Guide To Government Loans & The SBL Canada Small Business Loan | 7 Park Avenue Financial

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Maximize Your Business Growth: Canada's Government Loan Program Unveiled



The Smart Entrepreneur's Guide to Canadian Government Loans

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Consider this article a must-read because it explains how SBL loans are the secret fuel behind thousands of Canadian business successes 


Insider Tips: Navigating Canada's SBL Program with Ease 





A whole lot of business relates to good fortune or business smarts around timing. So when exactly should business owners investigate and pursue government loans? We're talking specifically about the Canada small business loan, and our recommendation is: right about now!


Are you a Canadian entrepreneur on the brink of a breakthrough but held back by financing hurdles? The quest for business funding can seem daunting, especially when traditional lenders don't align with your vision.


Enter the Canada Small Business Loan (SBL) — a beacon of hope for start-ups and small enterprises. In this detailed exploration, we delve into the critical timing, the enticing benefits, and the surprising accessibility of government loans, with a special focus on the SBL program, tailored to bolster businesses like yours. 


Understanding the Misconceptions About Government Loans 



When many Canadian business owners or financial managers of start-up firms, or firms that are under, say five million dollars in revenue think of a government loan they might tend to think of this as some sort of handout or something involving a strategic tax break of sorts. That’s the farthest thing from the truth around the SBL loan program in Canada. 




The Nature of the Canada Small Business Loan Program  



If we had to describe it simply (that’s our style by the way) we'd say it was a specially tailored financing program for new or smaller firms that provides access to funding and financing you normally might not qualify for under more traditional criteria and from those 'traditional' institutions, aka our beloved Chartered banks.





Why the SBL Loan Program is Worth Considering  



So when you take the time to understand the program, ensure you qualify for it you just might agree with most that it's one of the most superior financings in today’s economy.


Eligibility Criteria for the SBL Loan Program  



We're referred several times to the amount of 5 Million dollars as a revenue size. That’s for a reason, which is simply that the program is only offered to firms that have under 5 Million dollars in sales or who are start-up, pre-revenue in nature. Franchises by coincidence are great candidates for this the Canada Small Business Loan, technically referred to as the federal BIL/CSBF program.

Borrowers should ensure they have a proper business plan for their loan - 7 Park Avenue Financial prepares business plans for clients that meet and exceed bank requirements.




The Irony of Traditional Banks and SBL Loans 




Recall also that we identified the SBL as being perfect for firms who couldn’t access traditional bank financing. Well, if you are looking for some irony, those same banks that might not have provided you with the financing you wanted are actually the same entities that administer and run the program. How ironic! It's just that the majority of the loan, when approved, is in fact guaranteed to the bank by those good folks at Industry Canada in Ottawa.



The Popularity and Success of the SBL Loans



So are SBL loans one of those secrets only shared and utilized by some. You decide, because for the latest statistics available over 7000 firms in 2010 used the program for billions of dollars in financing. That might be one of your competitors by the way. 



Key Benefits of the Canada Small Business Loan Program 



What makes the program so great? The fundamentals are simply very attractive from a financing point of view. Rates are just several points over the bank prime rate, terms are from 5-7 years typically, and even items such as leasehold improvements can be financed under a competitive interest rate  -

Those items typically being very difficult to finance under any financing at any time. Actually, BIL, the technical term of the program stands for Business Improvement loan. The ability to finance real property under the government loan is also an attractive option for a loan amount up to 1 Million dollars. If loan repayment  is amortized over a period longer than a 15 year period the SBL loan  must be fully repaid no later than the end of the loan term.



Key Takeaways 


Eligibility Requirements: Understanding who can apply for the SBL loan is crucial. The program is designed for small businesses in Canada with gross annual revenues of $10 million or less. Not all businesses qualify; non-profit organizations, charitable entities, and farming businesses are not eligible. Grasping this concept helps identify the target beneficiaries of the program.

