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Industry Canada sponsors, but does not administer the SBL small business financing government loan program. Government initiatives a solid source of start-up and growth capital for thousands of start-up and medium-sized firms in Canada. The government small business loan is suited perfectly to provide you with a source of funding you might otherwise not be able to achieve.
We also might add that many clients approaching us for assistance and info on financing often ask about ' grants ‘, or info on Community Futures funds. These two programs are also a source of Canadian business financing, but not one we'll be discussing today.
First things first in our 'how to'... and that’s simply that Canadian business owners and financial managers need to understand the government is the guarantor of the loans, but not, we repeat 'not' the administrators of the 'SBL' (Small Business Loan) program. That clears up a lot of confusion for our clients, who often mistakenly perceive having to deal with the government on a loan as potentially being somewhat bureaucratic. That’s not the case.
So who does administer and run the program - you might have guessed by now that is our Canadian chartered banks, and some other miscellaneous institutions, but primarily the banks. Adding to the confusion is often the perception that the government crown owned business bank, commonly known as 'BDC' offers the program. Would make sense right? Guess what, they don’t have anything to do with the program.
The basics of the program are simply that your firm can finance up to $500,000.00 under the government guarantee to the bank. (In actuality the government guarantees 90% and the bank assumes a 10% risk scenario) However, you need to understand the 500k limit pertains only to real estate; typically the cap on the program is 350k.
What can be financed under the program? It's not as broad as you think. Items financed are essentially equipment, leaseholds, software, etc. The bottom line is assets and software. A major misconception we often have to explain to clients is that cash and working capital is not part of the program.
Terms? They are great. Really great. Rates are only several points over bank prime, terms can be up to ten years, and oh yes, guarantees, only a limited guarantee is required by the business owner. You in fact are not required to co-sign or guarantee all of the loans. We can categorically assure you that thousands of other businesses in Canada do have the owners personally signing for the full amount of the loan.
Pre-payment? Although we find many business owners in Canada ask us about pre-payment the reality is that most loans probably run to maturity. But if you did choose to pre-pay this is one of the only business financings in Canada that you can prepay without a penalty.
To qualify for the loan the business owner must have a reasonable personal credit history, some element of a down payment to cover the 10% which the bank is on the hook for, and of course a solid executive summary or business plan that is typical of any business financing request. These can be prepared efficiently for a low cost by a trusted, experienced and credible Canadian business financing advisor, who can steer you through the 'how-to' of the Canadian government loan for small business financing. You'll want to investigate the SBL!
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