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How much does it cost to start a new business?

8 common expenses to consider when budgeting for your startup.

You need to spend money to make money — but just how much depends on the type of business you’re looking to start, on top of other factors. Estimating the different costs you might incur can help you apply for financing that truly meets your new business’s needs.

How much does it cost to start a new business?

Business startup costs can range quite extensively from under $1,000 to over $10,000. How much you actually pay depends on your business type, where you’re located and the equipment and supplies you’ll need to get up and running. For example, it will cost much more to start a new restaurant than it will to start a freelance photography business out of your home.

How to calculate startup costs for a small business

Calculating the cost for a startup is relatively simple — you just need to add your estimated expenses together to get a full picture of what your budget should look like. Do some research into the type of business you’re planning to start in order to give you an idea of the costs involved.

8 common startup costs

While your specific costs will vary, these are the eight most common factors to consider when deciding how much you’ll need to borrow:

1. Registering your business: $200 to $400

In most provinces, registering your business as a corporation costs between $300-$400, while federal registration costs are usually $200-$250. But licensing and permit costs can vary, so it’s best to meet with an accountant and attorney to guide you through the process. Just be sure to work their fees into your budget as well.

2. Office space: $5-$70 per square ft

Renting or buying office space is typically one of the larger fixed expenses your new business will face. On average, you can expect to pay $5-$70 per square ft. Keep in mind that the office location will drastically impact the price. If you want office space in the business district downtown, be prepared to pay top dollar. However, while larger cities are often more expensive, they may offer more amenities and easier access for your employees.

To reduce this cost, you may want to consider working from home or out of a coworking space for those first few months while you’re getting started. Once you’re ready to expand into an office, take the cost of rent, utilities and taxes into account as well as any changes you plan on making to the layout of the office.

3. Equipment and supplies: Varies

The equipment and supplies you need will vary greatly depending on the type of business you plan on opening. Because of this, it’s critical to do your research.

You’ll likely need to finance some of your equipment, so prepare a budget and a solid business plan so you can present it to lenders. And if you plan on hiring employees, keep in mind they’ll need their own equipment and supplies, too.

4. Inventory: Varies

You’ll have no concerns about inventory if you provide a service. But any business involved in retail or manufacturing will need to calculate their inventory costs.

To create a budget, work backward from your revenue goal. Use the price you plan on selling your inventory at and how much you realistically plan on selling in a year to help guide you.

5. Employees: 1.2 to 1.4 times each employee’s annual salary

Payroll should cover more than just an hourly salary. Consider these other expenses when calculating how much you should budget for your employees:

  • Benefits
  • Employment Insurance (EI)
  • Canada Pension Plan (CPP) deductions
  • Employment taxes
  • Commissions
  • Overtime pay
  • Vacation pay
  • Bonuses

Because it varies widely across the country and by industry, there’s no set number to keep in mind. Instead, you should be prepared to dedicate a significant portion of your budget to payroll at first.

Remember: You also need to be paid, so be sure to account for your own wages when determining employee costs.

6. Insurance: Around $500 to $5,000 per year

Canadian small businesses will pay anywhere from $500 to $5,000 per year. Your costs will vary depending on where you’re based, your business’s risk profile and the provider you choose.

When comparing business insurance providers, you might want to look into these four types of coverage depending on the industry you’re in:

  • Product liability
  • Commercial general liability
  • Professional liability
  • Cyber risk coverage

7. Website and marketing: Varies

If you plan on using an online platform like WordPress, Wix, Squarespace or Weebly, you’ll likely only need around $10 to $35 per year to register a domain and create a website for your business. If you want to pay someone else to custom design your website for you, you could end up paying a few thousand dollars.

As for marketing, most of these costs can be reduced by simply using social media and other free brand-building platforms. You can also create flyers, buy ad space on Facebook or print business cards. As a benchmark for your budget, a 2019 Business Development Bank of Canada (BDC) survey revealed that small businesses spend around $30,000 on marketing, while businesses with over 50 employees tend to spend upwards of $100,000.

8. Taxes: Approximately 12% of revenue

If your a small business registered as a corporation, you should expect to pay a combination of federal and provincial/territorial tax rates. The costs can get tricky, though. Rather than calculating them on your own, contact an accountant to ensure your business is following all regulations. It can help save time and money now — and some headaches down the road.

