How to Get a Canada Small Business Loan - By Stan Prokop - 7 Park Avenue Financial
The Canada Small Business loan program is an ongoing major initiative by the Canadian Federal government to provide capital financing to new and existing businesses that meet the criteria of the program.
The program is very popular in Canada, primarily because it a business loan that the business owner may not have been able to achieve elsewhere.
Many business owners and financial mangers either aren't aware of the program, or, as is more often the case, don't understand the requirements of the program and how to ensure a proper approval in a timely manner. Naturally, rightfully or wrongfully so, there exists a perception that any government type funding program is extremely paperwork and administratively burdening to the business.
There are several key basics that allow a business to ensure that they are in fact qualified to pursue the program. Those basics are as follows:
1. The company must be a private corporation - public firms are not eligible
2. The company must be under 5 Million dollars in revenue
3. The loan must ' flow through' a registered administrator of the program - In Canada this is typically a chartered bank - this is one of the key perceptions of the program, in that the banks ' administer ' the program, but they don't own it
4. Only three major asset classes are covered under financing in the program - they are as follows: Equipment, Leaseholds, and Real Estate
The government, as we have shown, doesn't lend the funds, but it guarantees the funds to the bank
Almost every type of business in Canada can qualify for the loan program.
The challenge of course, as always, is ' How does my firm get approved?!'
If a business owner or manager feels they are not capable of providing a proper submission to the bank it is highly recommended that they used the services of a trusted financing advisor or intermediary.
We cannot overemphasis that the key to dealing with the government and the bank is that it is critically important to have all the necessary paperwork in a properly submitted and, hopefully, professional package.
What does that ' paperwork ' include? Companies should ensure the package reflects the current financial position of the company, a proper business plan and or executive summary, and miscellaneous personal data surrounding the bank and government requirements - i.e. statement of net worth, proof of no tax arrears, etc.
Most importantly is the need to position a proper purpose of the loan re dollars, timing, use of funds, etc
On occasion it might be appropriate to offer up other guarantors or additional collateral, but in general this is not required.
Most business owners don't realize the true benefit of doing everything once, the right way! In lending and loan approval that is important. You can re- submit and renegotiate, but that is not an optimal strategy for business financing success.
In summary, the bottom line is ' do it once, right '. If you feel that can't be done internally engage the services of a trusted financing advisor with credentials in this area.
Canadian Business Loans -Is My Cash Flow Really Free? And How Free is it!- By Stan Prokop - 7 Park Avenue FInancial
Get the business loan experts in your corner!
Maintaining a competitive edge in the cut-throat business markets of today can be difficult, and sometimes you need a bit of help to keep your business one step ahead of the competition. That’s where 7 Park Avenue Financial comes in. We are experts at sourcing business loans in Toronto Ontario, and we can help save you money and costly delays. Don’t take our word for it, view our proven track record! Between March and April 2008, we raised over one million dollars in financing for our clients alone!
Every business is unique, the solution should be too!
Your business has its own unique challenges and needs, and a cookie-cutter solution just won’t cut it. We offer personalized attention to customer financing needs, and our goal is to become your trusted financial advisor.
When sourcing Toronto Ontario business loans, we believe that customer service will make the difference – and customer service can’t be mass produced.
The solutions to your financing problems await!
We’d love to help your business grow and become more successful by arranging the financing you require. Contact us today to deal with business loan experts who have a proven track record of success.
Canadian business owners and financial Canadian managers might not be familiar with the term free cash flow. When owners discuss business loans with their bankers and other lenders they often focus on the 'profits 'their firm is generating. More sophisticated owners and financial managers realize that profits in fact have not a lot to do with cash flow. Furthermore, those owners that understand the concept of 'cash flow 'are unfamiliar with our term, we note as 'free cash flow '.
When the business owner takes his financials into the bank he is often proud of course to discuss the 'profit 'that the company has generated. The banker or other intuitional lender is probably turning over those pages in the financial statement and looking at the cash flow. Cash will of course repay any loans that are made, not profit, which is a term from the income statement of course. Profit and cash are never really equal or identical amounts on the financial statement.
