Private Funding Sources for Ontario Businesses: Do You Know These 9 Private Sources of Grants, Loans & Investments?

When starting a private business, finding adequate funding can be a hassle.

If you only need a small amount of money to start out, you can resort to the three f’s: family, friends, and fools.

There are also plenty of government programs and non-profit sources of funding.

But in terms of the sheer number of sources, there are hands-down more private sources of funding than any other.

So, the million-dollar question is where do you go to get funding for your business?

To go straight to one of the 9 sources, click in the menu below.  

Private Funding Sources for Ontario Businesses

Check out our infographic that summarizes the 9 Private funding sources (click here to go straight to the infographic)

Important Factors to Consider When Looking for Business Funding

When searching for money for your business, there are a lot of “it depends”…

It depends on:

  • The size of your business
  • The amount of money you’re trying to raise
  • How mature your business is
  • Which sector you’re operating in
  • What you plan to use the money for

Additionally, you should consider the perks and benefits some financiers might be willing to offer you while also taking into account the drawbacks of working with said financier.

For instance, angel investors tend to offer mentorship, but they also take a considerable stake in your company, which could affect your autonomy as the company’s founder.

You also need to consider the type of financing you are looking for. Broadly speaking, there are two main types of financing: equity and debt.

Equity financing means someone will give you money in return for partial ownership of your company; the exact stake the financier receives depends on the amount of money you are getting, the valuation of your company, and the amount of risk the financier is taking on.

On the other hand, debt financing means someone will give you money in return for interest you will have to pay them regularly until you pay back the debt.

To recap, these are the factors you need to consider when looking for funding:

  • How big is your business?
  • How much money you are trying to raise?
  • How mature is your business?
  • Which sector are you in?
  • What are you going to use the money for?
  • What perks are you looking for?
  • What disadvantages would be deal breakers for you?

With that said, let’s take a look at nine of the main types of private funding sources you can find in Ontario:

The Sources of Private Funding for Businesses in Ontario:


A business incubator is an organization that attempts to expedite the growth of nascent companies, and companies that make it through an incubator have better chances at receiving funding from angel investors and other types of investors later on down the road.


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    When we are talking about “nascent” companies, we are talking about companies that could still be in the ideation phase, where they are nothing more than just an idea in the founder’s head before a full team has been attached to the project.

    Different incubators operate differently. Some provide a space where entrepreneurs can work and network with each other, whereas others might provide actual funding. Some have an actual physical space, while others operate virtually. The bottom line is that there is no single modus operandi for all incubators.

    However, there are a few things that most incubators have in common. For one thing, they all offer a long program that ranges between one to five years but averages around two to three. Moreover, aside from the capital and the office space, plenty of incubators offer valuable resources, including mentorship, access to contacts and industry experts, and the availability of accountants and lawyers who can help the business get on its feet.

    What’s even better is that incubators aren’t limited to a single type of industry. Some are focused on tech, while others operate in the fashion industry. And, if this is not good enough for you, you can always find an all-purpose incubator that doesn’t care which industry a startup operates in.

    As for the type of financing offered by incubators, it depends on the incubator itself. Yet, most incubators operate as non-profits, meaning that the funding companies receive has no strings attached. This is why the application process to incubators can be very competitive.

    Here is a short list of a few incubators you can find in Ontario:

    • Artscape Daniels Launchpad
    • Biomedical Zone
    • iBoost Zone
    • IBM Innovations Space
    • HumberLaunch


    Commonly confused with incubators, accelerators also help early-stage companies by offering them funding, mentorship, office space, and other vital amenities.

    However, accelerators usually work with companies that have gone past the ideation phase and already have a proof-of-concept; these companies may be mature enough to stand on their own, but they can become a lot stronger under the right guidance and nurturing.

    Aside from the maturity of the companies they accept, accelerators differ from incubators in another important aspect: the duration of the program. Whereas an incubator program can last for several years, an accelerator program lasts between three to six months. During those few months, startups are expected to work hard to make the most of the program.

    If you choose to take your startup and enter an accelerator program, this is what you can expect:

    Your startup will be among a cohort of companies that are in the program. During your time there, you will meet several experts and attend several seminars, all of which attempt to condense years of practical experience into a few months.

