Access to sufficient capital is always a business issue, from
the start-up stage right through to the exit stage. But the reasons
for the financing need – product research and development,
market validation, operations, growth – and the typical
sources of that financing vary depending on where the business is
in its financing lifecycle. To help you get started or know
what's coming, here's a summary of the five key stages of
the financing lifecycle.
Stage 1 Concept Financing. In this beginning
stage, the entrepreneur is developing and completing an initial
validation of a business concept. Financial resources will be
minimal, often consisting of self-funding or loans from friends and
Stage 2 Seed Financing. At the seed stage, the
start-up will have increased costs as the entrepreneur incorporates
the business and devotes more time to validating the concept,
defining the market and developing the product. Funding options at
this stage typically include government grants and loans and
investments from friends, family and close business associates, as
well as "accredited" angel investors. Start-ups often
attract angel investors by participating in a
provincial small business investor tax credit program or raise
funds through other
equity-based funding options, like crowdfunding. To secure
angel investments, the entrepreneur may have to give up some
management oversight and control to the new investors. However,
angel investors often provide more than just capital, contributing
input and guidance about management and other aspects of running
Stage 3 Launch Financing. When the start-up is
ready to officially launch its product to market, it will need to
ramp up spending to hire personnel and create relationships with
partners, suppliers and customers – with little or no
incoming revenue. At this stage, the start-up might begin looking
for early stage venture capital funding (typically from venture
capital funds or other institutional investors as opposed to
individual investors) or financing through strategic investors
while continuing to raise money from established angel investors.
These types of investors spend more time on due diligence before
investing, and to attract them, the entrepreneur will have to give
up greater control over the business. In exchange, the entrepreneur
will gain mentorship from experienced business people and access to
a broader network of partners and investors and help implementing
corporate governance practices to give the business a leg up as
it continues to grow.
Stage 4 Growth Financing. Once a product has
been successfully accepted by the market, the business will be
looking to grow and expand its reach. If the business's revenue
stream isn't enough to support the targeted growth, it will
need to raise more money. Larger venture capital funding, sometimes
in multiple rounds (Series A, B, and so on), is common at this
stage. The company might also use venture capital or angel investor
funding at this stage to bridge to an exit transaction or a public
Stage 5 Maturity/Exit Financing. Once the
business has matured, additional financing options will become
available for growth and expansion opportunities. For example, the
company might decide to undertake an initial public offering (IPO)
to raise money in the public markets and achieve liquidity for its
investors or obtain bank debt financing that isn't accessible
to earlier stage companies. At this stage, the company might also
move forward with an exit transaction through an acquisition by or
a merger with another company.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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