The Credit Crunch and Canadian Small Business

Uncertain economic times such as what we’re experiencing right now pose challenges to small business owners when it comes time to find financing. An October 14, 2008 article on the Financial Post’s Small Business page called “Pessimism in the Wake of Credit Crunch” written by Eric Beauchesne discusses the findings of a Canadian Federation of Independent Businesses (CFIB) survey which noted that “credit concerns have accelerated since early September, and the number of businesses reporting problems accessing bank financing has risen 25% in early October from 18% a month earlier”.

Notes Kristine Owram from the Canadian Press in an article published on September 17/08 in the Money section of Canoe.ca called "Credit Crunch Affecting Small Cdn Companies", “They (sic small businesses) have less options, and the less options you have the more expensive your funding is going to be…It just shows how this credit crisis is pretty profound.”

Another of Eric Beauchesne’s articles appeared in the Edmonton Journal on October 21/08 called “Hit by Credit Crunch, Small Firms Remain Resilient”. He indicates that the bad news is that small companies will be hit hard by the credit crunch and will not be able to escape the Canadian economic slump; the good news though is that small companies “have held up better than the economy” and he predicts that they “will be the first to rebound once the recovery gets underway next year”. He notes that the hardest hit businesses are those that operate in or serve manufacturing but that ones in the personal service sector are still doing well.

The CFIB’s Business Barometer, which is normally published monthly, is currently tracking the small business outlook on a weekly basis. Update #4 dated October 30, 2008 indicates that the bad news in international markets has dimmed operating plans for many small businesses. Check the site weekly until November 10, 2008.

As the credit squeeze continues, how and where can you get financing aside from banks and credit unions?

About.com’s Small Business Canada page offers insight and alternatives. It includes links to a variety of organizations including the Canada Small Business Financing Program and Business Development Bank of Canada (BDC) along with a slew of non-profits and organizations providing grants and loans. An informative section of the site on community investment funds is called “Where to Get a Small Business Loan When the Banks Turn You Down”.

(Angel investors might help too (see my posts dated May 6 and April 23 called “More on Angel Investors” and “Angel Investors: An Alternative Source of Financing for Small Business”.)

Check out D&B Canada for a variety of commercial credit risk management tools to help you survive the credit crunch including DNBi which allows credit checking and monitoring changes to companies’ key customers.

Angel Investors: An Alternative Source of Financing for Small Business

If you have exhausted your pursuit of traditional bank financing, you may want to consider using an angel investor to get that great idea off the ground. Read on to find out more about who these angels are, what they can do for you and where you can find them.

What is an Angel Investor?

Typically, an angel investor is an affluent individual seeking to invest in a startup company and provides their own capital for that startup. In return, an angel investor generally expects some form of equity and control in the company. Sometimes angels group together in a syndication to pool the financing; they are known as angel groups or angel networks. Angel investors may also be corporate investors who are looking for strategic synergies from an alliance with an entrepreneurial company.

Find out more:

Wikipedia’s “Angel Investor” article gives further background on angel investors.

Entrepreneur.com has a how-to page called “Angel Investors” which is devoted to the concepts of what an angel investor is, who might use one, how much they cost, what the investor expects in return for their capital and how and where to find them.

An article appeared in the March 17, 2008 edition of Canadian Business called “Angel Investors: Spreading Your Wings”. Written by Megan Harman, this article discusses exploring all financing options like those provided by angel investors.

Where Can You Find an Angel Investor?

Check out About.com Canada’s article called “How to Find an Angel Investor”.

Below are some links to some organizations that bring investors and businesses together in order to secure financing and allow businesses to grow:

The National Angel Organization (NAO) considers itself to be “Canada’s Voice of Angel Investors”. The NAO’s directory includes links to 21 angel groups from 8 provinces in Canada as well as links to U.S. national and regional angel groups.

The Angel Capital Education Foundation (ACEF) provides information on angel investing and lists 22 Canadian angel groups with links to their websites from across the country in its ACEF directory. There are many more links to American groups and ones located in Mexico.

Calling itself “North America’s professional alliance of angel groups”, the Angel Capital Association (ACA) is an association of 265 angel organizations in the U.S. and Canada; the ACA member directory with Canadian and U.S. links is also available online.