Government business financing in Canada – While many entrepreneurs have heard of Canadian govt loans they have not fully understood his business finance offering. Let’s ‘ unbox ‘ the program and discuss the merits and applicability of this loan to your business – and that applies to start ups, franchises… in fact any business tha is under the pre-requisite 5 Million in revenues. Let’s dig in
Established by the federal gov’t many years ago the Small Business Financing program is dedicated to helping new , young, and growing businesses access the financing they might otherwise not receive.
The uniqueness of loan is that the majority of the loan is ‘ guaranteed’ to Canadian banks which offer the financing. At the end of the day it’s the govt commitment to encourage Canadian banks to lend to new and smaller businesses. Naturally one of he benefits to the government is the overall economic stimulus in employment, taxes, etc.
In recent years upwards of 7000++ businesses access the loan annually – for billions of dollars. The accessibility of the loan is augmented by the fact that Canadian ‘ bricks and mortar’ branches are on every main street in Canada. (Truth be told the challenge is not finding the right bank, it’s finding the right banker).
The ability to get approved for a govt small business loan in Canada provides realistic access to capital for businesses who otherwise cannot qualify for ‘ traditional ‘ loans. Yet the actual offering of the program is just that – a traditional term loan at attractive rates, great amortizations, and even the ability to pre-pay without penalty.
Many businesses who utilize the loan are either new, or in some cases purchases of businesses, including the very popular ‘ franchise ‘ segment.
The requirements of the loan are pretty basic – the owner must have reasonable good personal credit history, and must be able to contribute a minimum of 10% or more of permanent capital to the financing in question. The loan can only be used to finance 3 separate asset categories – equipment, leasehold improvements, and real estate. (The latter, real estate is rarely used in our experience as commercial mtges are more suited to this type of finance need).
As important to understand what the loan does to is what it doesn’t offer. You cannot use proceeds to refinance existing loans or for working capital/line of credit needs.
Other key aspects of getting approved include a good business plan, a cash flow forecast, and basic info on your business location, previous business experience, etc.
If you’re looking to ‘ unbox ‘ government business financing in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist in making Canadian govt loans a realistic part of your new or existing business venture.
Stan Prokop