A detailed look at the different funding options available to small businesses, including bank financing, alternative lenders, peer-to-peer lending, traditional crowdfunding, equity crowdfunding, investors, prepurchases, and community bonds. Originally delivered to Adventure Elevate conference in Saguenay, Quebec, June 6&7, 2016. For more helpful business and strategy tips, visit http://the-social-entrepreneur.com/blog

1. Getting Funds to Drive
Your Strategy

2. WHY DO I NEED FUNDING?
• Bootstrapping is ridiculously - and needlessly - HARD
• If you’re unprepared for difficult times, you might not make it
• Additional capital can finance significant growth and
opportunities

3. FUNDING OPTIONS
1. BANKS AND CREDIT UNIONS
2. ALTERNATIVE LENDERS
3. PEER-TO-PEER LENDING
4. INVESTORS
5. TRADITIONAL CROWDFUNDING
6. EQUITY CROWDFUNDING
7. PRE-PURCHASES
8. COMMUNITY BONDS

4. BANKS AND CREDIT
UNIONS

5. BANKS AND CREDIT UNIONS
TWO PRIMARY BANK FINANCING TOOLS
1. FIXED TERM LOAN
• Set amount of financing
• Set term (e.g. 5 years) and interest rate
• Fixed monthly payment
Useful for one-time capital expenditures that you want to finance
over time instead of paying upfront (e.g. purchase new vans).
Typically lower interest rate than line of credit.

6. BANKS AND CREDIT UNIONS
2. LINE OF CREDIT
• Like a credit card – you pay when you use it
• Can be fixed or variable/floating interest rate
• Some require minimum monthly payment, some don’t
(balance keeps growing if you don’t pay it down)
Useful for ongoing operating expenditures (e.g. staff, marketing,
etc.)

7. BANKS AND CREDIT UNIONS
PROS CONS
Familiar Can be difficult to obtain
Pre-Existing Relationship Often lengthy process
Typically better interest rates than
alternative lenders
Rigid Terms
Don’t have to pay for LOCs if you don’t
use them

8. BANKS AND CREDIT UNIONS
TIPS
• Establish a good relationship with your bank early on, esp.
with actual people
• Develop a solid business plan and know your numbers
• Shop around, and negotiate (don’t accept the first offer)
• Maintain excellent personal credit / repair bad credit
• Get a line of credit as early as possible, use it wisely, then
apply to have it increased from time to time
• Don’t allow multiple lenders to run your credit report (it will
affect your credit rating)

9. ALTERNATIVE LENDERS

10. ALTERNATIVE LENDERS
These are non-institutional lenders (i.e. not banks) that provide
term loans and lines of credit, often much faster than banks,
and via online applications.
Examples: kabbage.com, ondeck.com

11. ALTERNATIVE LENDERS
PROS CONS
Easy application and quick turnaround
Higher interest rates (sometimes sky-
high)
Usually easier to get than bank financing
Flexible terms
Wide range of providers, so you can shop
around for best fit for your funding needs

12. ALTERNATIVE LENDERS
For a list of alternative lenders, visit:
bit.ly/funding-resources

13. ALTERNATIVE LENDERS
TIPS
• Do your research and find the terms that work best for you
and your funding needs
• Do a cash-flow projection, especially for short-term loans
(e.g. 6 to 12 months), so you know how the payments will
affect your cash flow
• Don’t apply to multiple lenders, or your credit rating will
suffer

14. PEER-TO-PEER LENDING

15. PEER-TO-PEER LENDING
Peer-to-Peer Lending: Borrowing from multiple individual
lenders at the same time (rather than from institutions).

16. PEER-TO-PEER LENDING
THE PROCESS
1. POST THE OPPORTUNITY: You (the company) post a lending
opportunity (e.g. you need $50,000 to purchase new equipment for
expansion) as well as information about your business and the total
amount needed.
2. RISK ASSESSMENT: The platform will assess your application and
determine the risk level and interest rate (the higher the assessed risk,
the higher the interest rate).
3. CAMPAIGN PERIOD: Lenders registered on the platform assess your
opportunity, the risk level, and the interest rate offered and decide
whether to lend to you or not.

17. PEER-TO-PEER LENDING
THE PROCESS (CONT.)
4. LOAN APPROVAL: If you reach your target, funding is approved and
funds are released to your account.
5. REPAYMENT: You begin repaying the loan (loans are typically fixed-
term with a set interest rate and regular monthly payments); typically
payments are withdrawn automatically from your bank account.
6. REPAYMENT DISTRUBUTION: The platform distributes the loan
repayments back to investors until the load is fully repaid.

