Government Funding vs Private Equity Funding in Canada

The COVID-19 pandemic has had a significant impact on the bottom lines of many Canadian businesses. The Canadian government has rightly stepped up to the plate and offered a variety of support programs to help businesses recover. But for many businesses, this support may not be sufficient to help them through the pandemic – or there may be factors built into the government programs which make some businesses ineligible.

For businesses that must look beyond what the government offers, private equity (PE) funding may be a good option; however, businesses that are new to applying for and receiving this type of funding may understandably be hesitant. It is important, therefore, to understand the benefits of PE funding.

Get Expertise and Experience in Addition to Funding

PE investors aren’t just throwing money at anything that comes their way. They are proactively looking for the right investment opportunities and businesses either to invest in or to buy outright. Business owners who choose PE funding often do so because they are getting more than just a financial infusion – they are getting a savvy business partner who is looking to add value through their expertise and experience.

And while these owners may, in fact, be selling a portion of their equity, they see the opportunity for business growth and revenue as outweighing the percentage of their company that they are giving up.

The PE Sector is Evolving

Although the idea of selling off a portion of the company still makes some business owners nervous, the PE sector has been continually evolving to meet the needs of its assets. For example, more firms are building teams of professionals who can provide better advice and expertise to help their assets thrive.

Additionally, environmental, social, and governance (ESG) has been incorporated into the mission of many PE firms. These firms are looking to create benefits that go far beyond just their own profits – and this outlook ultimately leads to much more sustainable growth.

Rigorous Preparation is Involved

Even though many PE firms have large amounts of capital to invest, it doesn’t mean that they have money to burn. They are professional investors looking for the right opportunities. The process for debt underwriting, for example, is still extremely strict, and some companies are still going to be quite difficult to finance.

How to obtain PE funding

There are a number of things that business owners can do to improve their chances of being approved for PE funding:

  • Ensure PE funding is right for you and get buy-in from your management team and stakeholders. This means doing your due diligence and being able to clearly communicate how such an investment can be used to help the company grow.
  • Have the proper financial information ready. Your potential investors will want to see this – and they will want you to be organized enough to have it when they ask for it.
  • Ensure the right management team is in place – this is part of your value proposition to investors!
  • Seek professional advice and support. You should have your own lawyer, accountant, financial advisor, etc., that you trust to provide you with advice.
  • Understand that you have as much control in choosing the right partner for the company, as the PE firms have in choosing entrepreneurs to back. Spend time looking for the right partner, with similar values, to ensure you find the best fit
Contact CBGF today

For more information on how CBGF can help your business, contact us today.