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Canadian government loans. We wrote recently about key misunderstandings on the SBL loan program in Canada. We cleared up some myths, hopefully, and... here's some more!
Myth # 1 - It can't get any better than this when it comes to misunderstanding. Many Canadian business owners and financial managers are under the distinct impression that if one bank declines your submission then all Canadian chartered banks might, or will do the same.
Here it's also necessary to step back a bit and say that the SBL BIL (Business Improvement Loan) is run by Industry Canada, the federal department branch. However, on a day to day business, you simply deal with your local banker or via an experienced advisor.
So back to our point, the reality is that if a bank did in fact not approve your submission another bank just well might. Of course, we're making the assumption you have properly prepared, which unfortunately isn’t always the case.
This myth, if we can call it that, is one of our biggest 'bones to pick' with the program, It's that each bank 'interprets' and then underwrites the program in a different manner. Some even choose not to participate in the program at all, and worse, many do not train their staff to properly understand and explain the program to their clients. But we digress....!
It might be best in many cases to speak to an expert in this area to determine if, in fact, you are working with the right parties. Talk about saving you time and money!
Myth # 2 - Are you guaranteed funding if you have a strong submission and a proper business plan and cash flow forecast? One that addresses the who, what, when, where and why scenarios as a good plan should. The answer, unfortunately, is no, there are no guarantees. Again, not our favourite way of doing things from our perspective, but each bank underwriter has their own interpretation of your business's success. In our opinion, they might be biased about things such as your industry, your geography or location, etc. Suffice to say preparing a tight plan and anticipating all the questions and issues sure helps.
Myth # 3 -The rates and terms and structures.
offered by each bank differ even though it’s the same Canadian government loans program. The answer is simply no, there are no differences, and the rates are the same under the program, essentially 3% over prime. Where misunderstanding occurs is where each bank has different advance and down payment scenarios. The permanent equity down payment you need in such a loan by the way is 10%.
Myth # 4 - You only need 10% down to get approved and qualified. In theory, correct, in practice not correct! Again, different banks may require some additional working capital back up to help guarantee business success. And again, and not our favourite way of doing things, each bank is different.
And our final debunked myth? Many applicants think they need outside collateral or 100% personal guarantees or other guarantors on the loan, which by the way caps out at $ 350,000.00 as the maximum you can borrow. Not the case. The equipment and leaseholds and even real estate you choose are not collateralized by your personal assets. That’s a good thing.
Is the SBL BIL loan for you? We sure think it is, as long as you have the proper information. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you to 'debunk' those myths and get you... Approved!
Stan Prokop 7 Park Avenue Financial/Copyright/2020