    Throughout this intense period, you will probably receive funding from the accelerator so that you can stay afloat for the duration of the program. At the end of the program, you will likely have a graduation ceremony, also known as a demo day, where you will pitch your business idea to several investors in the hopes of receiving continued funding.

    Given that one of the main selling points of accelerators is the immersive education they offer, it is worth asking whether this education confers any value to the startups. The good news is that there is plenty of research that indicates that accelerators help both startups and the entrepreneurial ecosystem at large.

    In return for the valuable education and funding offered, accelerators tend to get some stake in your company, making them equity-based financing. Yet, some accelerators are non-profit, which means that they don’t expect profit from you in return. Like incubators, this makes them very competitive programs.

    Here is a short list of accelerators you can find in Ontario:

    • Creative Destruction Lab
    • EON Accelerator
    • gBETA Toronto
    • LaunchYU
    • MaRS Investment Accelerator Fund

    Angel Investor

    Angel investors are private, wealthy individuals who choose to invest their money in small startups that are bound to grow.

    This investment can either come in the form of a one-time cash-infusion or in the form of regular cash injections that can buoy the company during its tenuous first years; the investment is usually in the tens of thousands of dollars, occasionally reaching the hundreds of thousands. For investments of more than a million dollars, you might want to look into venture capital firms (see below).

    It is worth noting that an angel investor’s strategy is one of high-risk, high-reward. They invest in small companies where future success isn’t a sure thing, so they expect to make a substantial return on the money they are risking.

    Also, to lessen their risk, angel investors tend to diversify their portfolio, meaning they invest in numerous startups simultaneously and are fully aware that some of their investments won’t pan out. The ideal scenario for an angel is that their startup gets investment from a venture capital firm, buying out their shares and actualizing their return.

    To protect their investment, angel investors dedicate a lot of their time to helping their entrepreneurs succeed. They mentor them, help them network, and put them in touch with important contacts. At the end of the day, they want to see you succeed because that makes their bank accounts happy. As a result, angel investors look for startups with high potential at the outset, and they focus a lot on the founder, making sure that they have the requisite skills and passion to grow the company.

    Obviously, in return for their investment, angel investors expect a decent stake in your company, which can come in the form of equity or convertible debt. However, one of the biggest problems with angels is that they take a large chunk from the companies they invest in, a chunk that ranges from 20 to 50 percent of the entire business; the exact percentage they take is usually based on how much money they invest, as well as the valuation of the company at the time of investment.

    Angel investors don’t have to be lone individuals looking for the next big startup.

    Sometimes, angels can create an angel investor network, a pool of capital from different individuals that enables this network to not only take on more projects but to also spread out the risks of any one startup over several investors.

    Here is a short list of a few angel investor networks you can find in Ontario:

    • York Angel Investors
    • Golden Triangle Angel Network
    • Maple Leaf Angels
    • Capital Angels Network
    • Angel Investors Ontario

    Venture Capital

    Venture capital firms, shortened as VCs, invest in businesses that have matured enough to show promise and seem to have long-term growth potential.

    Venture capital firms are usually confused with angel investors, but whereas angels invest in the thousands, venture capitalists usually invest in the millions. Ergo, given how large the investment tends to be, venture capital comes from large institutional investors, investment bankers, or any other large financial institution.

    VCs offer equity financing, so they expect to get a share of the company they are investing in. This share entitles them to get a say in how the company is being run, and if a VC isn’t particularly happy with how the ship is being steered, they might decide to change the management team altogether. As for the financing itself, it can come in the form of direct equity or convertible debt.

    For a venture capitalist, they, like angel investors, expect a high return on their money for the high risk they are taking, which is why they focus on companies that seem destined to grow aggressively over the next few years, offering above-average returns.

    That said, venture capitalists aren’t long-term investors; they expect to get their money out of the company after a few years, which can happen in one of two ways. The startup they invested in can go public, and the company’s IPO should be more than enough to compensate the VC for their time and money; alternatively, the startup can get acquired by a larger company, cashing the VCs out.If you need an investment in the millions, but your credit history makes it difficult to seek a loan from a bank or your company’s track record is too short for banks to use to gauge your creditworthiness, venture capital might be the ideal solution for you.

    This becomes all the more pertinent when you don’t have any hard assets which the bank can secure. Moreover, your company will benefit from the expertise and connections the VC brings to the table.

