Battered Canadian businesses are looking for access to capital to help them forge ahead through the challenges that have disrupted the global economy. The EDC BCAP Guarantee was developed to that end in the face of the pandemic, but there are many tools at your disposal. As part of our efforts to help businesses recover, EDC has put together this guide to provide you with insight into those options you may not have already discussed with your financial institution. Consider these nine ways you can get the financing you need—whether through traditional means, or more creative alternatives—which we have bucketed into three categories: grants, debt financing and equity financing.
1. Seek government grants
If you’re concerned about your ability to pay back a loan, you may decide to look for a grant instead. Whether you’re hoping for a local or a national grant, check out Grants and funding from the government of Canada. It starts with a brief, straightforward questionnaire to identify the type of funding you’re looking for, helping refine results and ensure they’re relevant to your needs.
Innovation Canada also has an online tool that prompts you to describe your challenges from a series of drop-down options. Based on your businesses profile, the tool will present you with a list of support choices, some of which are grants.
Once you’ve identified grants that seem suited to your business, you’ll need to put together a grant proposal. Find advice on Writing a Government Funding Proposal For Your Small Business.
2. Consider the EDC Business Credit Availability Program (BCAP) Guarantee
In today’s uncertain economic climate, it can be difficult for businesses to get the credit that they need from their financial institution (FI). To make it easier, the EDC BCAP Guarantee provides your FI with the confidence needed to offer you additional capital. This decreases the FI’s risk, making it possible for them to say “yes” to your request for access to a new line of financing. This debt-based solution is available to exporters and non-exporters alike and is best suited to those who, as a result of COVID-19, need more working capital to cover operating costs. Find out more about the EDC BCAP Guarantee.
3. Access the Export Guarantee Program
The Export Guarantee Program (EGP) works the same way as the EDC BCAP Guarantee—it decreases your FI’s risk and gives them the confidence to provide you with more financing. The EGP offers up to $10 million in guarantees and is so flexible it can support more than 10 different financing scenarios, ranging from bigger operating lines to assistance with your international investments. This solution, however, is only available to exporting companies and can be used to do things like enter a new international market, acquire a company or buy equipment. In contrast, the EDC BCAP Guarantee is only for covering operational expenses, providing capital to those who need it because of the pandemic.
4. Get financing based on a sale
If you have an order from an international company, but you are unable to purchase the supplies to fill it, EDC and Business Development Bank of Canada (BDC) have partnered to offer a solution. With EDC-BDC Purchase Order Financing, we’ll lend you part or all of the money you need to fulfill the purchase order and you can pay it back when you get paid. That way, you can focus on an exciting new opportunity instead of looking for a way to pay for supplies.
5. Insure your sales
EDC Credit Insurance can help you optimize your cash flow by protecting one of your largest business assets, your accounts receivable, making sure that you get paid - even when your customers don’t pay. It covers up to 90% of your insured losses and makes your incoming revenue more predictable. In turn, it may help to mitigate the risk FIs associate with your business when considering whether they provide you with financing, thereby increasing the likelihood that they’ll be able to offer you a loan.
6. Source equity financing
Can you make a good case for your business’s long-term success? Promising dividend forecasts may inspire shareholders to increase their investment, increasing your cash flow without requiring new debt. Find out ten ways to create value for your shareholders.
If you don’t yet have any outside investors, now might be the time to consider taking your company public. It’s not an easy decision, but it can give you the capital you need without necessarily giving up the majority control of your business. Learn how to publicly sell shares in your company with this guide on how to “go public” in Canada.
7. Get crowdfunding
Crowdfunding is an alternative way to raise money that has truly exploded thanks to the Internet. Many start-ups use it to turn great ideas into real businesses, but there’s no rule that says you can’t use it to boost an existing business. Interested in finding out more? Access more info and guides to get you started.
You can undertake this tactic on your own, or in partnership with other businesses. To help businesses like yours that might be struggling as a result of COVID-19, Crowdfund.ca has created “Pay It Forward,” a free campaign for helping businesses crowdfund (they usually charge a fee). This campaign helps businesses generate advanced sales of their goods and services by offering fixed-value "business credits" to mitigate short-term cash concerns.
8. Find angel investors
There are wealthy businesspeople out there who want to invest in Canadian businesses, but it’s not always easy to find them, since they tend to keep a low profile. (But don’t let that stop you: here are 9 steps to finding angel investors for your business.) So why would you look for one of these “angels?” To start, they’re usually quite experienced in business and want to help. Unlike some traditional investors, who may simply buy stock through an intermediary and have no interest other than returns, an angel investor often gets to know the company CEO well and may help make business introductions or provide advice.
Even though angel investors are usually associated with start-ups, you may be able to find one who is willing to help you right now, often with conditions. Be ready with a compelling business case showing how you’re adapting to the current business environment and expecting your business to thrive again in this reopened economy.
9. Approach venture capitalists (VCs)
According to the Government of Canada’s Venture Capital Catalyst Initiative, venture capital firms invested $6.2 billion into Canadian businesses in 2019. At first glance, venture capitalists may seem similar to angel or equity investors, but there’s definitely a difference—VCs are employed by a firm that draws from a pool of investors’ money, offering a private source of equity funding for companies they feel have significant growth potential. They tend to favour financing innovative, high-tech companies that are just starting out and often expect to have a large stake in the company and drive the decision-making. There are many venture capital firms in Canada to choose from, though they often have specific types of businesses that they want to invest in, so you’ll need to do some research on prospective firms to find a good fit.
Another venture capital avenue to explore is the government’s $400 million Venture Capital Catalyst Initiative, which aims to help small- and medium-sized enterprises grow. The initiative focuses on businesses in underserved sectors, cleantech companies and businesses committed to growing women’s presence in their workplace. Check out the call for expressions of interest to see if your company qualifies.