Financing the Bush Order Business Plan

We want to share the story of how we came to write our business plan, and finance our land purchase and startup costs. We want to share the hurdles we overcame, what many of the unknowns were, and how long it really took to get approval. We want to share all this in the hope it helps someone in the future understand the process because no one tells you when you get started.

Starting with the Business Plan.

Like most people who start a business, it started with a dream and the drive to reach that dream. Writing down all of our crazy ideas was the first step. Writing a business plan is a mind mapping exercise above all else and is a crucial step to starting a new business. We were not prepared for the amount of time it took to write the business plan and then rewrite it again. Do not underestimate the time spent revising financial projections.

We had a rough vision of what we wanted to accomplish with the business back in October 2019. When we thought we had a good plan we smugly took the plan to two financial institutions to get a better understanding of what we would need to finance the purchase of a property.

In both cases, we were essentially rejected on the spot. Our business plan was not very strong and we were asking for a lot for a new, unproven business.

One institution said that they wouldn’t be able to finance the purchase of a property without more collateral, as our personal collateral wasn’t enough. They did suggest they might be able to finance some of the equipment but ultimately fell short of extending help. 

The second institution thought the business too much of a risk due to our northern location (fair enough, it’s cold here, and our growing season short) and didn’t believe a wholesale sourdough bakery would be properly supported by Yellowknife and would essentially fail without a storefront downtown.  

Our business plan, if you haven’t picked up from this post, was written so that the bakery component would help incubate the market garden component. It takes time to nurture healthy, arable soil supported by living microbes. Not to mention we can only grow outdoors for 4 1/2 months and season extension techniques could take time to incorporate. So while a storefront might be at the forefront of most people’s minds, it was not in ours.

Our business plan is rooted in a realistic and conservative approach. And knowing we wouldn’t be able to utilize all the potential land we wanted to purchase right away, we did incorporate alternative revenue streams.

After being rejected from the first two institutions, we moved onto another major bank. It was now late January 2020, Australia was on fire and COVID-19 was breaking out in China.

With connections through the Yellowknife Chamber of Commerce over the years, we emailed the branch manager of the bank and asked who we should speak to about our business startup.

He referred us to his Small Business Advisor and his Commercial Business Advisor. In our business plan our startup costs – the land purchase, equipment and renovations of a bakery space – put us right on the threshold of small business and commercial business. One would assume your business will grow to the point of being in the commercial business category and thus we might as well start there.

We had one positive meeting with both advisors to pitch our plan. Surprisingly to us, the idea was received very well with some constructive feedback from the commercial side. This was our first glimmer of hope that something was possible. We were to update our financials a bit more and get back to the commercial advisor. So we did. 

After a long wait we learned that our project didn’t fit within the criteria for commercial financing. However, our small business advisor did have an option for us to explore. He outlined to us that he could possibly finance 70% of the land purchase, given we could produce the 30% equity and startup funding. 

Two things to note at this point.

First, no institute would finance the purchase of a property unless we could also somehow get the funds for the startup. Any lender would want to see how we planned to realistically get operational and generate revenue. Where is the working capital? 

So while 70% of the property purchase sounded great, it was actually only 57% of what we needed.

The second noteworthy thing at this point was that we were simultaneously speaking with a territorial business development corporation about financing our business as well. They have much higher interest rates than a traditional bank but are willing to take a higher risk.

So to bring this back around, when we learned we could get 70% of the property purchase financed in principle, we then took our business plan and readjusted finances to the business development corp to ask for the property purchase equity and startup funds.

Finally, after a joint meeting between all three parties; ourselves, the major bank and the business development corp, we received a verbal approval-in-principle that we could stack the two loans and that the major bank could be first in the general security, meaning they’d get the first crack at recuperating their money should we go bankrupt.  

At this point, both institutions indicated that the next step was for us to get an accepted offer on the property we’d like to purchase. None of the financing was secured, but we needed to put some money on the line and commit to purchasing a property in order for the loan applications to be officially considered.

Little did we know, finding the right property would bring all sorts of factors and variables that would affect our business plans, financials and timelines.

All that will be in our next instalment article.

Read More of this Series

Part 1: We Decided to Buy Land. Not Rent.
Part 2: Financing the Bush Order Provisions Business Plan
Part 3: Finding the right property for Bush Order Provisions
Part 4: Hurdles of getting Financing Approved

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