There are many different types of business financing you can choose as alternatives to Clearco, which is a popular e-commerce financing company based in Toronto. These include alternative lenders, crowdfunding platforms, investors and grant-issuing organizations. Learn more about financing alternatives to Clearco and decide which one could be the best fit for your business.
What is Clearco?
Clearco provides fast and affordable financing for e-commerce companies in Canada. It lets you access marketing and inventory capital up to $20 million. You’ll need to pay fees to access this capital, but you won’t need to give up equity in your business. Clearco may be a suitable financing option for e-commerce sites, but you may need another type of financing if you don’t specialize in e-commerce or meet other eligibility requirements.
1. Alternative lenders
Alternative lenders are private organizations that provide loans to businesses in the same way that banks do. The main difference is that bank loans can be difficult to qualify for and usually require positive business revenue and a good to excellent credit score. Alternative lenders provide loans quickly and with less strict eligibility requirements.
Compare alternative lenders
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How it works. Apply for a business loan by submitting your personal information online. If approved, get your funds deposited as a lump sum and repay your loan each month until your term expires and your loan is paid off in full.
How do I qualify? You’ll need to be a Canadian citizen or resident and the age of majority in your province. You’ll also need to meet credit score and revenue/income requirements as well as business age requirements (many lenders won’t fund startups).
Crowdfunding platforms are online funding platforms that let you raise money for your business by collecting small, individual contributions from a large pool of donors. These donors can include your family, friends and even strangers in some cases. Your campaign can be shared on social media and you can incentivize donations with special rewards.
How it works. Fill out details of your business venture and agree to pay any platform fees/commissions as required. People can then donate to your campaign, but you may only get paid out if you reach your proposed fundraising goal with some platforms.
How do I qualify? You will need to be a Canadian citizen or resident and the age of majority in your province (for most platforms). You will also need to have a project that conforms with the rules of the crowdfunding platform you want to go with.
Sample crowdsourcing platforms. Kickstarter, GoFundMe, FrontFundr, Crowdfund Canada, Indiegogo, Crowdfunder, FundRazr and other popular crowdfunding sites.
Pros
Cons
Trusted way for people to contribute
Gives you access to a larger pool of donors
Fast release of funds when your funding cycle ends
You’ll need a solid marketing campaign
Most platforms charge fees
Some platforms don’t pay out unless you reach your fundraising goal
You may need to offer rewards
3. Private equity firms
Private equity firms are investment management companies that can give your project or business funding if you can persuade them it will make money. These firms tend to invest in more established companies with the potential for growth and will usually want a controlling equity stake in your company (greater than 50%).
How it works. Private equity firms help you grow and develop your business so that you can sell it for a higher price or increase your revenue. This increases their return on investment since they will usually have a majority equity share in your business.
How do I qualify? You will need to be a Canadian citizen or resident and the age of majority in your province. You will also need to have a large and well-established business with growth potential and be willing to give up greater than 50% equity in your company.
Sample private equity firms. Birch Hill Equity Partners, Crestview Partners, Hellman & Friedman, TPG Capital, Abacus Private Equity Group, Citic Capital Partners, CPP Investment Board and Novacap Investments.
Pros
Cons
Large amount of funding
Dedicated support to increase revenue or sale price of your company
Money doesn’t need to be repaid
Need to give up controlling equity share in your company
Not available for startup funding
4. Venture capitalists
Venture capitalists are private equity investors working with firms that invest in startups and small businesses wanting to expand. These investors usually take a minority stake (less than 50%) in the companies they invest in and profit when these same companies go public, get acquired or increase their share price or revenue.
How it works. You’ll need to meet with executives of the VC firm to pitch your project and negotiate a “term sheet” (which is a business agreement). From there, you’ll work with lawyers to document the terms of the investment more formally.
How do I qualify? You will need to be a Canadian citizen or resident and have majority ownership of a company (usually a small business or startup). You will also need to meet income/revenue requirements and market a product/business that venture capitalists are interested in.
Sample venture capital investors. Real Ventures, Inovia, OMERS Ventures, Georgian Partners and Business Development Bank of Canada.
Pros
Cons
Large amounts for promising startups and small businesses that need over $1 million in funding.
Opportunities for networking and access to new markets
Money doesn’t need to be repaid
Very competitive – can be difficult to get a foot in the door
Need to give up equity in your company
Not ideal for small amounts of funding
5. Angel investors
Angel investors are high-net-worth individuals who typically fund early-stage development for startups. Unlike venture capitalists, who work in an investment firm, angel investors usually work alone and provide smaller investments in exchange for ownership equity in your company.
How it works. Reach out to an angel network or a high-net-worth individual to arrange a meeting. Prepare your business case, financial records and other information you’ll need to secure an investment.
How do I qualify? You will need to be a Canadian citizen or resident and have majority ownership of a company. You will also need to meet income/revenue requirements and market a product/business that angel investors are interested in.
