Once you have listed the start-up costs and operating expenses for your business, you need to look at sources of financing, and then select the source that best suits your business needs.

As an entrepreneur, you will find several sources you can tap:

YOUR OWN MONEY - This includes the money you have in bank or other financial institution, as well as money in the form of bonds, GIC (guaranteed investment certificates) or RRSP's (Registered Retirement Savings Plans).

LOVE MONEY - This refers to personal loans from friends, relatives and or potential employees.

TRADE CREDIT - This type of credit allows you to buy merchandise from suppliers on credit, with understanding that you will pay for it in the near future (usually in 30 or 60 days).

PARTNERS - You can take on a partner and share the start-up costs and other costs.

MORTGAGE LOANS - If you own your home you can take out a mortgage on it. Remember that you might lose your home if your business fails.

GOVERNMENT LOANS

SMALL BUSINESS ACT LOANS -The Small Business Loans Act guarantees loans from chartered banks to small businesses. In other words, the government is responsible for paying the loan back to the bank if the small business owner cannot. These loans can be taken out to buy equipment, a building, or land. They must be secured with the purchase. That is, if the owner cannot repay the loan, he or she may be required to sell the asset bought with the loan.

VARIOUS GOVERNMENT LOANS - The government (through the different programs) offers grants and loans and loan guarantees to businesses that qualify as exporters or innovators, or businesses that are willing to locate in areas requiring employment. To qualify for most of the funds available through the government, the business must provide ongoing employment and must stimulate economic activity.

BANKS AND COMPANIES

BANKS AND TRUST COMPANIES - Banks are in the business of lending money. Before granting your business a loan, bank needs to be assured that you and your enterprise meet specific credit criteria. They are happy to help entrepreneur who has convinced them of the possible success of a business idea. If your credit record is poor, you might be considered too great a risk for a loan.

FEDERAL BUSINESS DEVELOPMENT BANK (FBDB) - This corporation is a lender of last resort. It will lend money to a new or existing business if the business cannot obtain funds anywhere else and if it is convinced that the the business venture is sound.

SHARES - Once a business has grown to a certain stage, it can raise money from the general public by incorporating and selling shares in the business. These shares has to be issued under the authority of the corporate charter and the securities regulations. However, during good economic conditions this can be an excellent source of funds for a business.

VENTURE CAPITAL - It is usually long-term and risk capital. Companies providing venture capital take an equity position (often in the 20 to 40 percent range) and it's doubtful such partners will remain silent, they'll want to take an active role and consultation on such matters as financial planing & control, accounting and marketing. Because venture capital takes a minority position, they prefer firms that have management with proven ability.

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