We should also assess the quality of the profits and earnings - as they may be distorted in a number of different ways. Many companies prepay things like advertising, insurance, development etc and hope they will of course bring in future profits. They may, but then again they may not. Inventory is bought and paid for, and will hopefully be sold, but in some cases inventory will be rendered obsolete.
Another angle for our profit analysis, as it relates to our concept is the fixed assets on our balance sheet may or may not be true resemblance of their actual value or replacement cost.
All of this brings us to the key issue of our concept of 'free cash flow ', and that is the issue of capital spending. Because it usually is a major capital outlay for any firm, and the fact that assets will bring income over a much longer period of time, it deserves a good amount of focus. What we are saying is that depending on your firms capital needs they will have potentially volatile effects on your cash flow. When your firm may be having a tougher year and liquidity is not optimal then it will be very challenging to make investments out of cash into new assets for the business. Therefore business owners, for cash flow purposes, should probably be reviewing on an ongoing basis their maintaince needs for their assets, and their replacement needs.
How can business owners estimate the level of capital expenditures and cash outlay? One great method of doing this is to monitor your cost of goods sold and benchmark it against our capital expenditures. They should probably be growing at the same rate - that's a valuable analysis tool for your business and financial planning.
So lets come back to our definition and concept of 'free cash flow '. Free Cash flow is calculated by taking your firms profits, adding in depreciation, and then subtracting your capital expenditures. As complicated as that might seem to non- financially oriented business owners it is simply saying that your firm is earning a profit, you are in a position to replace assets, and the amount left, your FREE CASH FLOW, still allows you to take on additional debt, declare a management dividend or bonus, etc.
Let's recap - we are encouraging business owners to differentiate between 'profit' and cash flow. Once they have focused on cash flow (profit + deprecation) they should analyze that number in the context of additional assets they have to purchase to grow the business successfully. The amount of cash leftover after those asset purchases is a key financial metric for your banker, and it should be for yourself also, because, Cash is king!
Are There Government Grants and Loans For Canadian Businesses?
I am often asked by customers if there are grants and loans available for their business in Canada. On many occasions these firms are either a start up or pre-revenue. There is a general belief that there is 'free money' out there, and people are trying to find it! I categorically believe there is no free money available - if that was the case can you just imagine?!
However, there are some excellent programs, two in particular, that in our opinion are the two best government programs for Canadian business in the SMALL MEDIUM ENTERPRISE ' SME' sector.
The Canadian government has allocated hundreds of millions of dollars into what is known as the CSBF Loan program. The government provides a lot of data at its website around the availability of the program, how it works, and who is eligible.
While some of the information might seem overwhelming there is a lot of assistance available. For the purposes of this article we will share that the program is available to all new or established firms with revenues under five Million dollars. We note also that the program does not apply to publicly listed companies.
Most people that are familiar with the program might not know that in the current 2009 world economic crisis the government increased the amount of these loans to $ 350,000.00 and in some cases $ 500,000.00.
How can you qualify for the program, and, more importantly, do you qualify?
Customers need to review the classes of assets that can be financed. The true power of the program is that the rates are only 3% over prime, currently in the 5% range. Terms of repayment are 5-10 years, and, are you ready, a full personal guarantee of payment is not required!
Typically these programs are used by companies to acquire assets, improve their business, purchase or develop software, and even in some cases buy real estate.
Do Canadian business owners know that the government can assist them in purchasing business real estate with limited guarantees and great rates and terms? We don't think so!
If business principals feel they are adequately prepared to source out this programs financing power we strongly recommend that they begin this process. However, not everyone has the time, financial skills or accumen, and the ability or comfort level to complete this financing.
Those people should seek out the aid of a trusted advisor and business financing expert in order to maximize their participation in the program.
Let's get back to free money! Does it exist? Again, not really. But would you like to receive a check from the government for any processes, research or innovation that your firm has developed? If so you want to maximize your participation in the governments SR ED tax credit program. We will talk more about this program in an upcoming article.
