Government guaranteed loans in Canada seem to present a bit of confusion to many clients and business owners we talk to. The gov’t small business
Loan, commonly called the 'SBL ' is a solid financing mechanism, if, and only if, you understand the requirements and benefits of the program.
If we have to summarize where things go wrong in the program it pretty well comes down to key issues as follows:
What amount of equity does the borrower have to put into the deal?
How does the credit status of the borrower affect the loan approval?
What documentation is needed for the program?
Does your business or venture have to be profitable?
Where does the government actually fit into the loan process - P.S. It doesn't !
Is the program the same everywhere?
Lets highlight 10 key questions we're often asked and we’re e quite sure the above issues will be covered off nicely.
1. Is the loan in anyway a grant? Absolutely, positively not! While there are various ' grant ' programs in the Canadian business environment, the SBL loan program is a term loan, fully repayable. The concept of ' free money ' is titillating, but that’s certainly not what we're talking about today.
2. What exactly is ' SMALL ' when it comes to the program? Small in fact means for existing businesses or start ups that your revenues can't exceed, or be projected to exceed 5 Million dollars. Simple as that.
3. How does owner personal credit factor into the program? The answer is that the borrower, i.e. the owner or owners of the business must have reasonable personal credit history. Canadian credit bureaus rate us on a score basis, and in the case of SBL loans a score of 650+ is recommended.
4. What is required in a loan submission? From a documentation point of view you need a business plan or strong executive summary, and some solid financial projections. For non finance types these can easily be prepared by your accountant or an experienced Canadian business financing advisor.
5. Where in Ottawa do you apply? The answer is, you don’t. The program is underwritten by Ottawa, actually INDUSTRY CANADA, but the program is administered on a daily basis by Canada's banks. IF YOU CAN FIND A BANKER WHO KNOWS AND UNDERSTANDS THE PROGRAM!
6. How does the guarantee work? The loan is substantially guaranteed by the government, to your bank, and allows Canadian business owners and financial managers to access loans and financing they otherwise might not qualify for.
7. How does the program work? That’s a bit of an all encompassing question, but the quick answer is that you submit and work with a local banker to complete your transaction, and the loan is funded through your business operating account. The guarantee owner’s sign for on these loans is 25%, which is clearly a highlight and major benefit of the program.
8. What collateral is required? The collateral of the transaction is essentially what you're borrowing against, which is typically equipment, computers, software, and leasehold improvements. You can actually buy real estate under the program, but that's a bit rare in general.
9. What’s my rate? That’s the typical client question, and the good news is that the program has great rates for start up, young, or small firms. The rate is 3% over prime, which, as stated, rivals that of larger corporations in many cases.
10. What’s the repayment term? Typically its 5-7 years, and no prepayment penalties kick in if your loan is properly structured.
Who can help you achieve success under the government small business loan program? Your accountant or a Canadian business financing advisor can work with you to provide the right package, ensure that you qualify, and utilized industry and program knowledge to guarantee business financing success.
Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your needs around Canadian government guaranteed loans.
7 PARK AVENUE FINANCIAL
CANADIAN SMALL BUSINESS LOAN FINANCING EXPERTISE
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/government_guaranteed_loans_small_business_loan.html
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