YOU’RE LOOKING FOR FINANCING VIA
GOVERNMENT BUSINESS LOANS – AKA THE ‘ SBL ‘!
HOW TO APPLY FOR A GOVERNMENT SMALL BUSINESS GOVERNMENT LOANS
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Office = 905 829 2653
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Email = sprokop@7parkavenuefinancial.com
The Government Small Business Loan in Canada, aka the ' SBL, 'is undergoing some dramatic program changes. Are you up to date on the good, bad and ugly (there’s very little ugly!) and the ' who cares' of this top-rated program that finances thousands of new and existing businesses every year? Let's dig in.
WHAT IS THE CANADA SMALL BUSINESS FINANCING PROGRAM?
Many clients we meet and talk to have not even heard of the program in some cases, so a super quick ' primer ' might be in order. Patterned similarly to the U.S. equivalent ( there it's call3e can 'SBA' loan ), this financing was created by the Canadian government many years back to allow Canadian business owners and entrepreneurs to access capital where they might not normally access traditional Canadian chartered bank financing.
THOUSANDS OF CANADIAN BUSINESSES UTILIZE THE PROGRAM EVERY YEAR
Although it can be debated how seriously the banks embrace the program, the reality is that tens of thousands of businesses have qualified and been approved under the program over the years. The government guarantees a large portion of the loan to the banks in case of default.
THE ADMINISTRATIVE PART OF THE SBL PROGRAM
If the government guarantees default, why wouldn’t the banks fall in love with the program? You might not believe that the main reason is ' paperwork' at the bank level. Yes, it’s correct that top experts in the field tell us that the ' administrative burden' that comes with banks filing for the loan had become too much.
So... enter Change! And while significant, on balance, they still in our opinion, make the program robust and a solid solution.
CHANGES TO THE PROGRAM
So what are those changes? First of all, the old program had a personal guarantee scenario that was quite attractive to borrowers. They only had to guarantee 25% of the loan from a personal liability perspective. New legislation via INDUSTRY CANADA (the program administrator/manager) allows banks to take a full personal guarantee on the amount. What's our take on that one? Pretty simple, actually - since almost 99.999% of all business in the SME financing sector requires shareholder guarantees anyway, what’s really the issue here.
Interest rates remain unchanged in the program and are very attractive given the nature of the financing risk, and a nominal 2% registration fee is still required. As always the personal credit history and credit score must be satisfactory - typically a credit bureau score of at least 600 is required to access this business credit for the loan amount you are applying for.
While most amortizations are 3-5 years the program specifies a 10 year amortization is possible.
NO PERSONAL COLLATERAL IS REQUIRED!
Oh, and by the way, under the SBL small business government loan, no personal collateral can be taken or secured, which definitely isn't the case for most normal bank borrowers under SME Commercial Finance conditions.
Other program changes include small fees to be charged for set up, documentation and registration of SBL loans in Canada. The truth is that in any financing in the SME sector, the borrower almost always pays the legal and doc fees anyway, which are often in the several thousand dollar range or more. So the few hundred dollars charged for an SBL loan is somewhat of a moot point, don't you think.
It would initially appear that the old cap of 350,000.00 for equipment and leasehold financing was not increased So. Does that mean ' unlimited financing '? Hardly, we think, given that new borrowers still have to meet the program's same equity requirements and working capital requirements. The new cap on real estate financing under the program is 1 Million $.
KEY BENEFITS OF THE GOVERNMENT GUARANTEED LOAN
Rates, terms, and overall structure of these loans remain the same, and they are ultra attractive in our opinion, given the often start-up or early-stage nature of businesses that apply.
So, while Mr. Dylan might still be right ( " The times they are a-changin' ") the CSBF program - the ' SBL ' Government Business Loan is still a great deal for small businesses and should be considered by all borrowers who can't qualify for full traditional financing. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can guide you successfully through changes to the program.
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Stan Prokop
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