Explore Business Financing

Six Ways to Finance a New Business

Unless you are lucky enough to win the lottery or inherit money, it’s likely that you’ll have to raise funding to start your business or fuel future growth. Thankfully, there are a number of ways to finance a business—and you don’t have to choose just one. Explore the options below to learn about the many ways to fund your new venture.

Bootstrap (Use Your Own Money)

Investing some of your own money in your business—also known as bootstrapping—is smart. It makes you a more attractive risk for lenders and investors because it shows you have skin in the game and are prepared to back your business with your hard-earned cash.

Common ways to finance your business with your own money include:

• Use personal assets
• Sell assets you no longer need or use, such as your car or record collection
• Take a low (or zero) salary from the business while building cash flow
• Continue working at your current job or work part-time until the business takes off

Ways to cut costs when you’re starting out

Get Funds from Friends and Family

Money from friends and family, sometimes called “love money”, is a common way to access cash for a start-up. But it’s not always the best money—if the business fails, it can be awkward at the next family gathering! If you can make the loan short-term and pay someone back as fast as you can, it may be a good option.

Tip: Employees, friends and family may also be willing to invest in return for an ownership stake in the business.

Borrow from the Bank

At some point, you may need to borrow money from your bank—either through a business loan you pay back over time, or an overdraft or operating loan that lets you dip in and out of debt when you need it.

Making sure that your personal credit is in good standing when you are starting up is important. So is establishing credit under your business name—this allows your business to build a credit history, which can help with qualifying for other types of financing down the road.

Talk to your bank about the options that may be available to you. We offer a number of business loans and lines of credit to help with a range of finance needs. For example, our Royal Business OperatingLine^® offers a simple way to access working capital. You can also choose from a wide range of business credit cards.

Before applying for a business loan, you may need the following information handy:

• The reason you want to borrow money
• How much you think you need
• Update your business plan to show how you intend to repay the loan and how it will impact your cash flow
• Other debt you have

Tip: Try our business loan calculator to estimate what your monthly payment and interest costs could be.^*

RBC Black Entrepreneur Program

Access the solutions you need to start and grow your business, including loans, mentorship and more.

RBC Black Entrepreneur Program

RBC Black Entrepreneur Program

Access the solutions you need to start and grow your business, including loans, mentorship and more.

RBC Black Entrepreneur Program

Find Outside Investors

You may also want to seek out people or companies who could invest in your business. There are a couple types of outside investors to have on your radar:

• Angel investors are usually wealthy individuals who provide capital in exchange for ownership equity. The best time to approach angels is when you can clearly demonstrate that their investment will help grow your business. Search for possible angels in the National Angel Capital Organization member directory.
• Venture capitalists typically invest in young companies they anticipate will be sold to the public, or to a larger company, at a high rate of return. If your business is in a fast-growing industry with a large market potential, you may just catch the eye of an investor. The Canadian Venture Capital Private Equity Association (CVCA) is a good place to start.

If you plan to approach investors, keep in mind that you may need to form a corporation rather than a sole proprietorship or partnership. Plus, investors will likely want to see your business plan. Learn more about choosing a business structure and building your business plan.

Tip: Have a clear idea on the role you want investors to take in your company. Are you looking for silent partners who invest to realize a return, investors with expertise to complement your skills, or individuals who will take an active role in making business decisions?

Apply for Government Grants or Subsidies

Like free money? Unlike loans, grants don’t have to be paid back. Financial assistance from the government can help you get your business off the ground and also grow in the future—for example, through new products or adding staff.

Most government grants require you (the business owner) to contribute. Most often this means putting in your own money alongside government money (10% to 50% is standard). Another thing to note is that the government likes to invest in businesses that create jobs, innovate or drive research, so your business could be viewed more favourably if it does any of these things.

There are many different types of grants available. Some offer advice and mentoring, which is especially helpful when you’re just starting out. While certain grants may require your business to be operational for a set period of time, knowing your options can help you secure the funding you need as your business grows.

Learn More: Government Grants and Assistance

GrantMatch makes sourcing government funding easy by providing a curated list of government incentives based on your company profile. They can also help with grant writing, completing applications and more.

View GrantMatch Offer

Try Crowdfunding

Crowdfunding, also known as “democratic finance”, allows you to profile your business and attract investment (or loans) from a range of different people who wouldn’t normally be eligible to invest in new businesses.

To work, crowdfunding needs to be exempt from security laws. You’ll receive investment in your business through a crowdfunding platform hosted online, usually in return for shareholding.

For more information, check out the National Crowdfunding & Fintech Association of Canada.

Before You Seek Funding, Determine How Much You Need

If you haven’t already, it’s important to estimate how much money you need to start your business and make it through your first year. That way, you’ll know whether it’s feasible for you to raise this amount of capital and you won’t end up borrowing too much (or too little).

Estimating your costs falls into two categories:

• Start-up costs, which is how much money you need to start operating. Often these are one-time costs (like security or utility deposits) that you won’t have to pay again.
• Initial working capital, which is the money you need to cover overhead costs (like salaries, rent, etc.) until you start making a profit. For some businesses, it can take months or longer to generate enough sales to cover overhead.

Resources to help you determine start-up costs and manage cash flow:

How to Determine Start-up Costs and Working Capital

Start-up Costs Calculator

12-Month Cash Flow Forecast Template

Business Cash Flow Calculator