Hi, what a great question.
Ever since my best-selling book, Invest Local, came out in 2014, I've been getting lots of Clarity calls about raising capital for small business.
You haven't specified if you are looking for debt or equity financing. Let's discuss both.
Equity: The investors you've spoke to are likely 'accredited.' This means they can make any investment they choose with their money because their net-worth makes them exempt from securities laws. They're right. Your deal is too small. In order to be interesting to investors who want a diversified portfolio, you need to find a few very small investors. This means they won't likely be 'accredited.'
So how can you sell them shares without breaking the law? You need to use another exemption if you don't want the hassle of creating a proper prospectus. This means friends, family and business associates. This is sometimes called 'Love Money' because it comes from investors who are supposed to love you.
Check with your provincial securities regulator about the 'capital raising exemptions' as there are some subtle differences between the provinces. You may also wish to use what's called an 'offering memorandum' which is a lite version of a prospectus. In some provinces you don't even need audited financials for an offering memorandum.
Debt Financing: Borrow the money, but if this is a startup, forget about the bank unless you can personally secure a line of credit with your credit score and net-worth.
Some alternatives do exist, for example, you can sometimes get an advance against a purchase order from a factoring company if your customer is solid.
Most entrepreneurs who need this level of capital will put up personal assets as collateral, such as getting another mortgage on their house or pledging assets such as stock portfolios. If you don't have any assets to serve as collateral, consider doing a combination of debt and equity financing, find a partner and give them equity in exchange for them guaranteeing the loan or putting up collateral.
Government programs also exist. For example the SEED program will lend $20,000 to new business ventures and it is offered via different economic development agencies across Canada.
Here is a video I did last year about courting small business investors: https://youtu.be/w0pJN4QB6Jk
If you want help or wish to discuss your case in particular, please arrange a call on Clarity.
David C Barnett