How to Get a Government Small Business Loan in Canada - SBL Business Financing
Investigate the Power of Small Business Government Loans In Canada
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Canada Small Business Financing Program: Loans for Business Growth
Most Canadian business owners and financial managers are not aware that if they have been 'refused' a loan by a Canadian chartered bank that they can still apply (to that same bank!) for a government-guaranteed Small Business Loan.
Government-Guaranteed Loans to Support the Growth of Your Business
We have observed this loan is called a number of things by a number of people - Borrowers refer to it as an 'SBL' (Small Business Loan), or a 'government small business loan'. Bankers tend to refer to it by its more formal and legal names, the BIL loan, or the CSBFL. The bottom line is that it's helping small business get loans via federal government loans for small business. Entrepreneurs know well that financing a business in Canada is a challenge in the SME/SMB landscape.
Whatever you want to call it when it comes to finance for small businesses, the loan is a great part of the government of Canada's focus on assisting businesses with financing.
Previous purchases you have made within a specified period are eligible for financing as long as you have proper documentation around the purchase. Repayment options that work for you are very flexible around amortization, terms that meet your needs around prepayment with no penalty etc.
So how do you get the loan, and what's involved? What are the costs?
Although the loan is directly guaranteed (90%) by the government, the loan is actually administered by the Canadian chartered banks. The government emphasizes that they like the banks to participate in this program as the originating financial institution, and the government guarantees to the banks 90% of the loan amount.
There is a one-time 2% registration fee that is due on loan funding approval - by the way this amount can be bundled into the loan amount. Interest rates are benchmarked against Canada's prime rates. When it comes to how to get a business loan in Canada SBL loans should be a 'go to' option!
Funding Amount - Eligible Applicants
How much financing is available? What can be financed? Loans can be used to finance the following costs:
The current maximum borrowing limit is 1,000,000.00 for real estate and 350k for the asset categories of equipment and leasehold improvements. Any business with under 10 Million dollars in revenues can apply for SBL loans - that includes sole proprietorships, partnerships. Borrowers will be pleased to know that in other Canada Small Business Financing Program News that entrepreneurs purchasing franchises can now include the franchise fee in the borrowing amount! Financing small businesses in Canada in the franchise industry is a major use of the program, as are bdc loans.
Note that you cannot use a loan to financing the following costs such as lines of credit, working capital needs, etc. This is a lump sum term loan repayable with fixed installments at variable or fixed rates.
COST OF FINANCING
This is not an interest free loan unlike some of the other government loan programs and grants, etc but the interest rates under the program are very attractive and in some cases, interest can be deferred for a period of time.
The biggest issue, we think, with the program, is the misconceptions that come with the program - business owners think they can get a 'line of credit' under the program. This is not the case. In certain instances, the program tends to be confused with another program called the COMMUNITY FUTURES program.
This is a separate program that is funded by certain economic regions to promote employment and business in that particular area or geography. It tends to be a bit more 'rural' in focus. Again, we emphasize, the Community Futures program is not the government guaranteed Small Business Loan. (In the U.S. our government loan is called an 'SBA' loan, as it's administered by a separate organization set up by the government).
So, who qualifies? Hopefully your business! You must have revenues under ten Million dollars per annum as we have noted.
So when should you proceed? We would recommend right now, not when your venture is in desperate need, at which point your chances might be less than successful.
What is the 1 Million dollar issue on the program?! It's as follows - Dealing with banks and paperwork requires proper preparation, detail, and you need to allow for some reasonable time frames. That is your 1 Million dollars' worth of advice!!
Canada Small Business Financing Program: How to Qualify
So what are those key next steps? Ensure you have a crisp financial package - balance sheets and income statements, your personal financial statement of net worth (more on that in a moment) and a clear business plan and summary of your business, the funds needed, and the purpose of the loan. A proper description of any assets being purchased (quotes/invoices, etc.) helps also. 7 Park Avenue Financial business plans we prepare for clients meet and exceed the requirements of banks and other commercial lenders.
The application must be handled by a Canadian bank. Here is where we recommend that if you either don't have a banker or if you don't have a strong relationship with a bank/banker, that you use the resources of a business financing advisor/expert in this area. The nominal fee you might pay this person is worth its weight in gold if they have solid contacts and experience.
What Else Do You Need to Know? The Loan Is Guaranteed!
In our experience many government small business loans are not automatically approved the first time - they are in fact reviewed and adjudicated by people at the bank that you will never meet. So be prepared to enter into healthy dialogue on any questions or issues that might come up! It is not unusual to go back and forth a bit clarifying any of your issues that might have come up in the application.
So what's the bottom line on small business and government loans? It's as follows: this is a solid government financing program. Business owners should understand it's administered by the bank, but not run by the bank, so to speak.
CONCLUSION: Get Help Applying for Business Funding
How do I apply for a loan? We get that one a lot at 7 Park Avenue Financial when it comes to the small business government loan.
To apply for funding ensure you prepare a good package, if you can't, enlist an expert by speaking to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor on the government small business loan (SBL).
Be patient, and hopefully those government funds will be 'flowing' into your firm shortly from the financial institutions in the program via your successful application - allowing you to grow sales of your products and services with financing that works and is tailored to your needs.
FAQ: FREQUENTLY ASKED QUESTIONS
How Can I Get A First Time Business Loan
Borrowers in Canada should ensure they have a good personal credit history and credit score and be able to produce proper financing statements or a business plan. The ability to demonstrate management and industry experience is also helpful. In many cases, collateral may be required to qualify for a loan. The Canada Small Business Financing Program is one of the best start-up business loan programs.
What credit score is needed for a small business loan
In Canada, a credit score in the 650 range and up is required for a federal small business loan. Various types of financing such as lines of credit, equipment leasing and short-term working capital loans/merchant advances place a strong emphasis on the credit score of the owner for business borrowing.
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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