Starting your own business means confronting the unknown. There’s simply no way to tell, with absolute certainty, how your business will do until it’s actually out there in the wild.
But that doesn’t mean that entrepreneurship has to be shrouded in mystery. One area where clarity is keenly needed (and too often lacking) is accessing financing.
So let’s peel the curtain back and go over what you’ll need to get your business financed.
A business banking account
The first step is also the easiest one. When your business gets funding, you’ll need somewhere to put those funds, make and receive payments, and otherwise move money around.
To open a business banking account, you need to provide a few basic pieces of information to your bank: your incorporation documents, two pieces of government issued ID (at least one with a photo on it) for each shareholder, partner or authorized signers, two years of employment history, and contact information. That’s it!
Data on how you handle your financial situation
Securing funding for your business is a little trickier than opening a business account. But don’t worry—we've broken down the process to make it as smooth as possible.
The first thing you should grab before you apply for financing is your tax return, also known as a T1 General, from your friends at the CRA. This lets the bank see the source of your income, which is an important consideration.
Next, you’ll want to create some kind of personal net worth statement. The idea is to add up your assets—that’s all the stuff you own, including cash and investments, along with anything you’re owed, like an outstanding invoice. This figure is weighed against your liabilities—that’s what you owe other people, like the mortgage on your house or the balance on your car loan. You can make your own personal net worth statement if you like, or you can just use our handy Net Worth Calculator.
Once that’s done, it’s time to collect any forward-facing documents on the finances of your business. This includes franchise agreements, lease agreements, and quotes on construction and equipment costs. Some of these might be works-in-progress, and that’s OK. (For example, we don’t recommend signing a lease agreement until you’ve spoken with a banker you trust.)
For quotes of any kind, banks like to see more than one. That shows us that you’re putting in the work to find a good price for the equipment or services your business needs.
The final step here is to grab the latest copy of your business plan. Your business plan is really, really, really important for your financing application.
A top-notch business plan
It is hard to overstate the value of a great business plan. A detailed and up-to-date plan shows banks that you’re on top of your game and should be taken seriously. This can go a long way towards securing your financing.
But the importance of a plan goes beyond even this. Your business plan should guide every decision you make as you start and grow your business. It is the guiding light of your business, its true north, its manifesto, and more.
So what makes a good one? Here’s what we look for.
- A detailed marketing section—this shows us that your idea has been validated past the back-of-a-napkin, pie-in-the-sky phase. Include primary and secondary market research and any evidence you’ve gathered that quantifies demand for your offering. Also include your business development strategy. Advertising and promotion plans, while nice to see, are of secondary importance.
- Up-to-date information—a business plan should be a living document that gets updated as circumstances change and new information becomes available. This also means you don’t have to have everything 100% perfect and settled in your very first draft. It’s okay to change your plan over time. But out-of-date information in your business plan is a red flag when applying for financing.
- A risk management section—all businesses face risks. We want to see that you’ve taken stock of yours and done everything in your power to mitigate them. Cover strategic risks to your business as well as personal risks, like your plan for dealing with a critical illness or injury.
- An assessment of management section with some swagger—this is a place to brag about yourself and your team. Tell us where you earned your Ph.D, tell us why your general manager is the next Henry Ford. Tell us why your management team is going straight to the top.
- Cash flow projections up to 24 months—we know no one’s psychic, but we still like to see how much revenue you expect to gather. There’s no need to go beyond two years out. The world of business is so volatile that looking further ahead is not often useful.
Creating a strong business plan takes more than an afternoon, but it’s worth it—we promise. If you need some more help getting your business plan started, take a look at our Business Plan Template.