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7 business financing alternatives to Clearco
Explore other ways to grow your operations or get your new business off the ground.
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
- 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).
- Sample lenders. Loans Canada, SharpShooter, OnDeck, Merchant Growth, Thinking Capital, Lending Loop and Wayflyer.
2. Crowdfunding platforms
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.
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.
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.
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.
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.
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.
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.
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.
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