By Mario Toneguzzi

A financial services company, based in Calgary with a national reach, has launched an initiative to spread the word to small business owners that there’s plenty of money available for their business.

They just have to know where to look.

Olympia Trust recently launched a new website rspsmallbiz.ca geared specifically to small businesses to help them explore the little-known secret of using RSPs to fund their ventures. In fact, it could be a lifeline for many businesses who are struggling these days with the ravages of the COVID-19 pandemic and its impact on the overall economy.

Craig Skauge, President and CEO of Olympia, said access to capital has always been a key consideration for a small business and its success but perhaps maybe more so today because of the current economic challenges.

“When they talk about whatever the percentage is — 90 percent of small businesses fail in the first year or two — it’s typically due to a lack of working capital. It’s just that pot of money that’s sitting there with no particular purpose identified but it’s that money that gives a business flexibility to get through leaner times,” said Skauge, a 2019 recipient of Canada’s Top 40 Under 40, founder and the President of Exempt Edge Inc., a company providing cloud based regulatory compliance solutions for participants in the Private Capital Markets, a founder, director, and Vice Chair of the Private Capital Market Association of Canada and a member of the Alberta Securities Commission’s Exempt Market Dealer Advisory Committee.

“And oftentimes those leaner times are when a company starts up and they build a customer base. But now we’re in leaner times for different reasons and the challenge is we don’t know when things are going to return to the old way because I think as we’ve seen here it’s not just contingent on what government says. It’s also based on consumer confidence. Just because the government says that restaurants are open doesn’t mean that people are going to go out to them.”

Skauge said it’s a little known secret in the business community that the Income Tax Act generally allows for shares in Canadian controlled private companies to be held inside a registered plan (RSP/TFSA/RRIF/etc.).

One requirement for private company shares to qualify as an investment for registered plans is that the company has to be engaged in an “active business,” that’s carried out primarily in Canada. The good news is that most businesses, be they a brewery, manufacturer, restaurant, retailer, etc. will meet the active business test.

Skauge said Olympia Trust has become the leader in the country for administering registered plans where the primary investment is a private security.

He said the working capital provided through those registered plans can help float small businesses through these challenging times.

“Under the preferred share model, it could be structured in a way that it’s almost like a loan to the business,” explained Skauge. “So they’re not giving up a part of their equity, they don’t get into the complexities of what’s my company worth. It’s just hey you’re basically lending me money from your RRSP.”

From a retail perspective, he said, some businesses may need money to modify the layout of their store - to accommodate a different type of shopping experience than it previously provided.

“But where does that money come from? If times are lean to begin with, perhaps they still have to pay their landlord, where do they get the money from? If you talk about how Canadians in general are cheque to cheque, so are a lot of businesses. A lot of small businesses run that way. They just don’t have enough working capital to get to that critical mass where they’re profitable. This is just showing the entrepreneurial community this is how they could go and get some capital,” added Skauge.

Olympia has been helping small business owners find that working capital in this way for close to 25 years. The range of capital investment could be into the millions of dollars.

On an annual basis, Olympia helps about 100 or 200 small businesses raise working capital in this way.

“The reason more people haven’t used it is just because it’s not well known,” said Skauge.

Mario Toneguzzi, based in Calgary has 37 years of experience as a daily newspaper writer, columnist and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, city and breaking news, and business. For 12 years as a business writer, his main beats were commercial and residential real estate, retail, small business and general economic news. He nows works on his own as a freelance writer and consultant in communications and media relations/training. Email: mdtoneguzzi@gmail.com

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