FOUR THINGS YOUR CUSTOMS BROKER CAN DO FOR YOU

As with any service, when it comes to customs brokerage you always want to make sure you’re getting the most for your money. Customs brokers can offer a variety of import and export services for small businesses; understanding those services, and what they can do for your business, can go a long way towards ensuring your relationship with your broker is profitable and successful.

Here are four things your broker can do for you do to help your business reach new markets and keep costs low. And if your broker doesn’t provide the following services, it might be time to look for one that does!

1. Reach New Markets

A successful small business needs to put its product in front of customers. But what if those customers are across the border? A customs broker that provides North American coverage – with a presence on both sides of the border – is imperative to helping your goods reach those customers quickly and efficiently.

And if you’re importing parts and components, a broker with locations at all major ports and border crossings can help ensure your goods get to you in timely manner. Ask your broker about their coverage and what services they can offer to help you reach new markets.

2. Provide Expert Advice

While you keep your efforts focused on your business, you can look to your broker for expert advice on moving goods across the border. Your broker should be able to offer guidance on customs regulations, tariffs, valuation, classification and more – advice that can help you reduce shipping times and save money. 

To provide this advice, your broker must have licensed or certified customs professionals available who can answer questions about the customs process – all you need to do is ask. Don’t hesitate to inquire and take advantage of any guidance or services your broker provides that can improve your processes, help with your recordkeeping and prepare you for customs audits. 

Personal Savings

Personal Savings: The Most Common Form of Equity Investment

You’ll likely get most of your start-up funding from your personal savings, inheritances, friends, or family. In fact, according to Statistics Canada’s Survey of Financing of Small and Medium Enterprises 2007, 76% of small businesses in British Columbia financed their business with personal savings.

Aim to fund 25% to 50% of your business from your own pocket. This shows prospective lenders and investors that you are personally assuming some risk, and are committed to your business success. It’s also a requirement for many small business loans, which are usually secured (i.e. backed by assets).

Throughout the course of your business, try to keep a personal investment of at least 25% in your business to increase your equity position and leverage. The more equity your business has, the more attractive it makes you to banks that can loan you up to three times your equity.

Debt Financing

1. Government Funding

Typically, the most sought-after type of financing is government grants because it’s free money that you don't have to pay back. Unfortunately, a grant might not be an option for your business because not only are there very few grants available, most are geared towards specific industries or groups of people such as youth, women, or aboriginal owners.

The majority of government funding programs are typically loans, for which you'll be required to repay the principal amount plus interest.

In 2007, only 2% of businesses obtained some sort of government funding or assistance. You can find information about government funding programs for free: 

• Search the Canada Business Grants and Finances section, which lists available government programs across Canada.
• Refer to our Overview of Government Financing document, which provides a description of the various federal and provincial government programs available to B.C. businesses, eligibility criteria, and contact information.
• Contact your industry association to find out if they know of any grants you might be eligible to receive.

Since the application process varies from program to program, you should contact the coordinator of the program that you’re interested in to find out what the specific application requirements and process are.

2. Commercial Loans

Commercial or personal loans from financial institutions account for the second most common form of financing at 44%.

• Long-term loans. Use long-term loans for larger expenses or for fixed assets that you expect to use for more than one year, such as property, buildings, vehicles, machinery, and equipment. These loans are generally secured by new assets, other unencumbered physical business assets, and/or additional stakeholder funds or personal guarantees.
• Short-term loans. Short-term loans are usually for a one-year term or less, and can include revolving lines of credit or credit cards. These are generally used to finance day-to-day expenses such as inventory, payroll, and unexpected or emergency items, and can be subject to a higher base interest rate.

Getting Your Loan Approved: What do Potential Lenders Look For?

