Looking for a bank loan? A $500,000 equity infusion? Or would you like to crowdsource some cash off the Internet? A one-day financial forum staged by Enterprise Toronto last week offered fundraising tips for entrepreneurs of all sizes and sectors.
The No. 1 takeaway: Raising capital ain’t easy. On a panel representing the full spectrum of financial resources, the banker, community-fund manager, crowdfunding consultant, angel investor and venture capitalist all agreed that the biggest mistake prospective clients make is thinking the process will be easier than it is. Yes, these funders want to do business with you. But they have terms, standards, qualifications and limits you have to meet, and that will require preparation, analysis and clear thinking on your part.
But here’s the good news: if this process were easy, all your competitors could get funding, too. So be glad that growth capital is available only to people like you, with the smarts, vision and track record to earn it.
As keynote speaker Jacoline Loewen told the more than 100 forum attendees, the growth projections and marketing plans you prepare for funders’ scrutiny represent essential thinking about your business. Even if you don’t score capital with every meeting, going through this process will strengthen your business and make you that much more attractive to the next lender or investor you meet.
Here are some key takeaways from the sessions I attended:
Keep up! There are new forms of financing coming on stream all the time, to address specific needs or market niches. For instance, this was the first time I had seen a financial panel that included microloans and crowdfunding — two new and very different sources of capital for those who have trouble raising conventional financing.
Can’t get a bank loan for your startup? Ontario’s Trillium Foundation bankrolls a number of community funds that provide low-cost microloans to qualifying entrepreneurs. (In general, you should own 51% of your business, it’s helpful to have taken some business courses, and you must use the loan to expand your business rather than pay off debt.) Panelist Michael Scotland of Toronto’s Access Community Capital Fund said first-time microloans are available for as much as $5,000, at interest rates just 1.5 percentage points above prime. (There’s also a 5% administration fee.) If you pay off your first loan, Access may provide subsequent loans up to $10,000.
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