Startup Funding for Young Entrepreneurs in Canada
Look First to Futurpreneur Canada
If you’re young and want to start a business, finding the money you need to turn your vision into reality can be tough – especially if your dream is to start a retail business. The standard commercial banks generally aren’t interested in loaning money to people with little or no collateral, business grants are few and far between in Canada (see The Truth About Small Business Grants), and crowdfunding isn’t a good solution for everyone.
So if you’re 18 to 39 years old and want to start a business in Canada, Futurpreneur Canada is the first place to look.
Futurpreneur Canada is the main source of youth-specific small business funding in Canada, a non-profit organization that provides money, mentoring and support to aspiring business owners aged 18 to 39.
The thing that makes this organization’s startup funding so outstanding, in my opinion, is their dedication to business mentoring. Successful applicants can receive up to two years of mentoring through Futurpreneur’s network of entrepreneurs, mentors and business experts from across Canada.
The organization offers several different startup funding programs:
Financing With Mentoring
Futurpreneur’s general program for 18 to 34-year-olds who want to start a business provides financing of up to $30,000 and two years of mentoring.
Their general program for 35 to 39-year-olds provides up to $45,000 with two years of mentoring (more on this below).
What’s so great about this? Well, these are collateral-free loans at “better interest rates than most banks offer”(Futurepreneurs website).
The actual rate depends on whether you are receiving your financing through Futurpreneur Canada itself or through its partner, the BDC.
If you are 18 through 34 years old and getting a business loan of up to $15,000, you are borrowing through Futurpreneur Canada. Your loan will have a five-year term with interest charged at CIBC’s prime rate plus 3%. You will make only interest payments the first year. (There is also a program registration fee of $50 and a $15 program fee charged monthly for the duration of your loan.) Only your doting maiden aunt would give you a better deal (if you have one).
If you are 18 through 34 years old and wish to borrow more than $15,000, you can – up to $30,000. But then you will be borrowing through the BDC, and you will have to show a minimum investment of 10% of the total value of your project. Your repayment terms will be different too.
While you will still make only interest repayment in the first year, the interest charged on your business loan will be the BDC Floating Base Rate plus 5%. (You will need to contact your local or regional BDC office to see what this floating rate is.)
If you want to prepay part or all of your loan, you can; once a year on the anniversary date of the loan authorization date, you may repay 15% of the principal outstanding without indemnity. You can also prepay all or any part of the outstanding principal if you are prepared also to pay the interest owing to the time of repayment, together with an indemnity equal to three months’ interest on the principal prepaid.
You will also need to pay a $50 processing fee, which will be deducted from the initial loan disbursement.
If you are 35 through 39 years old, you can apply for up to $45,000 of funding through the BDC. The same conditions apply as for the potential loans to 18 to 34-year-old entrepreneurs just discussed.
Two Years of Mentoring is Included!
The biggest problem young entrepreneurs face isn’t finding financing, though; it’s having the expertise to execute their business idea successfully. Being a successful entrepreneur involves so many skills and so much knowledge – and so few of us are Renaissance men and women who have all of them in one package.
Nor do most of us have an extensive network of the right people when we start out – those individuals that have already made their mark in our chosen industry, those who have “been there and done that” and can provide us with guidance and inspiration.
Having a good mentor automatically increases your new business’s chances for success – so much so that even if you don’t need any business financing to help you get your business going, I recommend taking Futurpreneur’s Mentoring Only program if you can.
What You Need to Apply for Funding
Besides being the right age, you must also be a Canadian citizen or a landed immigrant and have a business that is fully operating for less than a year.
Your proposed business needs to create full-time sustainable employment for the applicant(s) and be suitable for government funding (i.e., not sexually exploitive or illegal).
You do not need to have a fully developed business plan before you apply for funding, but you will need to have one by the end of the application process.
You must also:
- Demonstrate some training/experience related to your business idea.
- Agree to work with a mentor for up to two years (4 to 5 hours a month).
- Agree to complete Futurpreneur Canada status updates every three months.
- Agree to provide authorization for Futurpreneur Canada to carry out a credit check.
- Supply two personal references.
- Assure that the business is NOT in the research and development stage.
- Assure that financing proceeds may not be used for refinancing existing debt.
- Demonstrate that you have been discharged from bankruptcy for at least five years or one year after receipt of a Certificate of Full Performance in the case of a Consumer Proposal.
You can apply for the program above at any time of year.
Special Funding Programs for Young Entrepreneurs
Futurpreneur Canada also offers several specialized startup funding programs for young entrepreneurs, including those for:
The Spin Master Innovation Fund
If your business idea demonstrates innovation in your field, consider applying for this fund. Each year, ten young Canadian entrepreneurs are given the personalized expert support they need to break into their industry and up to $50,000 in funding.
(Note that this is not a small business grant, but a loan. The loan repayment terms are extremely favorable, though. As of writing, the BDC (Business Development Bank of Canada) interest rate for Spin Master Innovation Fund recipients is lower than for the Young Entrepreneurs of Canada Financing + Mentoring Program for Startups.
This personalized expert support includes an Innovation Launch Pad Workshop and an Accelerator Workshop (both in Toronto) as well as ongoing mentoring and participating in development opportunities – once you get through The Spin Competition, where you’ll pitch your business idea to a panel of Spin Master executives and industry leaders.
Interested but don’t have a business idea yet? See 7 Ways to Come Up With Your Own Business Idea.
What Do You Need to Apply?
To be 18 - 34 years old
To be a Canadian citizen or permanent resident
To have an innovative idea, one that is going to push the boundaries of what’s possible, and have a viable business plan that “clearly demonstrates how the venture is going to be profitable and how it is innovative in its sector.“
Your Business Plan must also include Two-Year Cash Flow Projections on the Futurpreneur Canada Template The Cash Flow Basics.
(Note that your idea must be past the research and development stage, although a business plan with a working prototype may be considered.)
Scanned copies of Drivers’ Licenses of all age-eligible applicants
A copy of the appropriate business registration documents – a copy of the Articles of Incorporation and Shareholder Agreement if your business is incorporated or a copy of your Sole Proprietorship or Partnership Registration
These dates will vary slightly by year, so check the website for exact dates:
Applications Open: May 1
Application Deadline: June 19
Shortlisted Applicants Notified: June 29
Another Great Thing About This Competition…
is that if you apply and are not one of the ten entrepreneurs selected to go through the Spin competition, or do get that far and no further, you can transfer your application to Futurpreneur’s Financing and Mentoring Program (described above) if eligible and still get some funding.