18. PEER-TO-PEER LENDING
PROS CONS
A viable alternative if banks and
alternative lenders turn you down
It takes a long time to get your money (vs.
alternative lenders or banks)
Multiple lenders who have a vested
interest in seeing you succeed
Usually higher interest rates than banks
Provide returns to citizens, not banks

19. PEER-TO-PEER LENDING
TIPS FOR PEER-TO-PEER BORROWING
• Like crowdfunding, you’ll need a good promotional plan – you
can’t rely on people just finding your opportunity
• Reach out to your network (e.g. friends, family, customers)
and try to establish some early traction towards your goal –
this will provide some social proof and credibility
• Log in to the platform often and answer questions quickly

20. INVESTORS

21. INVESTORS
INVESTORS: People, groups, or companies who will invest
money in your company in exchange for a portion of your
company (i.e. equity, or shares)

22. INVESTORS
TYPES OF INVESTORS
Private Investors (e.g. friends and family, customers): typically
$5,000 to $100,000 investments
Angel Investors: private investor groups (often former or
current entrepreneurs), typically $100,000 to $1M in funding
Venture Capital: Larger firms that typically seek high returns
and quick (3-5 year) exits, typically $5M to $100M in funding

23. INVESTORS
WHY INVESTORS INSTEAD OF DEBT FINANCING?
By bringing on equity investors, you have access to increased
capital stock (ie. $) without having to pay it back like you would
with debt.
Investors are people who believe in your business, and they thus
provide market validation, and may also provide other, non-
monetary assistance.
But… you’re giving up a chunk of your company to others!

24. INVESTORS
GETTING INVESTORS – A ROUGH GUIDE
1. Develop your plan: Why do you need more money? What will you do with it, and how will
it help you grow quickly (investors typically aren’t looking for slow, patient growth – they want to
see returns within 3-5 years)
2. Develop your pitch deck: Take your plan and put it into a pitch deck, a document that
will explain to investors why their investment in your company would be a wise one.
Elements of a strong pitch deck:
1. Opportunity Summary
2. Company Overview: current status, accomplishments, etc.
3. Your Product/Service
4. Market Potential + Competition
5. Marketing/Strategy
6. Your Team
7. Use of Funds
8. Financial Projections + Key Metrics

25. INVESTORS
THE PROCESS
3. Develop your investor list: Who will fund your company? Private investors? Angels?
VCs? Know how much money you need and who the best type of investors for that size of
investment are.
4. Hire a lawyer: Hire a securities lawyer that works with companies of your size and with
deals such as yours.
5. Develop your offering documents: Work with your lawyer to develop the
necessary documents, such as a term sheet (that explains the terms of the offering), offering
memoranda, shareholder agreements, etc.)
6. Rehearse your pitch: Know your plan inside and out. Know your numbers, and
anticipate investor questions (i.e. what’s missing from your pitch deck and what are the holes/risks
in your plan?) so that you can answer them confidently.
7. Reach out to potential investors: Start reaching out to your investor list (e.g. your
customers, angels, etc.)

26. INVESTORS
THE PROCESS
8. Keep following up with potential investors: Keep a database of your
potential investors, and track responses, interest, etc.
9. Close the round: Once you’ve reached your funding target, close off the round and have
your lawyer follow up with investors on the paperwork.
10. Issue shares: Your lawyer will work with the investors and the relevant regulatory board
(e.g. SEC, OSC, etc.) to issue the shares.

27. BANKS AND CREDIT UNIONS
PROS CONS
No debt You’re giving up a piece of your business
No monthly payments Complicated
Investors may bring other things to the
company (skills, networks, etc.)
High legal fees
Increases company value You typically have to have an exit strategy
Larger investors will provide lots of
resources
Larger investors will want to have a say in
how you run your business, and/or a
board seat

28. INVESTORS
TIPS FOR GETTING INVESTMENT
• Know your numbers: Nothing will kill a potential investment faster than a blank stare
when someone asks you ‘what’s your gross margin?’. Know how to read an income statement and
a balance sheet and know how to answer questions about it.
• Know your plan: How will you use the investment? How will the investment spur rapid
growth (the kind of growth that makes investors excited)?
• Know your exit strategy: It’s unlikely that you’ll be able to pay the kinds of dividends
that will make investors want to invest, so you’ll need a plan for how you will exit the company (i.e.
sell, be acquired, etc.) and make money for investors. Who will want to acquire you and why?
• Be realistic with your valuation: Find out what typical multiples are for your industry
(i.e. multiples of EBITDA) and what has been paid for similar companies in the past. Base your
valuations, realistically, on your earnings and comparable multiples.

29. INVESTORS
TIPS FOR GETTING INVESTMENT
• Know the regulations: The SEC and other organizations have strict regulations about
how to sell equity, to whom*, and the documents required. Your lawyer should know all of this, but
you should also get familiar with the requirements.
*in a traditional investment, you can only sell shares in your company via one of several
prospectus exemptions, usually friends, family, close business associates, or accredited
investors.
The definition of an accredited investor varies according to the relevant jurisdiction, but the OSC
and SEC define an accredited investor as someone with either $200,000 annual income or $1
million in net assets.
• Make your investors happy: Spend your investors’ money wisely, communicate with
them regularly, and above all, be honest with them; they may help you out of a jam if needed.

