A Guide to Getting a Small Business Loan in Ontario

As the most populated province in Canada, Ontario is also home to the highest number of entrepreneurs, with almost 450,000 small businesses operating across the region. Whether you run a bustling startup in Toronto, a brick and mortar shop in Ottawa, or a family-owned business in any of Ontario’s diverse communities, accessing the right financing is crucial for long-term business success.

Navigating the process of obtaining a small business loan can be daunting, so we’ve broken down your options in this blog. We’ve included which financial institutions can service small business owners, the types of financing available, how your business can use these funds, and how Merchant Growth can help.

Small Business Funding Ontario: Exploring Your Options

When the need arises to secure funding for your small business, it can be difficult to know where to start. One of the first things to consider is what type of lending institution you should work with. This is crucial to ensure you secure the best possible financing to support your enterprise.

Traditional Financial institutions

Traditional financial institutions such as banks and credit unions are often the first stop for small business owners seeking financing in Ontario. This is for good reason: banks offer competitive interest rates and a sense of reliability, making them a logical initial choice. Unfortunately, not all small business owners will qualify for a bank loan. With lower interest rates comes a greater aversion to risk, resulting in strict criteria for approval.

Additionally, the process of obtaining a business loan from a bank or credit union can be lengthy, requiring complex documentation. In-person visits to the bank are often required, taking valuable time out of a business owner’s day. Long waiting periods may be unsuitable for those who have a time-sensitive need for capital.

Government Grants

The Government of Canada has a wide variety of grants available at a provincial and federal level. For Ontario-based businesses, the provincial government’s website is a great place to start. Unlike loans, grants do not need to be repaid, making them an attractive source of funding for business owners.

Securing a grant typically requires thorough research and understanding of the various options available at provincial and federal levels. Additionally, grants often come with specific conditions and are usually intended for particular purposes, such as investing in worker training, technological development, or supporting specific industries or demographic groups. It’s crucial to identify the right grant that aligns with your business needs and goals.

The application process for grants can be demanding, often requiring detailed proposals and documentation. The limited availability of funds and high demand from other small businesses can make the process highly competitive. Despite these hurdles, the potential benefits of securing a grant make it a worthwhile option to explore for small business funding. However, it’s important to recognize that grants are usually one-time financial injections. Once the funds are used, you may need to seek additional capital from other sources.

Friends and Family

Turning to friends and family for a loan may be an option for some business owners. This approach often comes with lower costs and fewer formalities when compared with traditional lending options. While this method can provide quick and flexible funding, it is important to discuss and agree upon clear terms for repayment. Both parties should be mindful of unexpected scenarios, such as not being able to repay on time, or a sudden request for the funds to be returned earlier than planned. Carefully weighing the benefits against the risks is vital to ensure that this option does not compromise your valuable relationships.

Dilutive Funding

Some entrepreneurs opt to secure funding from venture capitalists or angel investors by offering a percentage of ownership in exchange for capital. This approach can provide not only financial support but also valuable expertise and connections from experienced investors.

On the other hand, one of the key downsides of obtaining funding from venture capitalists or angel investors is the dilution of your ownership, as well as the obligation to share decision-making authority with your investors. If all parties do not share the same vision for the company’s future, conflicts can arise. Additionally, unlike a traditional loan where you repay a set amount, giving up equity means sharing a portion of your profits with investors indefinitely. It’s crucial to ensure that this type of financial arrangement aligns with your long-term business goals, and that you are comfortable with the level of influence your investors will have.

Quick and Convenient Small Business Financing with Merchant Growth

If your business is ineligible for grants, or can’t meet the stringent requirements of a bank loan, an online business loan from Merchant Growth may be a suitable option for you.

Term Financing

At Merchant Growth, we offer term financing for amounts ranging from $5,000 to $800,000, supporting a diverse range of small businesses across Ontario and the rest of Canada. Our application only takes a few minutes, and funding is available in as little a 24 hours. Unlike conventional loans, we do not require collateral, and repayment is structured around your business’s cash flow, with flexible terms to suit your needs.

