Federal permits

It can be worth registering with the Canada Revenue Agency (CRA) even if you don’t technically need to. This is because it gets you a business number. You need this if you do later apply for any federal government program.

You must register with the CRA if any of the following apply.

• You earn more than $30,000 annually

• You need to collect Goods and Services Tax (GST) or Harmonized Sales Tax (HST)

• You have employees and hence pay related taxes and/or Canada Pension Plan contributions

• You are liable for corporate income tax

• You manage import/export and/or excise duties

• You pay insurance premium tax

• You pay air travellers’ security charge

Provincial permits

Many small businesses need to register with their provincial tax regimes. If you’re operating as a sole proprietor or as a partnership, it may be worth registering voluntarily with your province. This gives a little protection to your name. It also adds to your credibility.

Municipal permits

Generally, even small businesses need to apply for a business permit. If you’re running a knowledge-based business from home, this is likely to be a formality.

If you’re running a business that could potentially cause disruption, you should be prepared to demonstrate how you’re going to mitigate this risk.

You are only likely to need to look at environmental, zoning and building permits if your business meets any of the following conditions:

• Impacts the environment

• Handles hazardous materials

• Is involved with construction

Applying for funding

There are three main ways a small business can get the funding it needs. These are:

• investment

• government support (e.g. grants for small businesses)

• debt (e.g. getting a business loan)

Here is a quick guide to each of these options.

Investment

Although you may not think about it this way, most if not all small businesses are initially financed with investment funds. At a minimum, small business owners contribute their time, which has a value. Realistically, most contribute some level of capital as well.

Some entrepreneurs may want or need to take this a step further and get business financing from third-party investors. This can give the business the funds it needs to grow, without the concern of how to repay a small business loan. It can also help to bring in additional expertise.

There are a variety of routes you can take to reach out to potential investors. Whichever route you take, expect your business plan to be examined closely. This is another reason why it pays to take the time to create the best one you possibly can.

Government support

Government support is available in many forms. The main ones include:

• Government financing programs e.g. the Canada Small Business Financing Program (CSBFP)

• Small business loans and capital investments

• Tax credits

• Wage subsidies

• Grants and other non-repayable contributions

Each scheme has its own criteria for determining who is and is not eligible. As a rule of thumb, small businesses that can reasonably be described as social enterprises are most likely to be eligible for direct financial support.

For example, if businesses further social goals (such as supporting vulnerable minorities) or promote sustainability, they are relatively likely to qualify for direct grant aid.

But no matter what type of small business you run, it’s definitely worth checking to see if you could qualify for support. Quite simply, you have nothing to lose by doing so and potentially a lot to gain.

Keep in mind that government bodies can sometimes act as non-commercial lenders. In other words, they can issue loans that you need to repay. Those loans can be vastly more attractive terms than you would get from a commercial lender. These types of small business loans can be easier to get than non-repayable grants.

Debt

Realistically, this is probably the default small business financing option. It can also be a very good one. Making a loan application for a regular business loan can be more straightforward and quicker than securing either investment or government support. Getting a business loan from a regular lender also allows you to keep full control of your business.

Here is a quick guide to the basic process for making a loan application for a loan from a regular (commercial) lender.

Decide if you’re going for a personal loan or a business loan

If you’re a sole proprietor or a partner, go for a personal loan. If you’re a limited company, go for a business loan. This starts the process of building your new business’s credit rating.

You may have to give a personal guarantee to get a business loan but this is still usually the best option. If you can’t find a lender to offer a business loan, you could take out a personal loan. You could then loan this to your business yourself. Ideally, you should convert this to a proper business loan as soon as you possibly can.

Decide if you’re going for a secured loan or an unsecured loan

If you have assets you can offer as collateral, a lender may offer more attractive business loan rates.

Work out how much capital you need

You definitely need to tell a lender how much capital you are requesting. Most lenders also want to know why you want the money. This can play an important role in their lending decision. For example, if you want the money to buy tangible assets, they know that these could potentially be sold to repay (part of) the business loan.

Research potential lenders

Be prepared to go away from the mainstream here. For example, look at credit unions and peer-to-peer lending platforms. These options may offer more flexibility to small businesses than standard commercial lenders. They may also offer more attractive loan rates.

Check what paperwork is required

This step may seem really obvious, but it can be surprisingly easy to overlook. It’s preferable to have all your paperwork ready before you actually apply for your business loan.

The main reason for this is that it helps to avoid confusion and delays. Another important reason is that it shows a potential lender that you are organized and on top of your finances.

You will likely be required to produce your business plan or at least certain parts of it. If you haven’t already created a business plan, then do so. If you have, double-check it and see if there is anything that could be improved.

Make your application

Again, this may be stating the obvious, but read the instructions carefully and be sure to follow them to the letter. Give yourself plenty of time to do this as the application process for business loans tends to be very thorough.