Can I get a loan only with my idea?
An excellent idea and good planning are essential tools for a successful business. Unfortunately, an idea, no matter how good, is not enough to raise the capital needed to start a business or improve an already existing business.
The popular belief that an idea and a business plan provide the necessary financing is a myth. Usually, entrepreneurs are not approved for bank financing only based on their idea and their potential to start a business.
The business plan serves as a guide for the average investor. However, it invests in you, in your business, in the product you want to sell, in the people who work for and with you.
Business financing debunked
- Venture Capital is a valid option: Unfortunately, this form of financing is not valid for the majority of companies. The majority of companies that are fortunate to work with venture capital are companies with a very good reputation and well-known owners. If you want to open a neighborhood bookstore, venture capital is not the best for you.
- Bank financing is excellent for start-ups: In fact, banks rarely invest in start-ups; banks prefer well established companies.
- The Business Plan Guarantees a Lender: As mentioned above, no matter how good your business plan is, it does not guarantee funding. As an owner, you must convince the lender that you are the right person to turn your idea into a successful business.
That being said, you still need a good idea and a great business plan; it’s just that you can not just rely on your business plan and your idea. Your idea will be the cornerstone of the business, the starting point. The business plan will be the ultimate guide for you and your investor. This will tell you how much money you need and for what task. Everyone you approach will want to see your plan.
Where to find the money?
Where you are looking for money and where you will find it will depend entirely on the type of your business. Each company has its own needs and as an entrepreneur, it’s up to you to find the right financing for your project. Small business owners looking for some funding to increase their visibility should not be targeting the same lenders as a growing technology company.
Loans for SMEs
The Canadian government (see their website ) is working with financial institutions to provide SMEs with the financing they need. To qualify, you must be either an SME or a start-up and have an annual gross income less than or equal to $ 10 million.
Your funding will still be provided by a traditional financial institution (banks, credit union, etc.). So, you will have to present your business plan directly to the institution and the decision to approve or reject will belong to them.
Ordinary bank loans
If loans for SMEs are not what you are looking for, then you can opt for an ordinary loan. This type of loan is not guaranteed by the government, which gives you greater financial freedom. To get this loan, you just have to do business with your bank and present them your business plan.
Alternative creditors are gaining more and more popularity among entrepreneurs with some financial difficulties or a less brilliant history. Usually, these lenders do not place much importance on your credit score and credit history . These lenders instead analyze the growth potential of your business and want to help you achieve your goals.
The process is rather quick, which makes it very attractive for entrepreneurs who are looking for quick financing to seize an opportunity or to cope with an emergency.
Cash advance payments
For businesses that have a lot of day-to-day credit card transactions, advance cash payments can be a valid option. Convenience stores, restaurants and other small businesses can benefit greatly from these cash advances. Usually, the creditor lends money based on the volume of transactions you make.
The terms of this type of loan differs from one lender to another, but the payment is usually done through a daily percentage on the volume of your transactions.
choose the correct option
We understand that choosing the right financing can be a difficult task, especially since it will have a direct impact on you and your business. But, as the owner, you are in the best position to make that decision. In fact, no matter what you choose, make sure you feel comfortable with that choice.