Business Line of Credit

Our business line of credit is a flexible financing option designed to provide small businesses with quick access to capital when they need it. With a revolving credit facility, you can borrow funds as required and pay interest only on the amount withdrawn. This allows business owners to effectively manage cash flow and avoid over-reliance on credit cards. Our business line of credit offers favorable interest rates and repayment terms tailored to your business’s needs, giving you the freedom to borrow, repay, and borrow again as needed.

Small Business Funding Use Cases

At Merchant Growth, we understand that small business owners in Ontario and across Canada have diverse needs and priorities when it comes to financing. Our flexible funding options allow you to support various aspects of your business’s operations and growth.

Cash Flow Management: Even profitable businesses can experience cash flow challenges. Our funding solutions provide immediate access to capital, helping you bridge gaps between receivables and payables, ensuring smooth operations.
Expansion Initiatives: Whether you’re looking to open a new location, expand your current space, or enhance your facilities, our financing can provide the necessary capital to fuel your growth ambitions.
Inventory Purchases: Stay ahead of demand by stocking up on inventory. Our funds enable you to make bulk purchases, take advantage of supplier discounts, or invest in seasonal merchandise to meet customer needs.
Hiring Additional Staff: As your business grows, you may need to expand your team. Use our funds to cover hiring costs, onboard new employees, and ensure adequate staffing levels during busy periods.
Marketing Campaigns: Increase brand visibility and attract more customers with targeted marketing initiatives. Whether it’s digital advertising, social media campaigns, or local promotions, our financing can support your marketing efforts.
Emergency Situations: Unexpected expenses can arise at any time. Our funds provide a safety net, whether that be for emergency repairs, equipment replacements, or other unforeseen financial challenges.

With Merchant Growth, you have the flexibility to allocate funds where they’re needed most, empowering you to seize opportunities for growth and navigate challenges effectively. Don’t take our word for it though, and see what our customers have to say:

Ontario-based Customer Testimonials

The Decorating Centre

The Decorating Centre was founded in 2005 in Burlington, Ontario and works exclusively with trade professionals, offering high-quality, custom-ordered furniture and home goods. With a 25,000-square-foot showroom and over 3,500 registered interior designers, the Centre’s commitment to exclusivity and bespoke products has been key to its success. However, global supply chain disruptions extended manufacturing lead times from 6-8 weeks to 24-26 weeks, causing significant cash flow issues due to delayed receivables.

To address these challenges, The Decorating Centre secured financing from Merchant Growth, which provided the necessary funds to pay suppliers and their landlord, providing relief during a challenging period.

Read more about The Decorating Centre’s experience working with us.

Avenue Tire Depot

Founded in 2004 by Mohamad Zeitoun, Avenue Tire Depot has become one of Ottawa’s top providers of quality auto parts and workmanship. Avenue Tire Depot is committed to providing honest service at fair prices and through this dedication, the business has established a reputation for exceeding customer expectations.

Avenue Tire Depot faced logistical challenges when trying to meet customer demands, requiring additional funds to maintain inventory levels. When traditional bank financing was not an option, they turned to Merchant Growth and received funds within one week, enabling the business to catch up on purchase orders and buy inventory for the busy season.

Read more about Avenue Tire Depot’s experience working with us.

Securing a Small Business Loan in Ontario: Preparing Yourself for Success

Obtaining small business funding, whichever method you choose, requires careful preparation. Here’s a quick overview of the documents you can prepare ahead of time to maximize your success:

Relevant financial statements such as monthly bank statements, and any major contracts
Proof of ownership
Lease or deed to any physical spaces you rent or own
Tax documents
Your business plan

In Conclusion: Small Business Funding for Ontario Business Owners

At Merchant Growth, our mission is to make small business financing simple, with the below minimum eligibility requirements: