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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Government Backed Small Business Loans & solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Government-Backed Small Business Loans in Canada
Understanding the Basics of Government-Backed Small Business Loans
If we had to separate some of the major confusion surrounding two to three key areas of the small business loan from the government in Canada, aka 'SBL loans', it would be quite easy as clients seem continually misinformed about some of the key attributes and benefits of this program.
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Government-backed small business loans in Canada offer an invaluable resource for entrepreneurs seeking to expand or start their businesses with accessible financing options. The Canada Small Business Financing Program, a federal government-backed initiative, shares lending risk with lenders, making it easier for small businesses to get loans from financial institutions. This program, known for its extensive support, provides crucial funding opportunities that can make the difference between business stagnation and growth. By understanding the specific benefits and application processes of these loans, Canadian business owners can unlock potential that traditional financing often overlooks.
Loan Limits and Misconceptions
Clarifying the 'Small' in Small Business Loans
Let’s get ‘small’ out of the way first. The Canadian SBL loan underwritten by the government (more about that later!) actually goes to 1,100,000.00 dollars from a lending limit.
A one-time Federal Government registration fee of 2% of the loan amount is payable to the lender and can be financed. That’s one of the initial sources of confusion for our clients… because the 500k amount refers solely to your utilization of the facility for a real estate deal. All other transactions under the program are capped at $350,000.00.
Real Estate Deals Under SBL Loans
In many cases, it actually might make sense to do a real estate deal under SBL loans.
Real property improvements are eligible for financing under the program. For example, your 10% required equity under the program is significantly less than the 25-30% or more that is required by other lending institutions under a conventional mortgage scenario.
Cost Calculation for Real Estate Deals
We've done a calculation, and a $500k mortgage utilizing the SBL would cost around $5500 a month for a commercial transaction.
That is a higher payment than a longer amortized commercial mortgage, but consider that your required permanent own equity in the deal is only 10%, and your personal guarantee under the program is actually only 25%. Try getting that lower personal guarantee from another commercial lender. We don't think you'll be able to.
Revenue Limitations
Defining 'Small' in Revenue Terms
Let's reanalyze what the word small means in a small business loan from government sources. The program, which is officially called the BIL/CSBF program, stipulates that your current or projected revenues cannot exceed 5 Million dollars per annum.
Program Utilization and Awareness
As you can imagine, and as we have experience, that covers thousands of businesses in Canada that should be accessing the program but either aren’t aware of it or don’t fully understand some of its rules and guidelines.
Financial institutions are responsible for approving and disbursing the funds for the CSBFP loans. Oh, and by the way, almost 10,000 Canadian firms use the program annually … so somebody out there, including your competitors perhaps?.. accessing hundreds of millions of dollars in capital - So we think it’s about time you got on board.
Benefits of the SBL Program
Financing for Non-Traditional Borrowers and Working Capital Costs
We think the program works for a couple of great reasons… it usually can finance companies who would not otherwise be able to receive traditional financing - aka your ‘friendly chartered bank’, and, secondly, it covers the funding of assets that you need to grow (or start) your business.
Financial institutions play a key role in delivering and approving loan programs.
Eligible Assets for Financing, Including Intangible Assets
The program finances the two main asset categories are business assets, such as commercial land, buildings, equipment, and leasehold improvements.
Intangible assets, such as intellectual property, can also be financed under the program. That covers a lot of what you need to be successful. And by the way, things such as computer software are covered under the program also, as that generally falls under the equipment category.
Key Takeaways
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Eligibility Criteria: It is essential to know who qualifies. Most Canadian small businesses with revenues under $10 million are eligible.
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Application Process: Simplified steps guide you through the loan application, making it straightforward.
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Benefits: Highlighting advantages such as lower personal guarantees and favourable equity requirements.
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The Canada Small Business Financing Program (CSBFP) makes it easier for small businesses to qualify for loans by sharing the risk with lenders and providing government backing. Based on a formula around the participating lender's prime lending rate, the interest rates are very competitive as well as offering an unsecured personal guarantee and the ability to fund purchasing leasehold improvements and funding improvements to existing leasehold improvements on final credit approval
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Working capital costs, such as day-to-day operating expenses, can be covered using the financing options available.
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Comparison with Traditional Financing: Demonstrates why SBL loans are often more accessible than bank loans.
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Interest Rates and Repayment Terms: Understanding these helps in planning your finances effectively.
Conclusion
So, as a Canadian small business owner, do you feel challenged on what's available and how to execute SBL loan financing successfully?
A government-backed small business loan in Canada is a financing program supported by the government to help entrepreneurs access capital for growth and development.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, about why a small business loan from the government, aka 'the SBL,' will help your firm go to the next stage of its growth or development.
FAQ
Who is eligible for government-backed small business loans in Canada?
Most Canadian small businesses with annual revenues under $5 million can qualify for these loans.
How can government-backed small business loans benefit my business?
These government loans are offered by the government for economic development and come with lower personal guarantees, favourable equity requirements, and the ability to finance essential assets like equipment and real estate. Borrowers also can utilize BDC loans under that crown corporation's offerings.
What is the application process for these loans?
The application process is straightforward and involves providing business details, financial statements, and a detailed plan for using the loan.
How does the interest rate of a government-backed loan compare to traditional financing?
Government-backed loans often have competitive interest rates and more flexible repayment terms than traditional bank loans when approved by a participating financial institution.
What types of assets can be financed with government-backed small business loans?
Business Assets such as equipment, leasehold improvements, and computer software are eligible for financing under these loans.
Are there any limitations or exclusions for government-backed small business loans?
Certain types of businesses and uses of funds may be excluded from eligibility. It's essential to review the specific guidelines.
How do government-backed small business loans differ from conventional bank loans?
Government-backed loans often have lower personal guarantees and more favourable equity requirements, making them more accessible to businesses that traditional banks might not finance.
Can startups apply for government-backed small business loans in Canada?
Yes, startups can apply if they meet the eligibility criteria, including the revenue cap of $ 10 million per annum.
How can I ensure my application for a government-backed loan is successful?
Working with a trusted business financing advisor can help ensure you meet all requirements and present a strong application.
How does the government support these small business loans?
The government guarantees lenders, reducing their risk and encouraging them to offer loans to small businesses.
What are the repayment terms for government-backed small business loans?
Repayment terms can vary but are generally competitive. Depending on the loan amount and asset financed, longer amortization periods are available.
How can I use a government-backed small business loan to grow my business?
These loans can finance essential assets like equipment, real estate, and improvements, allowing your business to expand and operate more efficiently.
