Startup Funding in Canada: A Practical Guide for New Entrepreneurs
Canada has become an increasingly appealing place to launch a business, with vibrant startup ecosystems, supportive communities, and a growing number of resources for new founders. Cities like Toronto, Vancouver, and Montreal are home to incubators, accelerators, and funding programs designed to help entrepreneurs get started. But despite this progress, securing capital remains a challenge for new businesses globally. According to a 2024 report from Startup Genome, access to adequate funding is still one of the biggest hurdles facing early-stage startups.
If you’re just starting out, it’s easy to feel overwhelmed. Where do you begin? What kind of funding makes sense for your stage? And how do you access it without giving up control of your business? This guide will walk you through the most common startup funding options in Canada, so you can make confident, informed choices about fueling your business growth.
Key Takeaways
- There are many types of funding available, from government grants and startup loans to private investments.
- Choosing the right option depends on your business stage, industry, and funding goals.
- Planning ahead with a solid business plan and financial forecast can increase your odds of getting funded.
- Once your business has consistent revenue, term financing can help accelerate growth.
What Exactly Is a Startup?
There isn’t one universal definition of what makes a business a “startup,” but there are a few key indicators. In general, startups are new businesses that are still refining their products or services, building teams, and testing the market. A company might still be considered a startup even two or three years after launch, especially if it’s still focused on growth and not yet fully established.
What’s the Difference Between a Startup and a Small Business?
Startups and small businesses often get lumped together, but they tend to have different goals and trajectories. Startups usually aim to disrupt the market with a new product, technology, or approach, and often scale quickly. Small businesses, on the other hand, typically focus on steady growth, long-term sustainability, and serving local or niche markets.
That said, the line between the two is blurry. For this article, when we say “startup,” we’re referring to early-stage businesses still in the process of launching or scaling.
The Basics of Startup Funding in Canada
Launching a startup takes more than passion and grit—it requires funds. Unfortunately, many startups fail not because the idea wasn’t good, but because they ran out of money or couldn’t raise it fast enough.
Balancing the day-to-day operations of your business while also pitching to investors, applying for grants, or preparing loan documents can feel like two full-time jobs. And while raising capital is important, focusing too much on funding at the expense of building your product or service can also backfire.
That’s why it’s important to choose a funding option that fits your business stage and your strategy. Some founders are comfortable exchanging equity for early investment. Others prefer to retain ownership and pursue non-dilutive options like grants or loans. Either way, planning ahead and staying focused on building a viable business is key.
Why Early-Stage Capital Matters
Before you can generate consistent revenue, you’ll likely need to spend money to get off the ground. Early-stage costs can include:
- Product development and testing
- Equipment and software
- Hiring or outsourcing
- Branding and marketing
- Legal and administrative setup
Having access to capital early on can mean the difference between a quick launch and a stalled idea. The BDC Startup Financing Guide is a great place to explore more.
What Are Your Funding Options?
Before diving into specific programs and sources, it’s helpful to understand the two major types of startup funding:
- Dilutive funding means giving up a portion of your business in exchange for capital, typically through investors like angel investors or venture capital firms.
- Non-dilutive funding allows you to raise capital without giving up ownership. This includes grants, loans, and certain government support programs.
Choosing between these types depends on how much control you want to retain, how fast you plan to grow, and what stage your business is in. Many startups use a mix of both over time.
You’ll also want to think about where your business is in its journey. Early-stage businesses often need small, strategic injections of capital to get off the ground, while later-stage companies are usually looking for ways to accelerate growth or scale quickly.
Early-Stage Funding Options
If you’re in the early days of building your business—still validating your idea, creating a prototype, or setting up operations—then early-stage funding is what you’ll be looking for. These options are designed to help you get started without needing to give up a large stake in your company before you’ve even launched.
- Grants: These are non-repayable funds provided by government bodies, non-profits, or private organizations. They’re often tied to innovation, job creation, or specific sectors like tech or clean energy.
- Bootstrapping: This involves using your savings, or early revenue from the business, to cover expenses. It’s a common starting point for many founders who want full control and minimal debt.
- Accelerators & incubators: These programs often provide a small amount of funding in exchange for equity, but the real value comes in the form of mentorship, networking, and access to resources.
