: This is the earliest stage of funding for a start-up, and it typically involves a small amount of capital to help the company get off the ground.
    • Series A funding: This is the first significant round of financing for a start-up, and it usually involves a larger amount of capital than seed funding.
    • Series B funding: This is the next stage of financing for a start-up after it has proven its concept and is ready to scale up.
    • Series C funding: This is a later stage of financing for a company that has already achieved significant growth and is looking to expand further.

    In addition to these types of financing, venture capital investors in Canada may also offer other types of funding, such as debt financing or mezzanine financing, depending on the needs of the business.


    The final type of crowdfunding that can be used to raise money for a business is equity crowdfunding, which involves selling a stake in your business through a crowdfunding platform.

    With equity crowdfunding, a company or entrepreneur raises funds by selling shares of their business to a large group of investors, usually through an online platform. In exchange for their investment, the investors receive a share of the business’s equity and potential profits.

    Equity crowdfunding is different from pre-sales crowdfunding, where a company or entrepreneur sells their products or services in advance to a group of supporters, who are essentially pre-ordering the product. It’s also different from donation crowdfunding, in which individuals contribute funds to a cause or project they support, without receiving any ownership or financial return. Debt or loan crowdfunding, also known as peer-to-peer lending, is another type of crowdfunding where individuals lend money to businesses or individuals through an online platform, in exchange for a set interest rate and the promise of repayment.

    In contrast to those three, equity crowdfunding provides investors with an ownership stake in the business and the potential for a return on their investment if the business succeeds. This type of crowdfunding can be a viable option for start-ups and small businesses that have a promising business idea but struggle to obtain funding from traditional sources such as banks or venture capitalists.

    Bottom line: equity crowdfunding offers a unique opportunity for investors to support businesses they believe in, while also providing entrepreneurs with a new way to raise capital and grow their businesses.

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