At Business Link, we get a lot of questions about money. Quite often those questions are about how to get money to buy essential equipment needed to start a business. There are currently no grants for this type of activity, but there might be some paths you can take.
Learn from My Mistakes
When I started my first business as an owner/operator driving a truck for a snack food company, I thought it would be easy to get some money to start up. After all, I mainly needed a truck, an asset that the bank could easily take back if I defaulted, and my credit was pretty good. I went over to the bank and asked for a loan. I was surprised to find out that it wasn’t going to be that easy. The bank turned me down for a business loan but ended up offering me a new credit card that I used to finance the business, while the snack food company helped me finance the balance. Finding funding will probably be challenging for you as well. Now that I am a lot older and a little wiser, maybe I can suggest some other options.
Learn from an Innovator
In 1956, while working for the Ford Motor Company, legendary businessman Lee Iacocca came up with a plan to sell cars by having the customers pay in installments (an early version of the modern day car loan). Up until that time, cars were paid in full when people bought them. This new method helped Ford drive away from the competition and beyond being a huge key to their success, it changed customer purchasing forever.
When I talk with startups, they often forget all about Lee’s innovation. When you are looking to buy equipment, and even supplies, look no further than trade credit from suppliers. This is the credit that you get from suppliers that allows you to buy now and pay later. The main benefit to this (besides actually getting some equipment) is that you can spread out your payments over the life of the equipment and you don’t have to spend all your cash at the beginning of your business when you need it the most. This purchasing method isn’t reserved for big purchases either. Lots of retail locations will be happy to get you a credit card to buy up those smaller tools that you might need.
Use What You Learned
Do you remember when you were young and your parents co-signed for a loan for you? Me neither. Maybe it’s time that someone trusted you (*cough* Dad) and helped you with that loan. The Canada Small Business Financing Program is a program that does just that. You can get the government to back your loan when you are looking to finance renovations, equipment purchases, vehicles, and even when buying commercial property. There are some exceptions though. Don’t look to this program to help fund any inventory, advertising, staff or labour costs, or cash shortfalls. To apply, just go to the branch of your bank that is participating in this program (the list is here).
Before you buy, ask yourself a question, “Is this equipment something I NEED right now?” There are a lot of companies out there happy to rent you equipment that you might only need for one job or only a couple times a year. Build the rental costs into your quotes, and save your cash. Remember that one of the keys to starting a successful business is managing your cash flow. If it flows away, so will your business, so try not to spend what you don’t have and get washed away.