FCNB has a legislated mandate to foster fair and efficient capital markets and confidence in those markets. As part of this mandate we promote the development of capital markets by ensuring that New Brunswick has a regulatory infrastructure that supports access to capital and the growth of economic wealth and independence for New Brunswick residents.
Most New Brunswick business-owners think of debt financing (see below) when the topic of raising capital comes up. Debt financing is certainly a well-developed option.
However, you may not realize that as an entrepreneur or a company, you do have other options for raising money.
Debt usually comes in the form of loans, mortgages, lines of credit, and debentures. It's typically repaid in a series of instalments over a set period of time. The person or institution that made the loan may also have some claim over your company or personal assets in the event that the loan is not repaid. Debt financing can come from banks, credit unions, or government economic development agencies.
Equity investment occurs when a company issues shares to an investor, and the new shareholders receive an ownership interest in the company. Equity investment is based on the valuation of the company at the purchase date and the amount invested determines the ownership interest in the company. Shareholders are entitled to receive dividends if they are declared by the board of director—however these types of investments typically do not require any other payments from the company to the shareholders. Investors typically hold their investment for an extended period of time and may not be able to sell their shares to other individuals within New Brunswick.
Generally, every person who “distributes” new securities must disclose certain information to potential investors in the form of a prospectus. This requirement ensures that investors receive sufficient information to allow them to make an informed investment decision.
But there are exemptions to securities regulations. These are exceptions which relieve a business from prospectus obligations in certain circumstances. These exemptions can be used to start a company, reward employees, raise money to finance the development of a business or community venture, reorganize a business, or to sell a business.
Common exemptions from prospectus requirements include:
- Raising money from friends, family and close business associates
- Use of an offering memorandum
- Selling through a private issuer
- Selling to an accredited investor
- Selling to an employee, executive officer, director, or consultant
- Making a $150,000 minimum investment
For a full list of exemptions, please review National Instrument 45-106.
Small Business Investor Tax Credit (SBITC)
The SBITC is a provincial tax credit program that provides a non-refundable personal income tax credit to encourage New Brunswick residents to invest in a small business in the province. Details about the eligibility criteria for companies and investors wishing to take advantage of this capital raising option are available on the province of New Brunswick’s website.
Angel investing typically involves private equity investments in the range of $150,000 to $1,500,000. Angel investment is an important part of early stage growth because it leverages additional investment for entrepreneurs. Angel investors typically exit their investment when the company receives venture capital investment.
Venture capital investment allows early-stage high-growth companies to reach mid-stage growth development, secure the equity needed to commercialize their research and development, and pursue market readiness and entry. Early-stage venture capital helps carry entrepreneurs to their next stage of growth and an investment is usually in excess of $1,500,000.
Public Equity—Initial Public Offering (IPO)
An IPO is when a privately-owned company issues stock to the public, through an exchange, for the first time. Typically, an IPO is issued by a young company to foster growth. Established companies can also do an IPO if they want to improve liquidity of their shares by becoming publicly traded.
More information about the process of listing on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV) is available in the listing guides published by the Toronto Stock Exchange and TSX Venture Exchange.
Alternatively, a company can go public through several other exchanges including:
- TSX Alpha Exchange
- Canadian Securities Exchange (CSE)
- Montreal Exchange (MX)
- NASDAQ Canada
- Aequitas Neo Exchange