Many lenders will look for the four “C’s of Lending” when evaluating a loan application:

1. Cash flow. Your ability to repay the cash you are borrowing. This is measured using the cash flow forecast that you created for your business plan. 
2. Collateral. The value of assets that you are willing to pledge for assurance that you will repay your loan. A dollar amount will be placed on these assets and that will be compared to the amount of the loan you requested. 
3. Commitment. The amount of money that you're committing to your business. You can’t expect to obtain a loan without contributing a fair share yourself.
4. Character. Your personal credit score and history with the financial institution. Your credit rating or score is calculated from your history of borrowing and repaying bank loans, credit cards, and personal lines of credit. Without a good credit rating, your loan prospects decrease significantly.

A lender might determine how much to lend you by evaluating your cash flow, collateral, and commitment. They will then subtract your existing debt to arrive at a final amount. Note that lenders look at the limit on your credit cards, not the amount you're currently using.

Typically, start-ups are not rich in assets so you may be required to secure your business loans with personal collateral such as your house or vehicle(s).

The difference between a private lender and a government program is the relative importance of these four C’s. A bank might place more importance on “collateral” and “commitment”, whereas a government program can often decrease the need for these by providing a government guarantee to the lender.

Make a Good Impression With Your Lenders

You can increase your chances of securing a loan by:

• Having strong management and staff
• Showing steady business growth potential
• Showing reliable projected cash flow
• Offering collateral
• Having a strong personal credit rating
• Always making your loan and interest payments on time, and never missing a payment 

Making Your Dream

Making Your Dream a Reality: Finance Your Start-up With the Right Mix of Capital

If you’re planning on starting a business, chances are you’ll need some form of capital, which simply refers to the money that finances your business.

One reason for the failure of many small businesses is that they undercapitalize their business. Therefore, it is important that you know how much money you will actually need to start and to run your business until you reach your break-even point—the point when your sales revenue equals your total expenses.

Ask yourself:

• How much money is required to start this business?
• How much of your own money do you have for this business?
• Do you already own any of the assets needed to start this business?
• Do you have family, friends, acquaintances, or others who are willing and able to invest in this business?
• Do you have a strong personal credit rating or lines of credit available?

Equity Investment

Equity means ownership. With equity investment, an investor makes money available for use in exchange for an ownership share in the business. If you use equity investment, be sure to consider how much ownership you’re willing to give up, and at what price. Once you sell 51 percent of your shares, you lose control of your company.

Equity investment includes any money from individuals, including yourself, or other companies in your business. This money may be from personal savings, inheritance, personal loans, friends or relatives, business partners, or stockholders. These funds are not secured on any of your business assets.

But, before going down this road, it is important to know the BC laws that apply to any company or other entity that raises money from investors. To find our more read our article: Seeking Equity Investment? Know the Rules

Government Venture

But, before going down this road, it is important to know the BC laws that apply to any company or other entity that raises money from investors. To find our more read our article: Seeking Equity Investment? Know the Rules

Step 3: Find Financing that Applies to Your Specific Situation

Here are some of the most common ways in which your business might be expanding, and some specific resources and suggestions to help you find the financing you need:

a. Hiring Employees and Contractors

• B.C. Employment and Labour Market Services. If you’re expanding your business and creating new employment, you might be eligible to receive subsidies that help with your human resource requirements, and offset labour force adjustments. The two programs that are available for employers are Targeted Wage Subsidy and Labour Market Partnerships. Refer to the provincial website for more information on these two programs.

b. Training New and Existing Employees

• Human Resources and Social Development Canada (HRSDC). If you are hiring and/or training your employees, you could be eligible for subsidies to help cover the costs. Refer to the HRSDC website for a listing of the available programs and to see if your business would qualify.
• B.C. Training Tax Credit Program. If you’ll be hiring and training apprentices, you could be eligible for refundable income tax credits equal to 10% of the salary and wages you pay, up to $4,000 annually per eligible apprentice. Please refer to the provincial website for more information.

c. Property, Plant, and Equipment Improvements or Expansions

• Canadian Small Business Financing Program. Under this program, you could be eligible for term loans to help finance the purchase or improvement of your capital assets. Refer to Industry Canada’s website for more information.
• Business Development Bank of Canada (BDC). If you’re expanding your business, you might be able to obtain growth financing through BDC.Contact BDC for more information on the programs they offer and how to apply.

