Understanding your business’ financial needs is one of the most important aspects to having a successful business. If you are looking at starting or growing your food and beverage business, you will need capital. But in order for your business to succeed, you also need to be effective in managing your finances so that you can buy or rent equipment and space, produce sample products and test them, advertise and hire employees.

In this section you will learn:

  • ways to manage your finances effectively
  • the two basic types of financing
  • key information you need to prepare to get financing
  • where to find funding sources

Ways to manage your finances effectively

Before going to a bank, financial institution or investors, you will need to be able to prove that you can manage your finances. Your lenders or investors will want to know:

Bookkeeping System

Make sure you have a system with which you will be recording your revenues and expenses (bookkeeping). If you do not have a full understanding of how much your sales are, and to who or what your expenses are payable, it makes it difficult to explain how your business can be profitable to a lender. In addition, by knowing who you are selling your products to, you can also analyse your marketing plan and ensure that you are getting the full benefit from your advertising dollars. Your bookkeeping system can be as simple or complex as you want or need, but you must be able to use it. Here are some examples of bookkeeping systems that you could use:

  • Excel spreadsheets
  • off-the-shelf bookkeeping software (for example, QuickBooks or Sage)
  • paper-based ledgers (albeit this option would not be for everyone or every size of your business)

Bookkeeper/person who oversees the financial aspect of your food business

As a business owner, you will wear multiple hats (for example, marketer, salesperson or line operator). Depending on your skill set and how busy you are, you may not have the time or the knowledge to also enter financial information, create sales invoices and pay bills. Depending on the size of your business, you could hire an individual or a bookkeeping company to prepare your financial records. Either way, be sure they are qualified and experienced in maintaining the financial books of a food and beverage business.

Financial performance of your business

If you are just starting out, you will not have a past financial performance of the business. Instead, thoughtful and detailed financial projections will help your lenders or investors gauge how your business will be operated. If you are expanding your business, it is a good idea to have your past three years of financial information ready so that your lenders and investors can see how you were performing and whether you are in a position to expand.

The two basic types of financing


Debt financing is similar to getting a personal loan. You go to your bank or other financial institution, tell them how much money your business needs, agree to a rate of interest and repayment terms, and if you are approved, you get the loan. Once the loan is repaid, the lender has no more claims against your business. In addition, the interest paid on debt is most often a business expense for tax purposes, and for this reason the cost of debt financing is lower when considered on an after-tax basis.


Equity financing is sometimes the only option available to a business venture. A business may be experiencing a high degree of financial risk due to high debt leverage, or simply not have enough profitable history to interest debt financing sources.

Sources of equity financing can include, but are not limited to family members, venture capitalists and angel investors. Equity investors will advance capital to the business and in return will become a part owner of the business, either temporarily or permanently. There are pros and cons to this approach. On the one hand, they will have a say in the decision making. On the other hand, they may be able to provide advice and expertise that will help your business succeed.

Another benefit of equity financing is that the repayment terms can be more flexible than debt financing. It is important to know, however, that an equity financer is looking for a return on investment, not just repayment of a loan plus interest. You may end up paying back more in equity financing than you would have through debt financing.

You may need to get financing from several different sources to meet your needs. Family and friends are potential sources of financing but make sure all parties set and agree to repayment terms and conditions.

A good business plan can help you get financing. One way you can make it easier to get the financing you need is to have complete, solid and verifiable information about your current financial position and your prospects, such as current sales or contracts. In other words, you should have a solid business plan. If you have not started your business plan yet, check out Starting your business with a plan and support for more information about business planning and links to business plan templates.

Key information to prepare for financing

There are several sources of funding for food businesses in Canada, such as chartered banks and government financial institutions. Each institution will have their preferences for the type of business and their reasons for financing, with different costs involved.

Here are key pieces of information required by financial institutions. Much of this will come from your business plan.

Business focus

This is a short description of your business and should answer these questions:

  • What does your business do?
  • How will you be successful?
  • What is your vision and mission?

Purpose of the financing

Be realistic about the amount of financing you need and how much your business will be worth. Consider the following questions:

  • Why do you need financing?
  • How much do you need?
  • What results will this achieve?