30. TRADITIONAL
CROWDFUNDING

31. TRADITIONAL CROWDFUNDING
Traditional Crowdfunding, via platforms such as Kickstarter
and Indiegogo, involves multiple people (often hundreds)
giving your company money, either as a straight-up donation,
or a prepurchase of a new product.

32. TRADITIONAL CROWDFUNDING
PROS CONS
Free money (well, almost) Tough to pull off successfully
Validation of a business idea or product A LOT of work
Generates buzz about your
product/service
Falling short on an all-or-nothing platform
means you get SQUAT for your hard work
If your campaign catches fire, you could
raise a LOT of money

33. INVESTORS
TIPS FOR A SUCCESSFUL CROWDFUNDING CAMPAIGN
• Know your numbers: Sensing a pattern here? If you don’t know your numbers, you could
pull in $1,000,000 in crowdfunding but have to spend $1,200,000 to deliver your product. Know
your Cost of Goods Sold (i.e. the cost of each ‘unit’)
• Have a marketing plan: You can’t rely on organic traffic within the platform to reach your
funding goal (this typically only happens once you’ve gained enough initial momentum to get
featured on the front page or other feature pages). You’ll need to have multiple ways to drive traffic
to your campaign. Consider email, social media, publicity, promotional partners, and other sources.
• Start planning early: Successful crowdfunding campaigns usually begin planning 2-3
months in advance of launch, so that everyone involved knows their part of the promotional plan
• Invest in a killer video: A great video will go a long way to ensuring success. It doesn’t
need to be fancy, but it also can’t be really amateurish, or it will kill your credibility. Let your
personality/ies shine through!

34. EQUITY
CROWDFUNDING

35. EQUITY CROWDFUNDING
WHAT IS EQUITY CROWDFUNDING?
The newest player on the funding scene, equity crowdfunding
involves selling shares in your company to ‘the crowd’:
• Lots (typically dozens) of small investors, investing small
amounts (e.g. $2500 to $10,000)
• Unlike traditional crowdfunding, you’re selling shares of your
company, not a product or a donation
• Allows you to get around accredited investor requirement

36. EQUITY CROWDFUNDING
PROS CONS
Can raise a significant sum of money
without taking on debt
Complicated – there are still lots of
regulations
Lots of investors with an interest in seeing
you succeed
Can be a lengthy process
Once you hit your goal, the funds are
typically released immediately
Typically all-or-nothing
Crowdfunding investors won’t require a
board seat
Lots of paperwork
Investors won’t tell you how to run your
business

37. EQUITY CROWDFUNDING
EQUITY CROWDFUNDING TIPS
• BE PREPARED: Equity crowdfunding is not unlike raising money from investors
the traditional way: know your numbers, have a solid plan, have a great team in
place.
• SELL YOUR STORY: Like traditional crowdfunding, you’ll need a great story, and a
compelling video will help your cause.
• USE THE TEAM: Use the platform’s team to your advantage, and have a solid
promotional plan in place before you launch.
• LOOK INTO FINANCIAL REQUIREMENTS: Depending on your jurisdiction and
past investment history, you may need to have your financials reviewed or audited
• FIND AN EXPERIENCED LAWYER: Find a lawyer who knows equity crowdfunding
law and regulations

38. EQUITY CROWDFUNDING
For a list of equity crowdfunding platforms,
visit:
bit.ly/funding-resources

39. PRE-PURCHASES

40. TRIP PRE-PURCHASES
This is a new funding option I first tested out in 2013, and did
again in 2014:
• Pre-sold trips at a discount
• For every $1000 invested, I offered $1400 in trip credits, but
the credits couldn’t be used for 18 months
• Raised almost $30,000
• Works well if you have high-margin trips

41. PRE-PURCHASES
PROS CONS
If you have the margins, it’s a win-win all
around
If you don’t have high enough margins, it
may cost you a fair bit in the long run
You have free access to capital for a set
period of time
No complicated paperwork required

42. COMMUNITY BONDS

43. COMMUNITY BONDS
Community Bonds are a relatively new development in the
funding world:
• Typically used by nonprofits/charities
• Give investors the option to purchase a bond at a set rate of
return, to be repaid at a fixed date in the future
• Appealing to investors who are looking to receive a modest
return while investing in something they believe in

44. COMMUNITY BONDS
For more information, visit:
communitybonds.ca

45. CONTACT ME:
mike@sacredrides.com
twitter.com/mikebrcic
CONTACT ME
DOWNLOAD THIS PRESENTATION AT:
bit.ly/ae-funding
GET A LIST OF FUNDING RESOURCES:
bit.ly/fundingresources

46. HAPPY FUNDING!