- Crowdfunding: A great option for consumer-facing products. Platforms like Kickstarter or Indiegogo let you validate your idea while raising funds from early supporters.
Later-Stage Funding Options
Once your business has traction—some consistent revenue, customer demand, or proven product-market fit—you may be ready for more significant funding to scale. These later-stage funding sources typically offer larger amounts of capital but often require a stronger business case or willingness to give up some equity.
- Angel investors: These are typically high-net-worth individuals who invest their own money into startups they believe in. They often bring industry experience and networks, in addition to capital.
- Venture capital: VC firms invest larger sums of money into high-growth startups in exchange for equity. They’re looking for businesses that can scale rapidly and generate a strong return on investment.
- Term loans & business lines of credit: These non-dilutive options allow you to borrow money while maintaining ownership. Term loans provide a lump sum with fixed repayment terms, while lines of credit offer flexibility for managing cash flow or covering short-term needs.
Government Grants and Public Support
When you’re just starting out, every dollar counts—and government grants can be a game-changer. These non-dilutive funding options allow you to access capital without giving up ownership of your business. While grants are competitive and often come with strict eligibility requirements, they’re absolutely worth exploring if you qualify. Many are designed specifically to support innovation, research, and early-stage growth—making them a great fit for startups still building momentum.
Federal Funding Programs
Canada offers a range of national programs aimed at supporting startups through research, development, and global expansion. If your business is working on new technologies, entering international markets, or investing in R&D, these programs could be a strong fit:
- IRAP (Industrial Research Assistance Program): Provides advisory services and financial support to businesses conducting technology innovation or product development.
- CanExport: Offers funding to help small and medium-sized businesses grow into international markets through trade shows, market research, and promotional activities.
- SR&ED (Scientific Research and Experimental Development Tax Incentive): One of Canada’s largest tax incentive programs, offering refundable tax credits for eligible R&D activities.
To explore what programs you may qualify for, visit the Innovation Canada Navigator—a handy tool that matches you with the most relevant funding opportunities based on your business profile.
Ontario-Based Programs
If your business is based in Ontario, you’ll find several provincial programs designed to support regional development, tech innovation, and job creation. These options are especially helpful for businesses looking to grow within the province or connect with local startup ecosystems:
- OCE (Ontario Centre of Innovation): Supports high-potential startups working on tech and innovation projects through funding, mentorship, and commercialization support.
- NOHFC (Northern Ontario Heritage Fund Corporation): Offers grants and loans to businesses located in Northern Ontario to promote economic development and job growth.
- Regional Innovation Centres: Organizations like MaRS Discovery District, Invest Ottawa, and Innovation Factory offer access to grants, expert mentorship, and a strong network of peers and partners.
To start exploring these options, head over to the Ontario.ca business funding portal. It’s a great first step to see which programs are currently accepting applications and what documentation you’ll need to apply.
British Columbia-Based Programs
If you’re launching your business in British Columbia, you’ll find a growing number of provincial programs and innovation hubs designed to support startups through funding, mentorship, and community-building. From clean tech to life sciences, BC is a hotspot for entrepreneurial growth, especially for founders focused on sustainability, innovation, and export potential.
- Innovate BC: A crown agency that supports BC-based startups through grant programs, accelerator partnerships, and innovation challenges. Programs include the Ignite Grant (for R&D projects) and the Tech Co-op Grant (to hire student talent).
- BC Tech Association: While not a direct funder, BC Tech offers access to partner funding opportunities, accelerator programs, and a valuable support network for growing tech companies.
- Regional Innovation Centres: Organizations like Spring Activator, Accelerate Okanagan, VIATEC, and Innovation Island provide localized support, funding navigation, and community mentorship to startups across the province.
To explore these and other BC-specific resources, check out the Innovate BC website or connect with your nearest innovation centre to learn about current grant programs, pitch opportunities, and upcoming cohorts.
Quick Grant Checklist
Before applying for any grant, it’s important to have your key documents in order. While every program has its own specific requirements, most will ask for similar core materials that show your business is prepared and funding ready. Use this checklist as a quick reference to make sure you’ve got the essentials covered before you hit “submit.”
