How to Secure Business Funding as a Newcomer Entrepreneur in Canada

Introduction

Starting over in a new country brings excitement, fresh opportunities, and the chance to build something meaningful. And sometimes, succeeding isn’t just about finding opportunities; it’s about creating them.

In this guide, you’ll find an overview of three major business funding options available to newcomers: government grants, bank loans, and venture capital. Each option has unique advantages, requirements, and challenges.

Whether you’re looking for the flexibility of a grant, the stability of a bank loan, or the growth potential offered by venture capital, this guide will present the pros and cons, what to consider when applying, and tips for building a strong application.

Government Grants
Bank Loans
Venture Capital

Government Grants

Government grants can be an excellent way for newcomer entrepreneurs to secure funding for their businesses without taking on debt. These grants are especially suited for businesses that align with Canada’s priorities in areas like technology, environmental sustainability, or social impact. While grants offer a unique opportunity, they may not be the best fit for everyone—especially those needing funds quickly or with business ideas that fall outside common grant criteria.

Why Choose Canadian Government Grants?

Pros:

No repayment required. Unlike loans, grants are non-repayable, providing capital without adding financial burden.
Increased credibility. Securing a grant can enhance your business’s reputation, making it more attractive to potential investors and partners.

Cons:

High competition. Grants are highly sought after, meaning applicants face significant competition.
Time-consuming process. The application process can be lengthy and detailed, often requiring significant preparation and documentation.

Grant Amounts and Matching Requirements

Government grants vary widely in the amounts they offer. Some may be smaller, providing a few thousand dollars for early-stage projects, while others can cover a substantial portion of costs, sometimes up to $50,000 or more for businesses that align closely with national priorities.

Many grants require companies to “match” the funding amount, meaning that if awarded, you’ll need to provide an equal amount from other sources. This co-investment shows your commitment to the project but is something to consider if your business is still building capital.

Checklist for Applying for Government Grants

Summarize your business mission, target market, and how it aligns with the grant’s goals (e.g., innovation or community impact).
Define specific outcomes, such as jobs created or social benefits, showing how your business will positively affect the community.
Provide a detailed, realistic budget plan, including how matching funds (if required) will be secured.
Map out a timeline that includes key project milestones and demonstrates achievable goals within a feasible timeframe.
Include essential documents like financial statements, market research, and letters of support to reinforce your credibility.

Bank Loans

Bank loans can provide established, stable funding to help cover initial costs such as equipment, inventory, or operational expenses. For many newcomers, a bank loan represents a structured pathway to securing the financial resources needed for their business.

Why Choose Bank Loans?

Pros:

Bank loans can provide significant funding amounts, allowing entrepreneurs to make substantial investments in their businesses.
Many bank loans offer fixed repayment schedules, making it easier to manage cash flow.

Cons:

Banks typically require a strong credit history, which can be a barrier for newcomers who may not have an established credit profile in Canada. (For more information on credit history as a newcomer, check out this article by Scotiabank.)
Some loans require collateral, which can be challenging for those who may not have significant assets to secure the loan.
Depending on the type of loan and the applicant’s financial profile, interest rates and fees can add to the overall cost of borrowing.

Loan Types for Newcomer Entrepreneurs

Small Business Loans: These loans are specifically designed for entrepreneurs and can be used for various purposes, including purchasing equipment, inventory, or real estate.
Lines of Credit: A line of credit offers flexibility by allowing businesses to borrow up to a certain limit and only pay interest on the amount used. This can be beneficial for managing cash flow fluctuations.
Government-Backed Loans: These programs help newcomers access loans with more lenient requirements, often requiring less collateral and providing lower interest rates.

Tips for Strengthening Your Loan Application

Financial statements demonstrate your company’s health, with statements from the past two years or recent tax returns if statements are unavailable, especially for smaller loans.
Financial projections should include a realistic monthly cash flow forecast for at least 12 months. Prepare two sets—one assuming you receive the loan and another if you don’t.
A clear outline of how the loan funds will support your business goals.
Company information, including a summary of your company’s history, current operations, strategy, and management team.
Your marketing and production plans, such as your target market, competitive edge, and operational capacity.
Enhance your application with supporting documents, like market research, financial data, testimonials, and positive media coverage.

Venture Capital

Venture capital (VC) is a unique financing option that involves investors providing funds to startups and small businesses with high growth potential in exchange for equity ownership. Unlike traditional bank loans, venture capitalists typically seek to invest in innovative businesses that can scale quickly and offer significant returns on their investments. For newcomers with ambitious business ideas that target emerging markets or technologies, venture capital can be an essential funding source, enabling them to accelerate growth.

Why Choose Venture Capital?

Pros:

Access to substantial funds. Venture capital can provide significant financial support, often in the millions, allowing businesses to invest heavily in product development, marketing, and scaling operations.
Strategic guidance and networking. In addition to funding, venture capitalists often bring valuable industry expertise, mentorship, and connections that can help navigate the challenges of growing a business.
No repayment obligation. Since venture capital is equity financing, there is no need to repay the funds, alleviating cash flow pressures in the early stages of business development.

Cons:

Loss of equity. Accepting venture capital means giving up a percentage of ownership in the business, which can dilute the founder’s control and share of profits.
High expectations for growth. Venture capitalists typically expect rapid growth and high returns within a few years, placing pressure on businesses to perform and scale quickly.
Lengthy and competitive process. Securing venture capital can be a lengthy process, often requiring multiple pitches and negotiations, and competition for funding is fierce.

Key Tips for Pitching to Venture Capitalists

When preparing to pitch to venture capitalists, keep the following considerations in mind:

Tell a compelling story. Describe your business’s problem, solution, and market opportunity.
Highlight your team’s strengths. Show that your team has the skills and experience to execute your business plan.
Provide market insights. Show that you understand your target market, trends, and customer needs.
Prepare for investor questions, including business model, revenue streams, and financial projections.
Keep in touch with potential investors by updating them on progress, as relationship-building can be key.

Conclusion

Starting a business in a new country is a bold and rewarding path, and Canada offers various financing options to help newcomers succeed. From government grants to bank loans and venture capital, each funding route offers distinct benefits based on your goals and business model. By carefully selecting the right option and crafting a solid application, you’re already building a foundation for growth and impact.

Additional Resources

Whether you’re planning to move or recently moved to Canada, Scotiabank can help navigate the process with banking packages that help newcomers succeed financially. With StartRight^TM get one free year of the Preferred Package [HG1] chequing account, unlimited free international money transfers and access to credit cards designed for newcomers.¹

¹Terms and conditions apply; credit is subject to approval.

This article is provided for information purposes only. Any information, data, opinions, views, advice, recommendations or other content included in this article are solely those of the author and not of Scotiabank or its affiliates. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article is subject to change without notice. All third party sources are believed to be accurate and reliable as of the date of publication.