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Financing & Cash flow are the biggest issues facing business today
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"The secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into smaller manageable tasks, and then starting on the first one." - Mark Twain
Unlock the hidden potential of your business with Canada's best-kept financing secret!
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer the Government Small Business Loan and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Canada Government Business Loans: A Valuable Financing Option
Government small business loans go by various names.
We at 7 Park Avenue Financial call them ‘SBLs’, but whatever name you choose to call this financing, entrepreneurs must consider this valuable financing when evaluating business finance alternatives to start a business, buy a business, purchase a franchise, etc.
Canada Small Business Financing is a key program under the Canada Small Business Financing Act that helps fund various business-related expenses, such as land, buildings, equipment, and intangible assets.
We’re covering some solid reasons to consider the federal government's help when seeking funding. Let’s dig in.
Government Small Business Loan for Better and Faster Canada Small Business Financing
Government loans are a perfect financing solution for start-ups or firms that have been unable to attract ‘traditional’ financing.
Loan approval for Canada Small Business Financing Loans is crucial, as it determines the eligibility of previous purchases and offers the benefits associated with guaranteed loans.
Ironically, Canadian banks are involved in this program and play a key role in delivering the financing.
Get Rid of Start-up Financing Once and For All
The loans complement the owner’s equity investment into the transaction.
One popular reason for the program’s success is that no outside collateral is required to complete financing, thanks to the involvement of financial institutions in the delivery and administration of these loans.
Most business folks know that traditional chartered bank financing will over-require outside collateral, guarantees, covenants, etc.
Attractive Loan Terms and Asset Financing
Loan terms are another attractive part of the SBL process—they make great sense, given that typical repayment terms are 3-5 years.
When the loan is repaid, the amortization period affects the loan repayment schedule by allowing owners to match cash outflows with the useful life of assets.
That allows owners to minimize cash outflow, critical in a start-up or new business phase. Equipment and other business assets are typically the most used part of the program.
The ability to purchase new or used assets and finance them in a rational manner is key. Combined with the owner’s contribution to the business—i.e., the ‘down payment’ and the longer amortization of government loans make solid business sense.
In effect, you are matching your cash outflows with the useful life of assets you purchase and use to run and grow the business.
Financing Business Purchases and Franchises
Many clients we work with use the program to purchase a business - that can be a franchise or an independent private company.
The loan program can also finance intangible assets such as intellectual property or brand value, along with physical assets.
Existing franchises can also be financed, with the franchisor's approval. One critical piece of advice we discuss with clients is that buying a business should typically be negotiated as an ‘asset’ purchase, not a ‘share’ purchase. If the company has assets, the government loan program can finance them!
Business Experience and Planning
When buying and financing a business, purchasers should be able to demonstrate solid business experience. While direct experience in the same industry is helpful, it is not necessarily required.
Ensure you have a proper business plan that lays out the financials properly.
Real Estate and Working Capital Financing
We also remind clients that an often underutilized part of the program is its ability to finance a real estate purchase. Commercial mortgage financing can also be considered separately.
Effective cash flow management is crucial for businesses, and our loan program helps maintain liquidity through flexible financing options.
Any asset purchased within the last six months can also be financed under the government loan program.
This is a classic replenishment of working capital. An appraisal of an asset may be required, but this helps both the lender and the business owner—we consider appraisals an investment relative to the minor cost relative to asset size.
Three uncommon takes on Canadian government Business Loan:
- Leveraging government loans for industry disruption and innovation
- Using Canada Government Business Loans to bridge the gap between traditional and alternative financing
- Exploring the potential of government loans in fostering sustainable and socially responsible business practices
Key Takeaways
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Eligibility requirements focus on Canadian-owned small businesses with annual revenues below $10 million
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Loans can be used for various purposes, including equipment purchases, leasehold improvements, and business acquisitions
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The maximum loan amount is typically $1 million, with the government guaranteeing a portion of the loan - A registration fee is due on approval and the interest rate is very competitive -ie 3% over prime
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Interest rates are often more favourable than traditional bank loans, with longer repayment terms available
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The application process involves working with a participating financial institution and providing a comprehensive business plan
Conclusion: The Power of Government Small Business Loans
Canada Government Business Loans provide a lifeline for entrepreneurs seeking to overcome financial hurdles and realize their business aspirations.
Don't underestimate the power and flexibility of the Government of Canada's guaranteed small business loan programs.
We mentioned earlier that the banks play a key role in delivering the program. They administer and fund the loans under the auspices of INDUSTRY CANADA, the program's sponsor.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, to learn how you or your business can utilize this valuable Canadian business financing vehicle.
FAQ
How can a Canada Federal Government Business Loan benefit my startup?
These loans offer favourable terms, lower interest rates, and more extended repayment periods, providing crucial support during your business's early economic development -In 2022, major changes were implemented, including financing of working capital costs as additional eligible costs. Another feature is that only a limited personal guarantee is required.
What types of business expenses can be covered by this loan program?
The program covers various expenses, including equipment purchases, leasehold improvements, and even business acquisitions.
Are there any advantages to choosing a government loan over traditional financing?
Government loans often require less collateral and offer more flexible terms, making them an attractive option for businesses that may not qualify for conventional bank loans. Companies are in a potential position to explore global markets.
Can established businesses also benefit from Canada Government Business Loans?
Yes, established companies can use these loans for expansion, modernization, or to increase working capital, helping them stay competitive in their industries.
How does the government guarantee that these loans will benefit borrowers?
The government guarantee reduces the risk for lenders, often resulting in more favourable loan terms and increased approval rates for borrowers.
What is the typical processing time for a Canada Government Business Loan application?
The processing time can vary depending on the complexity of your application and the lender's workload, but it generally takes 4-6 weeks from submission to approval.
Are there any industries or business types that are ineligible for these loans?
While most industries are eligible, certain businesses, such as real estate investment, multi-level marketing, and illegal activities, are typically excluded from the program.
Can I apply for multiple Canada Government Business Loans simultaneously?
Yes, you can apply for various loans as long as the total amount doesn't exceed the program's maximum limit and each loan serves a distinct business purpose.
Is a minimum credit score required to qualify for a Canada Government Business Loan?
While there's no specific minimum credit score, lenders will consider your credit history as part of the overall application. A stronger credit score can improve your chances of approval.
What happens if my business struggles to repay the loan?
If you encounter repayment difficulties, it's crucial to communicate with your lender promptly. They may offer options such as temporary payment deferrals or loan restructuring to help you manage the situation.
What sets Canada Government Business Loans apart from other financing options?
These loans offer a unique combination of favourable terms, government backing, and flexibility, making them an excellent choice for businesses struggling to secure traditional financing.
How does the government's involvement impact the loan terms and conditions?
The government's participation allows for more lenient eligibility criteria, lower interest rates, and longer repayment periods, creating a more accessible and affordable financing option for small businesses.
What long-term benefits can businesses expect from utilizing a Canada Government Business Loan?
Beyond immediate financial support, these loans can help companies to establish a strong credit history, foster growth and expansion, and potentially lead to more accessible access to additional financing in the future.
