Obtaining Financing
this unit used in BCS 421 and MRK 200
updated 2008 Feb 21
.. This unit is used in
    o MRK 200
    o BUS 106
    o BCS 421
Not all of the material in this unit will be used in each of these courses; the amount of material covered will be indicated by the actual lecture given in class by the professor. Some courses cover this topic extensively, some courses deal with it briefly.

Feb 13th 
Section UU 


Obtaining Funds
. Before you go and look for money - you have to deal with the question of what do you need the money for, and how much - these are not simply matters but rather they require a great deal of thought and analysis.

It is necessary to deal with these questions because the people to whom you ask for money will undoubtably want to know your reasons for the money and plans for using it since it relates to your ability to make a profit and pay back the lender.

  • personal money
    • savings
    • credit cards
    • property and assets
  • "love" money 
    • friends and 
    • relatives
  • banks
  • credit unions
  • government
    • federal
    • provincial
    • municipal
  • suppliers
  • leasing vs. buying
  • customers advances
  • criminal organizations
"You Don't Need a Fortune to Start a Small Business"
was the title of a story in the Financial Post 2008 Feb 18th
story was at http://www.financialpost.com/small_business/succession/story.html?id=315997
Andrew Webber is a nationally ranked marksman who started his own company making rifle scopes, and eventually grew large enough to sell rubber armoured rifle scopes to the Canadian army
"When the former naval engineer had difficulty finding accurate optical sights needed to win competitive rifle matches, he started a business to help himself and his rivals access better equipment. With his characteristic ability to hone in on a target, he started his business on $1,000, which he raised by selling one rifle.

Today his company, Halifax-based Armament Technology Inc.,  www.armament.com  sells weapon-sighting systems to armed forces and security firms in Canada and the United States. Its sales are $13-million. It's proof you don't need to raise a fortune to start a business. "I didn't spend money foolishly," Mr. Webber says. "I worked every weekend and holiday, I drove old junkers for cars."

Rick Spence, Financial Post was the journalist who wrote the story about Webber



"You Don't Need a Fortune to Start a Small Business"t was the journalist who wrote the story about Webber

Spence explains
"Most entrepreneurs...start businesses with their own money
click to view larger "Often, though, that's not enough. If you're starting a retail business, you may need to upgrade a property and buy new furnishings and equipment. If you're a manufacturer, you must invest in machinery and inventory. If you're starting a technology business, you may need to hire software developers long before you have anything to sell."
Spence adds 
"If you've a proper business plan, you'll know your startup costs and how much money you need to get your business to the break-even point. Now all you have to do is find the money."

"For some people, this may be surprisingly easy. Established homeowners with a good credit record and years of equity under their belt can often draw on a bank line of credit secured against their home.

But if you don't have personal assets to pledge against a bank loan, or if you need more than your home is worth, here are likely places to look for startup cash. If your needs are modest, you may get by using credit-card advances.

Advantages: There is no hassle, it's easy to tap, and you can pay money back any time. Drawbacks: This is expensive money, probably costing you 12% to 18% a year. And it may not provide enough cushion if business is slower than you forecast."



"You Don't Need a Fortune to Start a Small Business"
was the title of a story in the Financial Post 2008 Feb 18th
by Rick Spence

Spence says
"One of the most common forms of startup financing is "love money," a.k.a. the bank of mom and dad. Some entrepreneurs raise $10,000, $20,000 or more from various family and friends, sometimes without so much as a promisory note. Since the capital is being offered to you in love and trust, respect that commitment by being clear about your intentions.

That means sharing your business plan; explaining what the money is for; and what's in it for them. Make sure your backers understand this is a high-risk investment; they may never see their money again. Establish clear terms: are they lending you the money (for how long? at what interest rate?) or are they investing in business (how many shares? at what price? how can they expect to sell their shares?). "


Women Entrepreneurs


Women Entrepreneurs

Obtaining Funds from a Canadian  Bank
. There are a number of articles in magazines and newspapers from the 1990's through to the early years of the Millenium about the difficulty that average Canadians have borrowing money from the bank for a small business.


Ellen Roseman wrote and article for The Toronto Star 2003 Nov 12th titled
"Women  entrepreneurs blast big banks"
Roseman writes
"Access to capital is a huge problem, not only when starting a business, but also  when expanding a business and installing new technology.  "Women entrepreneurs find it particularly gruesome to raise money for the  necessary technological backup for their businesses," says Anna Porter is one of Canada's mostsuccessful publishers. 

Roseman describes Porter's experience
"Key Porter Books  Ltd., started in 1979, has $8.8 million in annual sales. She's 52nd on the list of Canada's top 100 women business owners, according to Profit magazine's November issue. Yet in a letter to the Prime Minister's task force on women entrepreneurs, Porter sounded distinctly unhappy about the challenges she has faced.  "My own experiences with banking have  been horrendous, somewhat exacerbated by  the fact that banks are allergic to the publishing business as well as to dealing with women entrepreneurs," she told the task force."

"Rebecca MacDonald runs the biggest business on the Profit 100 list, Energy Savings Income Fund, which sells natural gas and electricity contracts  door-to-door. Founded in 1997 as Ontario Energy Savings Corp., the company  went public in 2001. It now has a $1 billion market capitalization and $538.7 million in annual sales. But MacDonald, too, sounds off against banks in an interview published in this month's Profit magazine. While some are trying to target female entrepreneurs,  "they still view those women as a risk walking through the door versus an  opportunity," she says. She's in favour of more competition: "I'd be very happy to open up this country  to foreign banks. I think it would shake our Big Five."

Sarmite Bulte chaired the task force on women entrepreneurs, which was set up  a year ago [in 2002] and heard from more than 1,000 women across Canada. 

" A major issue for women is the lack of a credit history. Many have used their spouses' credit cards and are not the primary debtors on mortgages and car  loans. As well, most women-owned businesses are in the service sector and don't have hard assets to pledge as security for loans."

Obtaining Funds from a Canadian  Bank :-(

Spence explains

"Contrary to many people's expectations, Canada's chartered banks are not in the business of lending to startups. "Their margins are too small," says Toronto accountant and entrepreneur Andrew Wilkes. "Banks traditionally lend against hard assets receivables, inventories, and personal guarantees."

To help Canada's banks and credit unions back more entrepreneurs, Ottawa has established the Canada Small Business Financing Program, which guarantees

85% of a loan to qualifying businesses with less than $5-million in sales.

The money must be used to fund hard assets, such as buildings, equipment and vehicles (but not working capital or inventories). The maximum loan size is $250,000. Borrowers pay their lender a 2% administrative fee on top of regular interest payments."

from "You Don't Need a Fortune to Start a Small Business"
by Rick Spence in the Financial Post 2008 Feb 18th