Sample angel investors. Spark Angels, Capital Angel Network, GreenSky Capital, York Angel Investors, Golden Triangle Network, Maple Leaf Angels, Angel One and independent high-net-worth individuals.
Pros
Cons
Lower amounts for startups that need or can only qualify for funding under $1 million
Technical support for early-stage development
Money doesn’t need to be repaid
Very competitive – can be difficult to get a foot in the door
Need to give up equity in your company
Not ideal for companies needing an infusion of cash over $1 million
6. Organizations that offer grants
There are a handful of private organizations and different levels of government that offer grants to businesses. You’ll usually need to meet very specific criteria to qualify and the money won’t need to be repaid in most cases. Grants are competitive and you may need to prove that your product/service will benefit the government or granting organization in some way.
How it works. Develop an application or proposal as required by the granting organization. Submit a business plan, develop your pitch if required and wait for approval and release of funds if you’re selected for a grant.
How do I qualify? Different organizations have different eligibility requirements. For example, you may need to be a Canadian citizen or resident who has a product/business that focuses on a specific sector to qualify for some grants.
Sample granting organizations.SD Tech Fund, Industrial Research Assistance Program (IRAP), Canada Job Grant (CJG), CanExport, Strategic Innovation Fund (SIF) and other grants for small businesses.
Pros
Cons
No need to share equity in your business
Fewer corporate reporting requirements
Money doesn’t need to be repaid
Very competitive
Industry-specific in many cases
Often geared towards new technology and services that benefit the granting organization in some way
7. Non-profit lenders
Some non-profit organizations provide loans, mentorship opportunities and technical support to eligible businesses. Loans typically come with better interest rates than other types of financing but are smaller than what you might qualify for with private financing.
How it works. Develop an application or proposal as required. Submit a business plan and wait for approval and release of funds if you’re selected for a loan.
How do I qualify? Different organizations have different eligibility requirements. May require you to be a Canadian citizen or resident making a specific income/revenue before you’re eligible to apply.
Sample lenders.Futurpreneur Canada, Community Futures, PME MTL and Startup Canada.
Pros
Cons
Lower interest rates than private financing
Fewer corporate reporting requirements
No need to share equity in your business
Competitive
Lower amounts (usually under $50,000)
Not very many loan-granting NGOs in Canada
How to choose the best business financing for your needs
Think about the following questions when deciding on the best financing alternatives to Clearco for your business:
What size and type of business do you have?
Large businesses are typically better suited for private equity and venture capital investments. Smaller businesses can benefit from private loans, crowdfunding, angel investors, grants and not-for-profit lending.
How much do you want to borrow?
Private equity and venture capital firms usually invest more than $1 million. Private loans and grants are for varying amounts, and angel investors and crowdfunding are usually best for under $1 million.
What do you need the money for?
Some companies will limit how you can spend the money they give you. Check in with your investor or lender to find out if there are any spending restrictions before you apply.
Can you pay the money back?
Alternative and not-for-profit loans require you to pay funds back. Investment firms don’t usually need repayment but expect a share of equity in your business. Grants and crowdfunding don’t usually need to be repaid.
Are you willing to give up equity in your business?
Most venture capital firms, private equity firms and angel investors want equity in your business in return for an investment. Other forms of financing don’t require this.
Are you eligible for “free” money?
Grants and crowdfunding are the way to go if you want access to capital that you don’t have to repay or give up equity in your company to get. Most other forms of financing come with strings attached.
Bottom line
There are many alternatives to Clearco if you’re looking for business financing. Learn more about how you can access money through different lenders, investors, granting institutions and crowdfunding platforms. Weigh your financing options and ask yourself a handful of questions to decide which type of financing could be the best fit for your business.
Frequently asked questions
Apply for a loan with an alternative lender as an alternative to Clearco. These loans usually come with higher interest rates but they are much less competitive than some other forms of financing. This means you won’t need to put as much effort into applying and making a business case. Crowdfunding is another easy way to get financing that you don’t need to repay.
You can connect with potential investors on LinkedIn, through your industry colleagues or in local entrepreneurial networking groups. You may also be able to join a business incubator or mentorship program to expand your reach. Just be aware that you may still need to pitch your idea and present a deck with these alternatives to Clearco.
Giving up equity in your company is a natural part of securing investments. The main question you should be asking is how much equity you want to give up. Aim for under 50% equity if you want to maintain control of your business. Many founders will settle on giving up 20% to 40% of their equity to make the deal worthwhile for investors.
It can be difficult to secure over $1 million in financing with alternatives to Clearco. You’ll usually want to tap into a private equity or venture capital firm if you need more than $1 million to start or grow your business. If you need this amount of capital for a small company, your best bet is to look into grants or crowdfunding.
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee.
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