Small business loan canada
Small business loan, though on paper is named for the money borrowed by a person to start or to maintain a small business. And, on practical terms, it is used by most lenders as a cover to describe the personal loans provided to small business people. To put it simply, the small business loan most often than not, is not approved solely on the merit of your business. It all depends on your personal financial status whether or not a loan will be granted. Even if you have a well-thought-out plan of business, your loan application may be rejected if you dont have enough collateral (those assets such as house, land etc. which you could put up to secure a loan). Another point worth mentioning is that most lenders are more inclined to provide loans for those businesses which have been running satisfactorily for a while, than to those which are yet to be started. The reason obviously is that the lenders would wish to take as little risk as possible.
However, it is possible for you to get a small business loan, if you are sure of the right lender to approach and if you succeed in convincing him of your case.
Some of the reputed institutions for you to approach for a small business loan in Canada are:
BMO financial small business loans
Business development bank of Canada
CIBC small business loans
Community futures development corporation- Ontario
Scotia bank
TD Canada trust
Programs for women in Canada: Apart from sources of small business loans in the general category, there are financing available especially for the businesses owned by women only (that is, women must own more than 50% of the whole business). These programs are available only in certain parts of the country. This indeed provides a great opportunity to those enthusiastic women who have a solid business idea and are looking to establish a small business on their own.
Some of the programs are listed below.
1) Women entrepreneurs fund : this is a program of the BDC (business development bank of Canada). The bank funds about $25 million for this program. Industries like food, health, software and manufacturing are given priority in this program.
2) ACOA Women in business initiative : this program, available for residents in eastern Canada, targets the improving the accessibility of finance to women for small business. For this, the Atlantic Canada opportunities agency (ACOA) has a tie up with Development corporations in the region. More than 40 communities, business development corporations (CBDC s) in addition to a large number of urban lenders in the region are part of the program.
3) Paro centre for womens enterprise : The paro center located in Thunder Bay, Ontario has over 30 peer lending circles over central and north Canada.
4) The AFER program for women in rural communities: This is a grant program which is targeted towards rural women who live in Quebec.
Loan presentation: The approval or the rejection of your application or a loan depends solely on the fact that whether you have succeeded in convincing the lender about your business, financial status and about the expected success of your business. For this, you should work towards preparing a business loan plan presentation in advance, before you forward your application. As the lender would be mainly interested about the exact reason you want the money for, and whether it is worthwhile in investing money on your business, your presentation must have enough explanation about the above so that the lender ultimately decides in favor of you.
Your loan presentation should carry a business plan , supported by the relevant financial statements and other items like charts, which will help the lender to become fully aware about your want of the money youve applied for and also about the chance of success of your business in the current market. To get your loan approved, you should provide the lender details about the collateral you have, which includes assets like house, vehicles, equipment or anything of value that you own. In the event of your failing to repay the loan, the lender could be compensated by the money got by selling those assets.
The amount of money you are prepared to invest yourself will also be a factor considered by the lenders, as it shows how determined you are towards the business.
As the degree of the success of your business partially depends on your experience and proficiency in the field of business you are venturing into, make the lender aware of the same by having a talk with him when you apply for the loan. If you submit the presentation with all the relevant records and documents in place, you increase the chance of getting your loan approved considerably. Therefore do spend enough time on it before you apply as it is worth its time and effort when you get your loan passed. Relationship with your banker: developing and maintaining a good working relationship with your banker is crucial in getting the finance you need for your business. It paves way for a smooth dialogue between you and your banker which ultimately result in your banker giving you the right advice, as he will be fully aware of you present situation.
For affecting a relationship with your banker, you may;
1) Open an account in a bank whose policies suit your size and type of business.
2) Manage your account properly. It is advisable that you avoid overdraws, bounced checks and a low balance.
3) Build trust towards your business of the bank by taking a short term loan and repaying in time.
4) In case you foresee any issue such as missing of payments or other problems that may affect you business, do inform your bank in advance.
Developing a good relation with your bank will be worthwhile especially at a time when you apply for a long term loan or a large credit line.
Strategies for the new environment: To keep pace with the changing nature of the industrial environment, one has to adopt suitable strategies. The decision whether to approve lone or not is now more or less decided by the computer nowadays using a credit scoring program, if the applied loan or credit is under $100,000. This reduces the human element factor in the decision making process and therefore, though a good relationship with your banker has its own merits, but to counter the automatic credit scoring, new strategies like the following have to be applied.
1) If you require an amount of about $100,000, apply for $110,000 or even more. Generally, if the bank asks for a business plan, it might not be using a credit model.
2) Obtain your credit report and make sure it is correct, before applying for a loan.
3) Make sure the data you provide are all accurate.
4) Be sure to give a correct description of your business.
5) In case of a rejection dont hesitate to get a clear reason for the same from the lender.
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