How to fund international expansion to Canada from the US

So, you want to expand your business to Canada from the US?

That’s a great idea for several reasons. Canada is proximally close to the US, there are few cultural barriers, and it’s a thriving market for small- and medium-sized businesses (SMBs). Out of the 1.23 million employer-owned businesses in Canada, 99.8% of them are SMBs. 

But before you can get going on your expansion, you need to consider funding. You might have most of your other preparation steps complete, such as familiarizing yourself with Canadian business laws, opening global business accounts, hiring employees and more. But raising capital is just as important as any other step. 

Here we’ll take a look at how to fund international expansion to Canada from the US. 

Capital is essential even if you don’t “need” it

Expansion capital is more or less an investment in your business. 

Even if you have enough funds to carry out your expansion, there are always factors that could pop up along the way. And there’s no way of predicting them. 

Securing capital will give your business a buffer if unexpected costs arise, as well as stabilizing your growth at a consistent pace. So even if you have the funds to complete your transition, it’ll likely be at a slower rate. Capital will give you the resources to efficiently increase your profitability and growth rate so you can reap the rewards of your success sooner. 

Some areas to use consumer goods expansion capital include the following:

• Product development

• Production capacity

• Sales and marketing

• Additional payroll

• Succession planning

• Acquisition financing

Raising domestic capital vs. applying for foreign capital

So where should you get your capital from? 

You have a couple options. You can either apply for expansion capital in Canada or your home country (the US). 

Many businesses seek their funding internationally, especially in the US. For example, $4.5 trillion has been invested into American businesses from foreign countries according to the US Chamber of Commerce. 

However, raising capital domestically is much easier.

For example, there are many intricacies to international laws that may be difficult to understand. Your business also isn’t as protected in terms of security and your product inventory. 

Let’s say you partner with an international investor that doesn’t have your best interests in mind. Your business is then at risk of information misuse and other areas such as intellectual property. The details of your product inventory could be at jeopardy. 

Another downside to international funding is local investors’ finder’s fees and other international costs such as customs fees. Neither of these should ever exceed 10%.

If you still prefer to raise your funding internationally, take the necessary precautions to protect yourself. Make sure to do proper legal research, be strategic with your marketing, keep all of your copyrights and patents up-to-date, and don’t divulge any information about your business and its offerings unless you have to. 

[Related: Should you pay in USD or local currency?]

How to get capital for expansion to Canada

You should have some idea of how much capital you need for your Canadian expansion before applying for it. If you’re unsure, use the revenue and balance sheets from your current business location to roughly outline what your first few months will look like financially and ensure you aren’t paying too much to be global.

You should also account for hidden and surprise costs in your new Canadian location. Your finances likely won’t perfectly mirror your American ones. Extra capital that you include in your funding securement will give you additional padding that you might be thankful for down the road. 

The next step is to establish where this capital is coming from. Here are some areas to consider.

Online funding platforms

Online funding platforms such as Kickfurther help businesses scale by providing working capital between $20,000 to $5,000,000+ without taking on debt or diluting your equity.

Kickfurther has helped businesses fund over $100,000,000 in inventory for up to 30% lower costs than other options. Plus, payment isn’t required for new inventory until after it sells, further enabling healthy cash flow. 

Whether you need to purchase inventory or free up capital to expand internationally, you can apply for the amount you need through Kickfurther’s platform. Book a call with Kickfurther if you’re interested in learning more.

Optimizing inventory quantities as you expand internationally involves your brand taking a look at the true cost of holding and storing your inventory. This includes forecasting and demand planning in order to have the proper amount of inventory at all times. The balance lies in having enough inventory to fill every order, while also not holding and storing the inventory for long periods of time, which can eat directly into your profits.

-Sean De Clercq, CEO, Kickfurther

Investors

Another option of raising money is through investors. 

Your government might have a program in place that invests in the growth of small businesses. There are a couple routes you can go whether you decide to raise your money domestically or internationally. 

For example, if your small business or start-up is already operating in Canada, you can apply for a government loan through the Canada Small Business Financing Program. But despite your business physically being there, that doesn’t necessarily mean your expansion is complete. You could still need funding help to get your business on a successful financial path.

Another example is applying for funding through the US Small Business Administration (SBA). They fund Small Business Investment Companies (SBICs), which are licensed and privately owned companies. SBICs combine their funds from the SBA and invest them into small businesses in the form of debt and equity.

Some businesses prefer not to work with investors because interest is often involved in the payback process. Or, you may have to hand over a share of ownership in exchange for the investment. Each deal is unique, however.

Working capital loans

Working capital loans are a great way to get funding, too. They provide the cash your business needs for its day-to-day expenses. 

This type of loan is generally easier for SMBs to secure because it doesn’t require personal guarantees such as handing over shares of the business or other forms of extensive collateral.

To help cover operating expenses, working capital loans can be secured through the following: 

• Bank credit lines

• Home equity lines

• Trade credit

• Short-term loans

• Equipment loans 

Additionally, the amount your business qualifies for is calculated by subtracting your current liabilities from your existing capital and assets. Most working capital loan applications are simple to complete online.

Purchase an existing business

You can also purchase an existing business to secure your funding. To do this, you essentially apply for a business loan to help you purchase an existing business. 

Loaners will see this as a way for your business to acquire the assets and overall worth of that business, which will help you fuel your transition and operating costs in Canada. 

[Related: How to collect payments from Canada]

Options for FBA businesses

If you’re an Amazon seller, it might be difficult to secure funding through loans from investors and traditional lenders. 

Here are some options to support your eCommerce financials.

USBA micro loans

In the US, the SBA will offer micro loans to businesses ranging from $500 to $50,000. These micro loans are designated for startups and the expansion of small businesses.

Amazon Lending loans

Amazon Capital Services, Inc. has an invitation-only program that helps SMBs with loans to grow specifically on Amazon. These loans are short-term financing options and range anywhere between $1,000 and $750,000.

Eligibility for an Amazon Lending loan requires you to have a global selling account and be in good standing with Amazon. You can check your eligibility in your Seller Central account. 

Amazon line of credit

Qualified Amazon sellers can also receive a business line of credit. This is offered through a partnership between Amazon and Goldman Sachs. Funds are offered on a rolling basis as your business requests. 

Similar to an Amazon Lending loan, the Amazon line of credit is invite-only, and you can check your eligibility through your Seller Central account.

[Related: Which eCommerce marketplaces take the least margin from US sellers?]

What to do once you’ve secured the funds

Now that you’ve got your funds, you need to get going on budgeting and strategic planning.

You might already have a vision or growth path laid out, but there are some areas to consider once you’ve acquired your expansion capital:

• Secure your business licenses, permits, and other legal forms.

• Familiarize yourself with Canadian business laws.

• Look into different types of business insurance.

• Set up your international business accounts.

• Start hiring foreign contractors, freelancers, or employees and set up payroll. 

Contact Airwallex to support your expansion to Canada

Airwallex is here to help you successfully expand your business to Canada from the US. 

Your business needs reliable tools, and we provide them to ensure your operations run as smoothly as possible. Consider our borderless cards, foreign currency accounts and payment links to streamline your business finances. 

We also offer free international transfers with market-beating foreign exchange (FX) rates to get your money where it needs to go at the lowest cost possible. 

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