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Loans and financing

How do you finance your startup?

October 3, 2022

Update : 13-12-2023

Are you facing a lack of liquidity to start your business? Do you have limited knowledge of financing? The following insights may help you make sense of it.

Getting off to a good start

The first thing to do is to identify your needs. To do so, there are 4 questions to consider:

  • Why? What will the requested funds be used for?
  • How much? What is the estimated cost to complete your project?
  • Who? Which financial players can meet your needs and expectations?
  • When? When will you need cash flow?

Once your goals are well defined and you feel ready to take action, it’s important to put together a complete file with the necessary information to prepare your financing application like a model plan and business plan. This will allow you not only to draw an accurate picture of your new business, but also to showcase it to all potential financial stakeholders. Once completed, this exercise will demonstrate the seriousness of your approach, and may open doors for you.

What’s next?

Since there are many types of financing, you need to understand the nature of each one so you can choose what’s right for you, at the right time, based on your project and its progress.

When you’re in the early stages, you may consider:

Down payment

The down payment is the money you already have. It’s your personal investment. If there are several shareholders, the down payment amount would be higher due to the large number of shareholders. Although a down payment is desirable, it is possible to do without one, for example, when the startup requires little or no capital.

When you’re in business, better watch your back

A shareholder agreement allows you to write down the terms that bind you to the other co-founders. Produced with a specialist (lawyer or notary specializing in commercial law), this document could help you:

  • Protect and reassure the various stakeholders
  • Maintain harmony by avoiding or limiting potential sources of conflict
  • Anticipate or set guidelines for different scenarios that may arise (for example, withdrawal or death of a shareholder, buyout of the company)

Did you know?

When a business relies on the expertise or knowledge of a leading resource, this expertise could be considered a contribution to the business. It is advisable to consult legal counsel to determine whether the proposed contribution is eligible.

Love money (founder capital)

If you’re asking your family or close friends for help—formally or informally—to raise money, that’s called love money. If they respond favourably to your plea and offer you money, it’s important to set out the terms of the agreement in detail. Is it a gift or a loan? Will they have a say in how the business is managed? Ensure everyone is on the same page, leave a written record of it and consult legal counsel to minimize the risk of potential conflicts. Issues come up when there isn’t enough money … or too much of it. Better to plan ahead.


A crowdfunding campaign allows you to raise, through the web, individual contributions from your family or close friends and, more broadly, the community. There are 2 types of crowdfunding:

  • Donation

In the first case, the donors contribute to a project without getting anything in return.

  • Presale

In the second case, they receive the consideration associated with the amount granted. For example, it may be an exclusive offer or product.


  • In this case, the donors are allocated securities such as bonds or shares, based on their contribution.
  • A successful crowdfunding campaign not only raises funds, but also increases awareness of your project. It’s a great way to mobilize the community and test the market. But before you get started, you have to take the time to choose the right platform and properly plan your campaign.

Desjardins is a proud partner of La Ruche, a crowdfunding platform.

Once you’ve completed the ideation phase and are starting your first pre-market sales, you have a new option:

Grants and contests

ontests are a great way to get grants or attract positive attention to your project. Led by foundations, private companies, educational institutions or governments, calls for projects may allow you to win a grant to reward or carry out a project. The winning combination: a distinctive project and the art of promoting it.

One of the contests to watch out for is the OSEntreprendre Challenge, which promotes the entrepreneurial initiatives of thousands of participants each year.

Encourage innovation

  • Spearheaded by Desjardins, the Coopérathon is Canada’s largest open innovation contest. The Coopérathon connects citizens, communities, entrepreneurs, researchers and academic and institutional communities to develop a socially responsible future together.
  • Impact Canada, in collaboration with federal departments, drives impactful innovation by launching challenges through a web platform. Innovative minds work together to develop solutions to a given economic, environmental or social issue. The selected project may receive several consecutive cash prizes to accelerate the development of the proposed solution.

When you’re in the marketing phase and first sales become recurrent, the following support could be considered:


Designed for young, innovative companies with strong growth potential (startups), accelerators with an investment fund are a good way to meet a major capital need by launching an initial round of financing with investors.

Find out about the advantages of accelerators here.


Business grants are offered by all levels of government, and none of them is to be overlooked. Accès entreprise Québec, a support service offered by regional county municipalities, and Fundica, an artificial intelligence-based financing search engine are 2 excellent resources for your grant search.

In all cases, since there are plenty of options, it’s important to ensure you meet all the eligibility criteria before applying. This will help avoid unnecessary disappointment while focusing your energy where it matters.

Psst! You’ll need to demonstrate sound accounting.

If your company is in innovation technology, you may be eligible for scientific research and experimental development tax credits through the Canada Revenue Agency. Learn more


In collaboration with its partners, Desjardins is proud to offer the Créavenir program to entrepreneurs ages 18 to 39 who have a viable startup project or business that is less than 3 years old.

Learn more about eligibility requirements

Once you’re in the growth phase and your business model has been validated, you can move on to the following financing methods:

Caring investors

Angel investors are generally business owners who have acquired experience and knowledge and have built a network in their industry. They can play an important role in the growth of your business, because they have a lot of capital to invest and because their involvement is not limited to financing. This financial contribution is also important for potential financial institutions.

Since they want a return on investment, they might mentor you or introduce you to their network. If you prefer to go solo, you should avoid this option. It’s also important to know that, in the form of preferred shares or convertible debt, this type of investment dilutes shareholder equity to offset the risk taken by angel investors.

Venture capital

When an innovative company has strong growth potential and a significant capital need, it can turn to venture capital funds. The participation of a venture capital fund provides additional resources that are not limited to financial contributions, but may also include access to a network of contacts and shared expertise. Venture capital provides startups with the funds they need to support accelerated growth. It’s a great way to take flight and rise quickly.

Bank loans

Financial institutions offer several types of loans that meet various needs. For example, a term loan may allow you to purchase equipment that you will repay according to a structured plan: a fixed monthly amount, over a defined period of time, based on a given interest rate.

More flexible, a line of credit allows you to meet variable needs, such as working capital. This means making the minimum monthly payment or, to avoid interest, paying the entire balance each month. In any case, since a bank loan comes with personal guarantees, a repayment deadline and an interest rate, it’s important to have support from your financial institution to fully understand the terms and conditions.

Getting a term loan

Before granting you a loan, a financial institution will review your file to ensure you meet 3 essential ratios by having:

  • Recurring or foreseeable cash inflows
  • Value in your business (equity)
  • Working capital (your assets are larger than your liabilities in the short term)

Knowing that profit is essential to achieving these ratios, you have to surround yourself with the right people and develop a strong sales force. If your profit margin is low, sales volume will have to make up for it.

Desjardins Microcredit to Businesses

In addition to traditional financing products, Desjardins partners with a microcredit organization to offer assistance through the Desjardins Microcredit to Businesses program. Members are granted a loan of up to $20,000 that is tailored to their specific needs. It includes hands-on support for starting, expanding or strengthening their business.

If needed, an advisor could help you see things more clearly. However, please ensure you have a detailed file to work with.