Loans, Credit, and Other Financing Options
If you’re not ready to give up ownership in your business—or just want to maintain full control over how things grow—loan-based financing might be the best path forward. For many founders, accessing capital through loans or lines of credit is a practical and empowering way to fund operations, hire staff, or launch new products—without diluting equity.
The key is finding an option that aligns with your current stage, cash flow, and goals. Fortunately, there are several startup-specific lending options available across Canada, from government-backed loans to flexible private financing.
Small Business Loans
Government-supported lenders like BDC and Futurpreneur offer accessible startup loans tailored to new entrepreneurs. These loans may be secured (requiring collateral) or unsecured, and they often come with additional support like mentorship, low-interest rates, or extended repayment terms. If you’re early in your journey and still building revenue, a small business loan can be a great way to get capital while benefiting from some extra guidance.
Alternative Financing & Term Loans
If you need faster access to capital or want a more streamlined alternative to traditional bank loans, fixed-rate financing or a business line of credit might be a better fit. These options are especially helpful for businesses with steady revenue that need capital to take advantage of growth opportunities.
Fixed-Rate Term Financing
Perfect for businesses with consistent income, this type of loan offers funding with predictable daily or weekly payments. It’s a smart way to smooth out cash flow and fund necessities like equipment purchases, marketing efforts, or team expansion—all without hidden fees or variable rates.
Business Line of Credit
This flexible option gives you access to capital as needed, and you only pay interest on what you use. It’s great for covering short-term needs or managing seasonal swings, without locking into a full loan or dealing with credit card interest.
Explore small business financing with Merchant Growth and see how we can help support your next move.
Private Investment & Crowdfunding
Not all funding needs to come from traditional institutions. In fact, some of the most successful startups get their early momentum from private investors or the public crowd. These options are especially appealing if you’re building something innovative, community-driven, or built to scale quickly. While both come with their own challenges—like pitching, marketing, and equity trade-offs—they also open up unique opportunities to grow your business with real-world support and visibility.
Angel Investors & Venture Capital
If your startup is targeting rapid growth or working on disruptive tech, angel investors and venture capital (VC) could be the right fit. These investors are looking for big potential, and in return for funding, they’ll often ask for a share of your company.
Angel investors are typically high-net-worth individuals who invest in early-stage startups they believe in. They may also bring valuable expertise, mentorship, and industry connections to the table. Venture capital firms tend to come in at a slightly later stage, offering larger amounts of funding in exchange for equity, often with more aggressive growth expectations.
To succeed here, you’ll need a strong pitch deck, solid proof of concept, and a clear vision for how the funding will fuel your growth. Transparency, traction, and a well-researched business plan go a long way.
Crowdfunding as a Launch Strategy
Crowdfunding can be an incredibly powerful way to bring your idea to life while building a community around your brand. It involves raising small contributions from a large number of people through platforms like Kickstarter, Indiegogo, or GoFundMe. This method works particularly well for product-based startups and social ventures, as it allows you to validate demand and gain early traction before going to market.
Successful crowdfunding campaigns often share a few key elements:
- A compelling story
- Clear goals
- Attractive rewards
- Solid marketing strategy
Beyond the money, crowdfunding gives you visibility, feedback, and a built-in base of early supporters who are excited about what you’re creating.
If you’re building something people can get behind—be it a product, mission, or movement—crowdfunding could be the boost you need to get off the ground.
Incubators, Accelerators, and Ecosystem Support
When you’re building a business from the ground up, funding can only take you so far. Sometimes what you really need is guidance, connections, and a community of people who’ve been where you are. That’s where incubators, accelerators, and innovation hubs come into play.
Across Canada, these programs offer much more than just early-stage capital. They can connect you with mentors, help you refine your business model, give you access to investor networks, and create opportunities to collaborate with other founders. Whether you’re an entrepreneur with an early-stage idea or a growing company looking to scale, there’s likely a program designed for your stage and sector.
Here are just a few standout ecosystems across the country:
- MaRS Discovery District (Toronto, ON): One of the largest innovation hubs in North America, MaRS supports science, health, and tech-focused startups through advisory services, funding opportunities, and investor connections.
