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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.

How to manage your small business finances

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.

Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
SharpShooter Funding Business Loan
Prime pricing from 9.00%
$500 - $250,000
6 - 120 months
$10,000 /month
100 days
Unsecured Term, Merchant Cash Advance, Invoice Factoring
To be eligible, you must have been in business for at least 100 days with a minimum of $10,000 in monthly deposits.

SharpShooter provides capital to small businesses that are underserved by banks and credit unions. It measures overall business health and potential rather than focusing strictly on traditional metrics. Fill out a simple application and get pre-approved in minutes. Receive your funds within 24 hours.
Loans Canada Business Loan
Prime Pricing from 9.00%
$2,000 - $350,000
3 - 60 months
$4,166 /month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a credit score of 410+ and show a minimum of $4,166 in monthly deposits ($50,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $350,000. Complete one simple online application and get matched with your loan options.
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Compare up to 4 providers

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Currents debts must total less than 60% of income
Min. credit score: 300
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More Info
An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
goPeer Personal Loan
8.00% - 31.00%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
Go to site
More Info
Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 400
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More Info
An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Min. income of $1,900 /month, 6+ months employed
Min. credit score: 600
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More Info
An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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More Info
An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
FlexMoney Personal Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500
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More Info
An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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More Info
An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Able to make monthly repayments on your loan
Min. credit score: 560
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More Info
An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Must be a homeowner
Min. credit score: 560
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More Info
Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
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More Info
A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
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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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