    So, with all of this in mind, here is a short list of a few VCs you can find in Ontario:

    • BDC Venture Capital
    • Pangaea Ventures Fund III, LP
    • PRIVEQ Capital Funds
    • Real Ventures
    • Rho Canada Ventures

    Private Equity

    A private equity firm, also known as a PE, is an investment vehicle that targets established companies that aren’t listed publicly and buys a stake in them. This means that venture capital firms are a specific type of private equity firm, but while VCs focus on small startups that are poised to grow at a meteoric rate, PEs cast a much wider net that goes beyond small startups.

    Some PEs may find it advantageous to buy a public company and delist it from the public stock exchange. Essentially, on a scale of maturity, if we can say that incubators deal with extremely immature companies, then private equity firms deal at the other end of the spectrum where companies are mature and established.

    As the name suggests, PEs expect to get equity as well as a say in how things are run in return for their investment. The amount of involvement a private equity firm may choose to have depends on its strategy. A passive PE will be content letting management run things and won’t plan to interfere whatsoever. A more active PE will try to help its companies to grow by connecting with C-level executives at other companies and by providing industry experts who can advise on how to increase efficiencies.

    So, given that PEs go beyond small startups, it should come as no surprise that the amount of money they invest tends to be significant, easily in the hundreds of millions. Consequently, most private equity firms tend to have deep pockets and are often made up of different funds like pension funds, or of accredited investors who understand what they’re doing and have enough money to contribute to a private equity fund.

    By now, you might be asking, if a VC is a type of private equity, what other types of private equity are there?

    Well, there is another well-known type: the leveraged buy-out, abbreviated as the LBO.

    LBO funds aim to take control of a specific company so they borrow a lot of money to increase the amount of capital under their control and to boost the rate of return they get for their own money. It is safe to say that LBO funds make investments that dwarf those of a VC firm.

    Here are a few PE firms that can be found in Ontario:

    • Wessex Capital Partners Limited
    • Summit Ridge Capital
    • Acasta Capital
    • Bedford Capital
    • Irongbridge Equity Partners


    Even though there are several different types of banks, the two worth looking at for our purposes are investment banks and commercial banks.

    Investment banks are responsible for arranging IPOs (initial public offerings) and helping companies go public. In other words, rather than being a direct source of financing, they facilitate it. Ergo, we will focus on commercial banks.

    When talking about commercial banks, we are moving from the realm of equity financing and moving into that of debt financing. Unlike equity funding, a debt has to be repaid after a certain period of time in addition to interest accrued over said period.

    Commercial banks offer businesses commercial loans, which can come in the form of a:

    • Line of credit
    • Unsecured loan
    • Term loan

    In any case, this loan can help a business cover large capital expenditures or help with working cash flow, funding operational expenses until a receivable is paid.

    Hence, loans tend to be ideal for companies that need a short-term loan and that have both a proven track record and an excellent credit history. Alternatively, businesses may have to put up collateral if they are unable to get an unsecured loan, and this collateral may be property, equipment, or anything that can be confiscated and sold in the event of delinquency.

    You also need to remember that not all loans are made the same.

    Although the interest rate you would have to pay on a loan is dependent on several factors, including your creditworthiness, banks generally demand interest rates that are in line with the prime lending rate at the time.

    Yet, some banks may offer you lower interest rates than other lenders, so it’s worth shopping around and making sure that you get the best deal. Also, you should be aware that to safeguard their money, banks will require your company to present them with monthly financial statements and to buy insurance for any large equipment you purchase with the loan.

    Here are a few commercial banks in Ontario that can offer you a commercial loan:

    • TD
    • RBC
    • CIBC
    • BMO
    • Bank of Nova Scotia

    Finance Companies

    Even though finance companies do offer loans, they are not banks: they don’t accept cash deposits from customers, and they don’t provide other services that you would normally associate with a bank, such as a chequing account. Instead, finance companies make all their money from the interest they charge you.

    So, why should you go to a finance company as opposed to a bank?

    Generally speaking, finance companies work with companies whose credit is not good enough to get a loan from a bank. Consequently, finance companies will charge higher interest rates than banks, making their loans more expensive. Additionally, some finance companies require collateral to secure a loan.

    There are three main types of finance companies:

    • Consumer finance companies work with individuals and help them pay their day-to-day bills
    • Sales finance companies work with large businesses that have a high credit rating, helping them cover the costs of operations
    • Commercial finance companies work with both small and large businesses, helping them make large capital expenditures.