- Futurpreneur Canada (National): While not a traditional incubator, Futurpreneur provides financing, mentorship, and resources to young entrepreneurs aged 18–39 across the country. Their programs are particularly helpful for founders launching their very first business.
- Accelerate Okanagan (Kelowna, BC): Based in the Okanagan tech corridor, this BC accelerator helps early- and growth-stage companies through mentorship programs, pitch training, and access to local investor networks.
- District 3 Innovation Hub (Montreal, QC): Housed at Concordia University, District 3 supports entrepreneurs in Quebec through incubator and accelerator programs, venture support, and access to research and technical expertise.
No matter where you’re located, joining a startup ecosystem can dramatically increase your chances of success, especially in the early days.
What to Look for in An Incubator or Accelerator:
- Equity Terms: Some accelerators offer funding in exchange for equity, while others are non-dilutive. Be sure to ask what the financial structure looks like upfront.
- Mentorship & Community: A good program will connect you with experienced advisors and peers, not just a co-working space and generic advice.
- Alumni Outcomes: Look at how past participants have performed. Did they raise capital? Launch successfully? Grow their teams?
If you’re not quite ready for investors but want to surround yourself with support, mentorship, and resources, joining an incubator or accelerator can be a powerful step forward, no matter where you are in Canada.
Making the Right Choice for Your Business
There’s no universal roadmap for building a successful startup, and that includes how you fund it. The best financing option for your business depends on where you are today and where you want to go next. Your stage of growth, revenue model, and risk tolerance should all play a role in shaping your funding strategy.
Matching Funding to Your Stage of Growth
Understanding what stage your business is in can help narrow down which options are most realistic and effective. Here’s a quick guide to aligning your funding approach with your current needs.
Early Stage
Just getting started? You’re likely still validating your idea, building a prototype, or launching a minimum viable product (MVP). At this point, options like grants, bootstrapping (using personal savings), or joining an incubator can help you get off the ground without taking on debt or giving up ownership too early.
Mid Stage
If you’ve launched and have started generating some traction—think early customers, initial revenue, or growing brand awareness—you might be ready for more structured capital. At this stage, traditional bank loans can still be tough to secure, but alternative lenders, crowdfunding platforms, and business lines of credit are often more accessible. These options can help fuel your growth while giving you flexibility and keeping your ownership intact.
Growth Stage
Once you’ve proven your model and you’re ready to scale—expanding your team, entering new markets, or launching additional products—you may want to explore venture capital, angel investment, or term financing. These options can give you the capital needed to grow quickly, though they come with different levels of commitment and trade-offs.
Building a Funding-Ready Business Plan
No matter what kind of funding you pursue, one thing is certain: you’ll need a solid business plan. Lenders, investors, and grant reviewers all want to see that you’ve done your homework and can clearly communicate your vision.
A strong plan should include:
- A compelling executive summary
- A defined problem/solution your business addresses
- A practical revenue model
- A transparent breakdown of how funds will be used
Planning for Cash Flow
Securing funding is just the beginning. Once the money hits your account, managing it wisely becomes the next challenge. Cash flow forecasting is key, especially if you’ve taken on loans or flexible credit. Understanding when your expenses hit, how revenue comes in, and what your repayment schedule looks like will help you stay ahead of potential cash gaps.
Your Next Steps: From Idea to Growth-Stage Business
Startup funding in Canada isn’t one-size-fits-all. The best approach often involves a mix of funding types at different stages. As your business evolves, so will your financing needs.
Stay focused, be realistic with your goals, and use the tools available to you. Funding is possible—but it takes planning, persistence, and the right partners.
Merchant Growth Helps Businesses Access the Funds They Need
At Merchant Growth, we support Canadian businesses across industries with fast, flexible financing options. Whether you’re an e-commerce brand, a service provider, or just getting off the ground, our team is here to help.
If you’ve been in business for at least six months and generate $10K in monthly revenue, you may be eligible for term financing of up to $800,000. Use it to:
- Hire your first employees or contractors
- Launch a new product line
- Expand your marketing or infrastructure
With fast approvals, predictable payments, and no collateral required, our financing helps small businesses grow—on their terms.
Apply today for a free, no-obligation quote and see what your business qualifies for.