Compare your business loans options

Once you’ve worked out a budget, you’ll have a realistic idea of how much financing you’ll need to cover the costs required to start your new business. Make sure to shop around for competitive interest rates with loan terms that best suit your business needs. Compare providers in the table below to find the right option for you.

1 - 1 of 1
Name Product APR Range Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered Broker Compliance
Loans Canada Business Loan
6.60% - 29.00%
$4,000 - $500,000
3 - 60 months
over $10,000/month
100 days
Unsecured Term
Loans Canada is a loan search platform with access to multiple lenders. Applicants will be matched with a suitable lender based on credit history and borrowing requirements.
To be eligible, you must have been in business for at least 100 days, have a Canadian business bank account and show a minimum of $10,000 in monthly deposits ($120,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $500,000. Complete one simple online application and get matched with your loan options.
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1 - 8 of 8
Name Product Ratings APR Range Loan Amount Loan Term Broker Compliance Requirements
Spring Financial Personal Loan
Finder Score:
★★★★★
Customer Survey:
★★★★★
10.8% - 46.99%
$500 - $35,000
6 - 60 months
Requirements: min. income $1,800/month, 3+ months employed, min. credit score 500
Loans Canada Personal Loan
Finder Score:
★★★★★
Customer Survey:
★★★★★
6.99% - 46.96%
$300 - $50,000
3 - 60 months
Loans Canada is a loan search platform with access to multiple lenders. Applicants will be matched with a suitable lender based on credit history and borrowing requirements.
Requirements: min. credit score 300
LoanConnect Personal Loan
Finder Score:
★★★★★
Customer Survey:
★★★★★
8.99% - 46.96%
$500 - $50,000
3 - 120 months
LoanConnect is a loan search platform with access to multiple lenders. Applicants will be matched with a suitable lender based on credit history and borrowing requirements.
Requirements: min. credit score 300
easyfinancial Personal Loan
Finder Score:
★★★★★
Customer Survey:
★★★★★
9.99% - 46.96%
$500 - $100,000
9 - 120 months
Requirements: min. income $1,200/month
AimFinance Personal Loan
Finder Score:
★★★★★
46.00%
$1,000 - $5,000
9 - 24 months
Requirements: min. credit score 580
Mogo Personal Loan
Finder Score:
★★★★★
Customer Survey:
★★★★★
9.90% - 46.96%
$500 - $35,000
6 - 60 months
Requirements: min. income $35,000/year, min. credit score 600
SkyCap Financial Personal Loan
Finder Score:
★★★★★
Customer Survey:
★★★★★
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Requirements: min. income $1,666.67/month, full time employment/pension, min. credit score 575, no bankruptcy
goPeer Personal Loan
Finder Score:
★★★★★
8.99% - 34.99%
$1,000 - $35,000
36 - 60 months
Requirements: recommended income $35,000/year, no payday loan debt, min. credit score 600, min. 5-year credit history. (Avg. approved rate of 15.80%)
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How to finance your startup

How can I pay for initial startup costs?

While your options are limited compared to businesses that have been around for a while, you still have a few ways to finance your startup:

  • Equipment loans. If your business requires equipment to get up and running, equipment loans allow you to buy necessary machinery.
  • Business credit cards. To help build your business’s credit and finance smaller startups costs, you may want to compare a few of the leading small business credit cards. Some even offer bonus intro APRs for the first year — giving you some breathing room to pay off expenses slowly over several months.
  • Personal loans. Some banks and online lenders allow you to use a personal loan for business expenses. However, you’re typically limited to borrowing $50,000 or less.
  • CSBFP loans. The Canada Small Business Financing Program (CSBFP) Loan is a government-backed loan offering up to $1,000,000 in funding and some of the most competitive interest rates. To apply, you’ll need to head to your local bank, credit union or registered financial institution and ask if they offer CSBFP loans. While government-backed, the decision to approve your loan ultimately lies with the financial institution.

Bottom line

From equipment and inventory to payroll and office space, funding the cost of your startup can put a huge dent in your personal finances. Before you dig into your savings, compare business loan options that might work for your new company.

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