Financing your Company
You have three ways to move personal money or assets into a company. One is to buy shares from the company and inject capital into the company. A second is to lend the company money through shareholder loans. A third, is if you have an existing asset or business, you can ‘roll’ it over into the company. Partnerships can also roll partnership property into a company.
The company can borrow money from shareholders, friends or banks. Most companies start with shareholder loans. Banks may want personal guarantees from the directors or major shareholders to secure larger amounts of money.
One way of raising financing is to start selling equity in a company, and have the company issue new shares. You can either issue voting shares, non-voting shares or preferential (non-voting) shares.
Bringing in shareholders typically means that more people will want a say in the business.
Be careful on who you ask for money. While family and friends are generally allowed to invest in your company, you need to follow securities regulations before marketing to the general public.
There are two primary ways to find new investors:
(A) The first is through a pitch to ‘dragons’ or accredited investors. Generally, these are people who earn over $200,000 a year or are worth well over a million dollars.
(B) The other is by marketing over the internet. There are rules that need to be followed, including limits of $1500 a person and $150,000 a round and papers that need to be filed. This is called crowd-sourcing.
If you are inventing new products or new services which requires research or testing, you may be eligible for grants to help you hire students, Canadian SR&ED tax refunds on labour and operating costs, or other programs. To be eligible, you’ll need a hypothesis and document your efforts to solve it.