Apply Now

Can I Get a Business Loan Based Solely on an Idea?

Loans Canada: The Country's Best Loan Comparison Platform

Can I Get a Business Loan Based Solely on an Idea?

Written by Caitlin Wood

Can I Get a Business Loan Based Solely on an Idea?

Categories

Business Business Financing Business Loans

A great idea and a well thought-out business plan are two invaluable and essential things that all business owners need to have, but unfortunately one great idea won’t guarantee you the money you need to get your company started or improve an already established one.

The belief that an idea (and a business plan) will generate the financing you need as a business owner is unfortunately a myth. Almost all financing options that are available to you will require an idea and business plan but you won’t be approved for a loan based solely on your idea or ability to create a great business plan.

The average investor requires a business plan as a way to document the most important information about your idea and business, but they invest based on you as a business owner, the people who work for you and the product you’re creating or service you’re providing.

Business Financing Myths, Debunked

  • Venture capital is a viable option. Unfortunately venture capital financing is not a viable option for most businesses. Most businesses that have the opportunity to work with venture capital have high profile management teams and high profile owners. Your business plan to open a great neighborhood bookstore isn’t what venture capitalists are looking for.
  • Bank funding is great for start-ups. On their own, banks don’t often fund start-ups; they look to invest in well established businesses. We discuss government backed small business loans later on.
  • Business plans sell lenders. As we discussed before, no matter how well written your business plan is it won’t guarantee that you get the financing your need. As the business owner you need to convince a potential lender or investor that you’re the right person to run your business and that you know what you’re doing.

This being said you absolutely need a great idea and a business plan; you just can’t put all your hopes   into your idea and plan. Your idea will be the backbone of your business, it will be the starting point from which all your future improvements come from. And your business plan will be the ultimate guide for you and your future investors, it will provide the details for how much money you need and where it will be spent. Anyone you speak to about your business will want to see a business plan.

Where to Find the Money

Where you look for the money and where you’re able to find it, completely depends on your business and its needs. Every business has its own unique needs and as the owner, it’s your job to decide what kind of funding is best suited to your business. Small business owner’s looking for a manageable loan to help open a new location or increase their advertising budget shouldn’t look in the same place as a high-growth internet based company.

Small Business Loans

The government of Canada (check out their site here) works with Canadian financial institutions to provide small businesses with the funding they need to improve and grow their companies. To be eligible you need to be a small business or a start-up operating in Canada and make $10 million for less in gross annual revenues.

Your funding still comes from a traditional financial institution (chartered bank, credit union or caisse populaire) therefore you’ll need to present your business plan directly to the institution you wish to work with, they will also be in charge of approving or rejecting you.

Learn how to get a small business loan now.

Conventional Bank Loans

If a small business loan from a bank isn’t what your business needs but you still want to work with a bank, you should look into a conventional bank loan. A conventional bank loan isn’t guaranteed by the government therefore there is more freedom associated with the money. With a conventional bank loan you only need to deal with your bank, they’ll still want to see a business plan from you but their requirements may be easier for you to meet.

Alternative Lenders

Alternative lenders are becoming more and more popular among business owners whose main concerns revolve around credit issues and overall financial health. Alternative lenders typically don’t place too much value on credit scores and financial histories (want more information on bad credit business loans?), they look for the potential for growth in a business and want to work with their clients to help them achieve their goals.

The process is typically very fast, which makes this option especially popular among businesses looking for quick cash to take advantage of opportunities or deal with emergencies.

Merchant Cash Advance

For those businesses that have high levels of credit card sales on a daily basis, a merchant cash advance could be a viable option. Retail stores, restaurants and other service providers are the types of businesses who could greatly benefit from a merchant cash advance where a lender loans a sum of money based on the volume of credit card sales a business has within a specific period of time.

Merchant cash advances differ from lender to lender but you can expect to pay back your loan using an agreed amount percentage of your daily credit card sales.

Interested in merchant cash advances? Check out this article.

Choosing the Right Option

We understand that it can be quite difficult and stressful to decide which type of financing is the right option for you and your business, but the good news is that you are, as the owner, the best person to make the decision. Whichever options makes the most sense and feels right is the definitely the best option for you.


Rating of 5/5 based on 1 vote.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Industry Spotlight

What's happening with Canada's credit industry?

Emma —  Making Life Insurance More Accessible to Everyone

Emma — Making Life Insurance More Accessible to Everyone

Emma, an online insurance platform, allows Canadians to access life insurance in an approachable and convenient way, all from the comfort of their hom...

Read More
Locator
Find The Best Rate
In Your Region
OR
Best Personal Loan Provider by Greedy Rates
Icon

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan.

Your data is protected your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.