    Finance companies even offer several types of different loans. For starters, you have your personal loans, which are offered by consumer finance companies, and they include mortgages, loans for purchasing automobiles, and debt consolidation loans.

    You then have asset-based loans and factoring, both of which are offered by commercial finance companies and are secured by collateral of some sort; however, in the case of factoring, the collateral used is the company’s accounts receivable (i.e. money owed to the company by customers).

    Here are a few finance companies in Ontario:

    • Credit Suisse
    • Citigroup
    • TCI Capital

    Crowdfunding Platform

    With the rise of the internet, a new way of funding businesses and projects has blossomed: crowdfunding.

    The simple idea behind crowdfunding is that capital is raised with the help of friends, family, customers, potential investors, and anyone else who might want to chip in.

    But, rather than limiting themselves to a handful of patrons, individuals who opt for crowdfunding tap into a large pool of individuals with the help of the internet and social media.

    Consequently, while you would need significant amounts of cash when tapping into the other funding sources mentioned so far, the fact that you are tapping into such a wide pool with crowdfunding means that each contributor could offer as little as 20 dollars and you could still make your target.

    There are several different types of crowdfunding: donation-based, rewards-based, and equity-based:

    Donation-based crowdfunding is where the patrons of a certain project expect no financial return whatsoever, which is how disaster relief efforts and some charities get funded.

    Rewards-based crowdfunding means that each contributor is promised a reward of some sort in return for their contribution, and this reward tends to be a “beta” version of the product getting funded. Some people consider rewards-based funding to be a subset of donation-based funding.

    Equity-based crowdfunding enables contributors to own a part of the business or project, entitling them to a financial return on their investment as well as a share of the profits; nevertheless, given that crowdfunding attracts a lot of contributors, each contributor only gets a small share of the pie, which is very different when compared to angel investors (for example).

    Aside from expanding your reach, crowdfunding offers several other benefits:

    For one thing, crowdfunding can help to market your product for you and can also serve as a form of market research, where you end up with a preliminary proof-of-concept, which can be vital if you are still in the early stages (after all, every contributor is a potential customer).

    Another benefit is that crowdfunding platforms can help streamline your fundraising efforts, providing you with a single place where any interested investor can buy a stake in your company.

    Here are some of the best crowdfunding platforms you can use in Ontario:

    • Art Market Canada
    • Brix
    • CookieeJar
    • Crowdmatrix

    Peer-to-Peer Lending

    In the same vein of crowdfunding, peer-to-peer lending, also known as P2P, taps into large pools of individuals.

    But, instead of contributors giving money as a donation or in return for equity, the money here is given as a loan, cutting out the need for financial institutions. This form of lending also goes by the names social lending and crowd lending.

    Lenders and borrowers find one another through a P2P lending website. The site usually handles everything, from setting the rates and terms of the loan to handling the money transfers and monthly payments. That said, some sites offer both lenders and borrowers the chance to haggle, negotiating rates and payment conditions.

    P2P lending can be beneficial to the borrower as well as the lender. On the one hand, the borrower can get favorable rates that are better than what they would get from a bank, something that becomes all the more prominent when they have good credit scores. On the other hand, the lender can enjoy rates of return on their money that is much higher than what they would have received had they parked their money in a savings account.

    Here are a few of the best P2P lending sites that are used by Ontario businesses:

    • Upstart
    • Funding Circle
    • Prosper
    • Lending Club

    Wrapping Up

    In this article, we looked at nine popular types of private funding sources. We started with equity financing, looking at institutions like incubators that will support companies at the ideation phase, all the way to companies like private equity firms that deal with mature and established corporations.

    We also ventured into debt financing, discussing commercial banks and finance companies.

    Finally, we pivoted slightly and looked at platforms (crowdfunding and peer-to-peer lending) that give us access to a wide pool of individuals who might want to invest in our company, loan us the money, or just donate it to us.

    When considering which source of private funding is best for your business, remember these key questions:

    • How big is your business?
    • How much money you are trying to raise?
    • How mature is your business?
    • Which sector are you in?
    • What are you going to use the money for?
    • What perks are you looking for?
    • What disadvantages would be deal breakers for you?

    Infographic of 9 Private Funding Sources for Ontario Businesses

    Private Funding Sources for Ontario Businesses

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