Tourism is an industry characterized by individual creativity and innovative solutions to a wide range of challenges. Finding the right combination of equity and debt is critical. The information provided in Part One of the guide, combined with the financial pathfinding provided in Part Two, will assist in meeting this challenge.
Some of the lenders and agencies listed are not always in a position to fund tourism projects, but should not be overlooked in the process of securing the best possible financial services for your business venture.
Once you have prepared detailed concept and business plans, including projected financial statements and a complete market analysis, you will be well-equipped to solicit funding for your proposed development.
Never underestimate the importance of a neat, organized package. For larger projects, your proposal may benefit from schematic diagrams of buildings and facilities, models and/or artist renderings. Be prepared to provide business and credit-related references, the type of security to be oﬀered for loans, a repayment plan, background information on the development area, and information on you, the developer, and key people involved in the project.
Internal Sources of Financing
Owners – Proprietors, Partners, Shareholders
The four basic forms of business organizations are sole proprietorships, partnerships, corporations and co-operatives. Regardless of the structure under which the business will operate, it is the owners who traditionally provide the initial financing from their own resources. The funds may come from savings or from borrowing against personal assets, such as one's home or other real estate. The Financial Analysis on page 11 outlines the importance of identifying the cash requirements of the business and the flow of funds as the business is established or expanded.
Each form of organization has legal and tax implications. The advice of a solicitor and/or an accountant should be sought in the creation of the most appropriate capital structure for your business venture.
Some businesses carry an excessive amount of inventory for resale. Carrying a lower level of inventory could free up cash for use elsewhere in the business.
Many businesses extend credit to their customers. The cash generated from credit sales will not be available to the business until the accounts receivables are collected. If the collection takes longer than planned, operating loans (or an additional injection of equity from the owners) may be required.
Many businesses purchase supplies and services on credit. Payment of these accounts when they are due rather than when they were incurred can retain more cash within the business for a longer period of time. This can reduce operating loan requirements.
Sale of Assets
One other internal source of funds is the sale of fixed assets that are no longer necessary in the operation or are unlikely to be required in future. This can include everything from oﬃce equipment and vehicles to real estate. Disposing of some assets may reduce or eliminate the need to borrow money.
These federally chartered financial institutions regularly provide medium- and long-term operating financing to virtually every kind of business venture. They have learned a great deal about diﬀerent businesses through the experience of granting, monitoring and collecting these loans. Bankers who have dealt with your kind of business venture can be a valuable source of information, as well as a source of financing.
Canada Small Business Financing Program – ic.gc.ca/csbfa
Credit Unions also provide a wide range of financial services to the business community. They are owned by their members and credit decisions are made or ratified by a local board, elected from the membership. For internal financial reasons, larger loans are sometimes handled by Credit Union Central, but they still require local support.
Other Conventional Lenders
Long- and medium-term loans are also provided by trust companies, insurance companies, commercial mortgage lenders and acceptance corporations.