How To Get Startup Business Loans And Grants In Ontario

Jul 26, 2017

The best business idea in the world is useless if you can’t get it off the ground.

That’s what a lot of small business owners discover as they try to launch.

It’s a lot easier to make money when you have money. Perhaps this is why over 30% of small businesses fail in the first two years.

But Canadian businesses can tap into startup business loans to help get them where they want to go.

Below, we’ll take a look at loan options for Ontario based businesses.

Personal Funds

The majority of small businesses in Canada finance their business with personal savings. If you don’t already have savings, this can be a tough reality to face.

But personal funds also include friends, family, and inheritance. Make a note of potential sources of capital from your own finances first.

If you feel confident asking family and friends for contributions, then why not try?

Be sure to treat it as a professional transaction. Set your business plans down. Make sure they understand their role as investors and the associated risks.

The trick here is to not cause any damage to personal relationships should your startup fail. The last thing you want after a rocky start to your business plan is a falling out with your family.

Crowdfunding Startup Business Loans

The crowdfunding boom is allowing a lot of small businesses to successfully launch where they might not have been able to before.

Crowdfunding can take a few different forms, so let’s go over some of the most popular.

Reward-Based Crowdfunding

This is the kind of crowdfunding made famous by Kickstarter. Backers pledge a contribution and receive a reward that fits their backer level.

This kind of crowdfunding especially lends itself to “easy sells”. For example, a new gadget or a piece of entertainment that people want.

Crowdfunding has the advantage of not being tied down to any terms or conditions. You’ll never have to pay crowdfunding back except in the form of rewards.

However, this is very much a donation. Backers aren’t guaranteed to receive any money back if the project turns out to be a faulty investment.

Equity-Based Crowdfunding

Unlike reward-based crowdfunding, equity crowdfunding focuses on the returns to investors.

In exchange for their investment, investors expect to see rewards in the form of equity from a successful business. Equity investors invest in an unlisted company and receive shares for that company in exchange.

Like reward-based crowdfunding, this comes with the risk for investors of losing their investment.

P2P Lending

Think of P2P lending as a crowdsourced loan. Investors fund the loan online, using services that match investors and businesses looking for startup business loans.

You’ll need to show your credentials a bit more with P2P lending, such as your credit score. P2P lending can be a great way to get an unsecured loan with a fixed repayment rate. That rate is based on a simple online application.

But, unlike some forms of crowdfunding, this is a true loan. So, whether your business sinks or swims, you’ll be responsible for repaying the loan!

As with other forms of loan, failing your repayments on a P2P loan can damage your credit score.

Venture Capital

Venture capital has strict payback terms compared to other forms of startup business loans. It’s most suitable for companies with high initial costs looking to grow quickly.

These investors usually expect returns from equity in the company they’ve helped to fund. Often this is in stock, with the intention of selling it later for greater gains.

Venture capital is a powerful form of financing. Along with the capital, investors usually offer their connections as well. This can also bring in other funding streams.

But remember, investors often have a very strong interest in the company’s performance. So, startups using venture capital can expect a lot of scrutiny from their investors.

Government Grants And Subsidies

The Canadian government understands the important role startups play in the country’s economic strength. So, there are some government grants available for entrepreneurs.

Government grants can help you cover a lot of business startup costs, from marketing to equipment and salaries.

The major difference between a grant and a loan is that grants don’t need to be repaid. That’s great news for a small business!

Unlike the more general criteria of a loan, grants are issued under a specific set of terms you need to meet. These ensure the grant money is being used effectively.

Although they don’t need to be repaid when used correctly, grants do often require you to match a percentage of the funding at the outset.

Getting Grants

Firstly, grants are not always labeled by that name on Canadian government sites. Small businesses need to keep their eye out for certain terminology, such as:

  • Subsidies
  • Rebates
  • Tax credits
  • Awards

While not grants in the strictest sense, these are all chances for your business to receive additional money it doesn’t have to pay back.

Secondly, you need to consider the nature of your business. Some businesses are considered a much higher priority for grants. This can also vary from region to region. Northern Ontario is a much more grant-rich area than Southern Ontario, for instance.

Businesses that benefit from grants tend to be focused on research, technology, or social enterprise. Retail businesses, meanwhile, might find it harder to secure a grant.

Taking your industry into account also helps to narrow the search. Narrowing the field to grants for your industry makes it much easier to find appropriate funding.

There are several websites that aggregate the kinds of grants available to small businesses. Take a look through them and pin down which ones might be appropriate for you.

The application for a grant will also require very specific information. Expect to have to show your full business plan, grant need, marketing strategy, and the experience you’re bringing to your industry.


These are designed specifically for small businesses who might be struggling to secure a standard business loan.

Microloans are heavily location-dependent, but several are available in the Ontario area.

You’ll need to investigate whether these could benefit your company. Eligibility for microloans will vary from company to company, so expect to have to do some research to find one that fits you.

As indicated by the name, microloans are often in the sub-$20,000 region, so they represent smaller startup business loans than some options.

Angel Investors

Angel investors are individuals with an interest in funding businesses. They work much like a patron. Technically, friends and family are a form of angel investor. However, we’re dealing here with securing startup business loans from strangers.

Although angel investors are individuals, they’re often organized into larger networks who will put you in touch with the right investors for you. This can be helpful for smaller businesses without many connections in place.

Unlike traditional startup business loans, you’re much more likely to sway an angel investor with ‘soft’ arguments for your business or product. They might choose to back you simply because they like your idea or believe in your vision.

Of course, this can vary from person to person! Angel investment is risky for the individual, so many are choosy about who they invest in.

But this can be a great way to get a small business in Ontario out of the proof-of-concept phase and into the real world.

Angel investors also avoid some of the cons of receiving investment from friends and family. After all, family can be awkward enough without perceived debts hanging in the air!

You’ll often need to approach angel investors more organically than other startup business loans. Instead of expecting a strict business transaction, you’ll get further building a rapport and credibility. Networking is key here.

Bank Loans

Bank loans are one of the more reliable and straightforward startup business loans.

The exact details and terms of your loan will vary from bank to bank. For a small business, it’s worth shopping around to find the ideal match for you.

For a bank to take your business seriously, you’ll need good credit and a sound business plan.

Bank loans offer a good middle-ground between venture capital and crowdfunding. They can also be tailored to fit your business, from a smaller start-up loan to a significant investment of your initial business funds.

You’ll also be able to discuss your needs in full with a bank rep before entering into any decisions.

But once you’ve received the bank loan, the money is essentially yours to spend on your business needs. These represent a very flexible way to gain the initial capital for your business.


With this advice in mind, you should be able to secure some startup capital for your business in Ontario. And from there, it’s like we said: it’s easier to make money when you have money!

Be sure to follow our blog for more hints and tips to help reach your startup goals!



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