Sources of financing beyond the banks will want to know your plan for the money before they agree to finance. This is because some of them specialize in certain business areas and will only finance within those areas. These areas include:

  • equipment purchase
  • purchase of land and buildings
  • inventory and receivable financing
  • restructuring
  • construction financing
  • trade financing
  • growth financing
  • mergers and acquisitions
  • leveraged buyouts
  • management buyouts

Current financial position

  • What is the value of your business?
  • What is the current financial situation of your business?
  • Are you making any profit?
  • Do you have outstanding debts? What are your assets?

Make sure your answers are accurate. Demonstrate that you can pay the money back or can generate a return for investors.

Financial history

If your business is not new, outline your business history, including the financial history of the business. Lenders and investors want to know that your business is financially stable. Here are some questions to answer:

  • How many years has the business been operating?
  • Has the business been profitable?
  • Has the business been growing?
  • Has there been management turnover?

Management team

Lenders and investors will want to know everything about your management team or advisory board. Answer these questions:

  • Who are the key managers of your business?
  • What skills and experience does the management team have?
  • Does the management team have experience with the product your business is making?
  • What are the weaknesses in the management team? How are you improving those areas?

Business strategy and plans

Your strategies and plans help lenders and investors gauge whether the business will be profitable in the future. You need to be able to answer these questions quickly and clearly:

  • How is your business going to grow?
  • What markets have you researched and what is your real potential in them?
  • How will you manage cash flow?
  • What are the key success factors for your business?
  • Who are your key competitors?
  • What makes your product better than theirs? (Your competitive advantage)
  • Who is your target audience and how much are they willing to pay for your product?
  • How do you expect your competitors to respond?
  • Is the market for your product growing and by how much?
  • Is your new product replacing another one?
  • How will you get the word out about your new product?
  • Are you planning to expand your markets? Product lines? Distribution networks? How are you going to do this?

Profit potential

How much profit could your business make in the future? Be realistic and do not inflate this figure! Be able to back it up.

Business risk

All businesses face risks, whether it is starting up or growing. Be realistic about the risks your research has revealed and spell out how you plan to overcome them. Consider conducting a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) which is a framework that can help you understand your strengths and weaknesses and identify opportunities open to you and the threats you may face. The internet has a wealth of information and templates that you can use to help you conduct a SWOT analysis.

Where to find funding sources

Here are some places you can go to find financing for your business.

Chartered banks — major banks in Canada

You can find other banks at the Canadian Bankers Association website.

Some branches of chartered banks in Canada may have specialists that deal with food sector clients. Do your research before going in.

Credit unions in Ontario

You can find other credit unions at the Canadian Credit Union Association website.

Government financial institutions

There are several primary federal government financial institutions that may be able to provide financing to your food processing business. Each has its own specific focus. You will need to research if any of these could meet your needs.

Other business financing

There are lots of other places outside of banks and government that finance businesses. You will find these investors often have a specific type of business they like to invest in. Do your research to find the one that fits with your business.

There is no one single listing of business financing firms. You will need to spend some time sifting through various sources. Here are some lists that can be found online:

You may qualify for other government funding under various programs and initiatives.

Other government funding

There are business programs and services that help all sizes of manufacturers. Whether you are looking to expand into new markets, train and hire staff or invest in new equipment, you will find support that can help you meet your business needs.

Government programs are constantly changing. For the most up-to-date information, check the Government of Canada’s Business and Industry’s Business Grants and Financing webpage.

Check the Ministry of Agriculture, Food and Rural Affairs’ (OMAFRA) available funding programs via the Rural and North site for a list of relevant programs.

The AgPal Program and Service Finder is another useful website to help you find programs that suit your needs.

Note that there may be limitations to qualifying. For example, fish processors may not be eligible for Agriculture and Agri-Food Canada (AAFC) programs.

A final word about financing

It is always vitally important for the survival of your business to have sufficient working capital on hand. You need cash to make purchases, pay employees and keep operating. You also need cash to cover unexpected expenses that may pop up.

Getting financing can take a long time. If you wait too long to start the process, you can find yourself in trouble. Many businesses fail because they did not keep an eye on the cash flow and waited too long to go for financing.

You and your business management team (if you have one) should review your finances on a regular basis.


  • I understand the key information that should be in my company’s financial reports.
  • I understand what my working capital needs are for the day-to-day operations of my company.
  • I have secured accounting and/or bookkeeping support for my company.
  • I have a financial plan for my company.
  • I have a balance sheet and income statement and a cash flow projection prepared for lenders and investors.
  • I have identified what financing my company needs.
  • I have looked at sources of available financing.
  • I have prepared an action plan to raise financing — and alternatives should it fail.