Loan Purposes: Recognizing what the loan can be used for is essential. The SBL program can finance up to $1 million for any one business, where a maximum of $350,000 can be used for purchasing leasehold improvements or improving leased property and purchasing or improving new or used equipment.

Loan Guarantee: Knowing how the risk is shared is significant. The Canadian government guarantees up to 85% of the loan made by lenders under this program. This guarantee is critical as it reduces the risk for lenders, making them more willing to lend to small businesses that might not meet conventional lending criteria.

Interest Rates and Terms: Understanding the cost of the loan and repayment expectations is fundamental. Loans under this program have competitive interest rates (which can be variable or fixed), and the terms of repayment can be up to 10 years. These terms affect the affordability and management of the loan over time for the borrower.

Lender Participation: Recognizing that traditional financial institutions administer the program is key. Even though it’s a government program, the loans are actually given out by banks, credit unions, and other financial institutions. Knowing this informs the applicant that they will be dealing with familiar entities rather than directly with government officials.


Incentive for Innovation Beyond Finance



While the Canada Small Business Financing (CSBF) Program is widely recognized for its financial benefits, an uncommon take is to view it as a catalyst for innovation. It implicitly encourages businesses to innovate by providing them with the capital to take risks they otherwise wouldn't. By funding equipment and leasehold improvements, it fosters a landscape where businesses are more likely to invest in new technologies and innovative processes, potentially leading to industry advancements and increased competitiveness on a global scale.

Conclusion -  SBL Government Loans  


So, yesterday? Already gone. The future - who knows where your firm will be at. So consider now as the appropriate time to investigate SBL government loans as a vehicle for business financing success.


Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor today on why this program is right, right now!




What is the Canada Small Business Loan Program?

The Canada Small Business Loan (SBL) Program helps startups and small businesses obtain loans up to $1 million for growth and operation needs through a government-backed guarantee to lenders to assist in economic development in Canada. These loans are not business grants for training employees for example,  but are structured as term loans and lines of credit for financial support of the small business owner via financing of eligible costs under the program. Funding new equipment as as well as used equipment is a popular use of the program.

Large businesses with revenues in excess of 10 Million dollars are excluded from using the program. Certain intangible assets, for example, franchise fees can be included under the program.

Who is eligible for the SBL Program?

Small businesses in Canada with annual revenues of $10 million or less are eligible, except those in farming, charitable, or non-profit sectors.

How does the SBL Program benefit borrowers?

Borrowers benefit via the Government of Canada program via easier qualification terms, competitive interest rates, and a government guarantee which can cover up to 85% of the loan, reducing the risk for lenders and making it more accessible for small businesses. The program can also be used by indigenous communities.

Can the SBL Program funds be used for any business expenses?

Funds can be used for specific purposes like buying equipment, leasehold improvements, or purchasing property, but not for working capital, inventory, or research and development. Borrowers can also make lump sum payments under the program structure.

Where can I apply for an SBL loan?

Applications can be submitted through banks, credit unions, and other financial institutions that participate in the SBL Program. Talk to 7 Park Avenue Financial about fast-tracking your application.


How long does it typically take to get approved for an SBL loan?
The approval time can vary, but it generally takes several weeks. The exact timeline depends on the lender and the completeness of your application.

Are there application fees for the SBL Program?

Yes, there is a registration fee of 2% of the total amount loaned under the program, which can be financed and included with the loan amortization period

Is personal collateral required for the SBL loan?

While the government guarantees a portion of the loan, lenders may require a  limited personal guarantee, depending on your business's financial situation.

Can I use the SBL loan to refinance existing debt?

No, the SBL loan cannot be used to refinance existing debt. It is intended for specific growth and operational investments.

What happens if I default on an SBL loan?

In the event of a default, the lender will follow standard collection procedures, which may include claiming the government guarantee for the portion of the loan that is covered.



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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil