Small startups, big dreams
Hamilton Business reporter Natalie Paddon looks at micro-loans and more for new entrepreneurs and talks to this year’s Lion’s Lair top 10
Hamilton Business reporter Natalie Paddon looks at micro-loans and more for new entrepreneurs
WHEN JOSIE RUDDERHAM and Nicole Miller were preparing to launch Cake and Loaf in 2011, they knew traditional financing wasn’t an option.
Rudderham was on maternity leave and Miller had been working at another bakery for about a decade making a modest wage. Neither was in a position where they would qualify for the funding needed to get their neighbourhood bakery business rolling.
“Banks wouldn’t come near us. There was no way,” says Rudderham, now 34. “Any financial institution we went to said, ‘OK, where are your co-signers?’”
But the two wanted to maintain their independence and not involve anyone else in the company.
A private family loan allowed the partners to do that by providing enough funding to finance the bulk of their business.
A $15,000 microloan through the Canadian Youth Business Foundation — now called Futurpreneur Canada — was the icing on the cake. The nonprofit provides support to aspiring business owners between the ages of 18 and 39.
“We jumped at it,” Rudderham recalls. “Finally we were in a lucky position where it just made things easier.”
The whole process — from applying for the loan to receiving feedback directly from small business people — was a supportive one, she adds. Not only did the program offer funding, it also hooked the two women up with a mentor for two years: a chartered accountant they could call for advice.
“It feels a lot more co-operative, like they are truly trying to start a business with you.”
Being a young entrepreneur whose wage is enough to get by on but not what banks want to see before they’ll lend money is among the barriers to launching small and medium-sized businesses. So are living in poverty and not having assets that can be used as collateral, and not having Canadian credit history because the would-be entrepreneur is new to the country.
“Maybe in Syria you had an empire. Maybe you had a factory. Maybe you employed 3,000 … but you came here, there’s no record of you,” says Dr. Benson Honig, the Teresa Cascioli Chair of Entrepreneurial Studies at McMaster University’s DeGroote School of Business.
“For the bank, it doesn’t matter what is in your head, you are extremely high-risk.”
Microloans — sums as little as $500, on up to $15,000 or more — can serve as an alternative for financing a startup if you face such barriers.
But they appear to be slow to catch on. According to 2011 numbers from Statistics Canada, only two per cent of small and mediumsized businesses used microcredit.
Ontario-wide microlending programs range from the Ontario Catapult Microloan Fund for Social Enterprises that provides loans of $5,000 to $25,000, to Rise Asset Development, which offers funding from $300 to $10,000 to people facing mental health or addiction challenges.
For Ontario residents between the ages of 15 and 29, the Strategic Community Entrepreneurship Projects program offers entrepreneurship training and $3,000 grants to help get businesses started.
Locally, programs include the one offered through the Hamilton YWCA and another through FirstOntario Credit Union, and grants are available through provincial programs such as Starter Company, which is administered through the city’s Small Business Enterprise Centre.
FirstOntario’s program launched as a pilot in 2010 and brought together a group of not-for-profit organizations that helped bring it to life.
Initially it was open to new immigrant women but has since broadened to include “individuals who wanted to start a small business as a means of which to change their life,” said Mary De Sousa, executive vice-president of member and community engagement for FirstOntario.
“Essentially these individuals will have poor credit or no credit.”
Participants receive training in sales, marketing and product development before being assessed for up to $2,500 in funding.
Many people will go through the training without taking the funding, De Sousa says. They might receive financial support from family or friends or have their own means to start their business.
It’s the same with the YWCA’s program, where program participants — all women — have the opportunity to tap into between $500 and $5,000.
“The purpose of our program is not just to access the loan portion, but it’s also to give them the tools to help them move forward,” said Deborah Schwientek, manager of employment and training services at YWCA Hamilton.
At the Y, program participants are given help in developing marketing and implementation plans for their business and offered support as they carry them out.
“Small businesses are the backbone of Hamilton’s economy,” Schwientek says. “We’ve lost a lot of big manufacturing industries here so the small and mediumsized entrepreneur … needs to kind of pick up that slack.”
YWCA Hamilton started offering the program in 2013 and has seen 176 women complete it.
They’ve had everything from newcomers who want to start a home-based business, to new moms who want to find a way to work and stay home with their kids, to people on Ontario Works or the Ontario Disability Support Program who want to generate a little extra income, Schwientek says.
Businesses launched have included jewelry vendors, African artifact importers, dog walkers, web developers, bookkeepers and personal trainers.
“It really crosses all cultural spectrums,” she adds.