For immigrant entrepreneurs, financing is a big problem

June 7, 2016

By Globe and Mail |

When Ralston De Zilva moved to Winnipeg from Sri Lanka eight years ago, he longed to start his own business. But he had no credit history in Canada, and little in the way of assets.

“There’s a huge initial expenditure associated with moving your whole family to Canada,” he says. “It takes you quite a number of years to again build your capital.”

It wasn’t until a year and a half ago, when Mr. De Zilva’s sister, Amanda, arrived that he felt ready to launch launch Chizma Tea Company – a retail shop and online purveyor of premium Ceylon teas.

Amanda had contacts with several large tea companies in Sri Lanka, and Mr. De Zilva had a good grasp of the business culture here. Together, the pair began to seek out financing.

The problem: like many immigrants to this country, the De Zilvas had nothing to use as collateral for a loan. Even a bank Mr. De Zilva had worked for in the past was only willing to pony up $2,000. “That would not have taken me anywhere,” he says.

Statistics Canada figures indicate newcomers tend to be drawn to entrepreneurial activity. By the end of the 2000s, about 19 per cent of immigrant workers were self-employed, compared with 15 per cent of those born in Canada. And a 2013 Government of Canada report shows 21. 7 per cent of small to mid-sized enterprises had a majority owner or CEO born outside of Canada.

Yet they face some unique barriers to getting their businesses off the ground. Apart from the fact that English may not be their first language and they may be unfamiliar with the business culture here, they often have a tough time getting financing, says Julia Deans, CEO of Futurpreneur Canada.

“They may not have a network of friends and family to help them get the ball rolling,” says Ms. Deans. “That’s often the first port of call when you’re setting up a business.”

On top of that, they usually don’t have a Canadian credit history. And if they haven’t yet found a permanent place to live, they can’t even get a bank account, she adds. “That makes them pretty high-risk in the view of traditional lenders.”

Nonetheless, there are funding options that lend themselves particularly well to new Canadians: Here are four of them:

1. Look for government loans. After several banks turned Mr. De Zilva down for a loan, he came across Futurpreneur Canada’s Newcomer Program through an online search. Not only did the De Zilvas get help honing their business plan and access to a business mentor for two years, they snagged a $15,000 collateral-free loan.

That enabled them to create a professional website, do some marketing and stock the shelves of their first shop. In March, they opened Chizma Tea Collections at Winnipeg’s downtown Cityplace mall.

Applicants for the Newcomer Program must be 18 to 39 and have been in Canada for less than 60 months (Amanda De Zilva qualified). They’re eligible for $15,000 loans, or as much as $45,000 if they already have a credit history in Canada.

Loans can be repaid at any time, usually over a five-year term and the interest rate “is slightly lower than the bank rate,” says Ms. Deans. “Because we are a not-for-profit, we can take a greater risk.”

To find other helpful government programs, do a search of 15,000 funding sources at fundingportal.com, suggests Teri Kirk, CEO of Funding Portal Inc. Plug in a few details about yourself and your business and Funding Portal turns up provincial and federal government funding sources.

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