d. Research and Development

• SR&ED Tax Incentive Program. If you’re investing in research and development work done in Canada, your business could be eligible for Scientific Research and Experimental Development (SR&ED) credits. Refer to the Canada Revenue Agency website for more information.
• Industrial Research Assistance Program (IRAP). If you’re planning to grow your business by using technology to commercialize services, products, or processes in Canadian and international markets, you could be eligible for IRAP funding. Refer to the National Research Council of Canada website for more information.

e. International Trade

In Canada, there are programs and associations that offer financial assistance to companies wanting to export their products. Refer to our Export-Growing section for more information. 

Applying for Commercial Loans

As an established business, you may have more success with banks. Make sure your business plan is up to date, shows your ability to manage your loan payments, and includes a clear description of your business and contingency plans. Be aware that banks are usually reluctant to make unsecured loans, so you must be willing to put up the collateral needed to get the loan.

Above all, make sure you maintain a good relationship with your lenders by always meeting your current loan obligations so that they are willing to loan you more money on good terms when you need it.

e. Factoring

You might want to consider factoring, which is a financing method in which a business sells its accounts receivable at a discount to a third-party funding source to raise capital. Factoring is very common in certain industries, such as the clothing industry, where long receivables are part of the business cycle.

In a typical factoring arrangement, you would make a sale, deliver your product or service, and generate an invoice. The factor would buy the right to collect on that invoice by agreeing to pay you the invoice's face value less a discount–typically 2% to 6%. The factor pays 75% to 80% of the face value of the receivable immediately, and forwards the balance to you (less the discount) when your customer pays the invoice.

You can find factors listed in the telephone directory and in industry trade publications.

f. Finding Investors or Other Equity Partners

Are you willing to share the ownership of your business? If so, you can look into finding equity investors to finance your business growth.

Angel investors are high net worth individuals who ideally have knowledge or expertise to complement your own, and who have money to invest.

• The B.C. Angel Forum introduces established companies to private equity investors. If you’re seeking equity financing of $100,000 to $1 million, you can apply to present your business and your growth strategy to pre-screened private and corporate investors. Contact the B.C. Angel Forum to see if your business would qualify.

Venture capitalists are professional managers that manage venture funds from high net worth individuals and corporations, or from institutional investors and government funds. 

• The Canadian Venture Capital & Private Equity Association (CVCA)represents the majority of private equity companies in Canada. The CVCA provides venture capital through investment in early stage companies, mostly in technology businesses. Contact the CVCA to learn more about what they have to offer and to find out if your business would qualify.
• The Canadian Financing Forum matches North American venture capitalists and corporate investors with serious entrepreneurs looking to build world-class technology companies. Visit their website for more information.
• The B.C. Government Venture Capital Program allows a small business to accept equity capital directly from investors, and enables investors to be actively involved in the growth of the small business. Refer to the Ministry of Jobs, Tourism and Innovation website for more information and to see if your business would qualify.

Groupon has announced

Groupon has announced the launch of their new product: Scheduler.  The online platform allows customers to book, cancel and reschedule appointments through a calendar and businesses to track those appointments, review previous appointments and monitor how much each customer has spent.

Still in its beta state, the tool is available to adopt for free by small businesses in the US and Canada (but not in Quebec).  Originally created to streamline the process for businesses that are using Groupon’s daily deals as a marketing tool, the technology has been opened up to use without those coupons as well.

 

Whether you are a spa, hair salon, yoga instructor or car valet, this simple platform allows you to add a simple JavaScript button to your site which directs to its online booking site.  Groupon's Scheduler aims to help you book more customers with less work, freeing you from spending time on the phone booking appointments and helping reduce the number of non-attended appointments.  The only businesses currently excluded from the tool are restaurants and hotels, with Groupon commenting that these businesses commonly have their own systems in place or use tools like OpenTable.

 

Based on the technology of the Vancouver company it bought last fall, OpenCal, the move is part of Groupon's long-term push to offer services and tools that encourage small businesses to run more deals through their site.