Can we ask you a simple question? Actually, if it’s ok with you, we’ll ask 5 questions, and we trust and hope you will gain some valuable knowledge about the Canada government small business loan. Federal loans under the CSBF / BIL program could be your secret weapon in Canadian business financing.
Ok, so let’s get the questions out of the way first and onward to those answers! Here are our 5 key shares around the program based on questions we continually get from clients.
Why should we finance equipment with federal SBL loans? What are the basic requirements of the program? Can the government small business loan be used to refinance business debt? Can we use the federal loans program for cash flow and working capital? And finally can we purchase a business via the SBL loan?
Great questions, and now hopefully some surprising answers! Here we go.
Equipment and lease financing in Canada are solid alternatives for the financing of your asset acquisitions. Numerous lease finance options are available, so why does it make sense to use the SBL program for equipment financing. For a start the small business loan program in Canada finances 90% of your equipment financing needs, the other 10% comes in the form of your down payment, which the program refers to as your equity in the transaction. Numerous lease scenarios may require either larger down payments, first and last monthly payments in advance, and in some cases might have a higher level of credit due diligence requirements .Equipment can be financing on terms up to 7 years, and typically that type of term may not be available through lease financing scenarios.
So what about those basic requirements of the program? The government small business loan requires the aforementioned 10% owner equity in your financing. Business owners and your business should have a reasonable credit history; you also should be ready to prepare a simple cash flow forecast that allows you to demonstrate repayment of the loan. Typically no other collateral is required for federal small business loans in Canada. We determined over time that it makes great sense to be able to properly demonstrate that you have sufficient management experience in your business and industry, whether you are a start up or an established firm.
On to our third question – can you utilize the loan to refinance existing debt .The short and simple answer is that any debt you wish to refinance in terms of equipment, leaseholds, software, real estate, etc can be financing within a 6 month window. Example – if you bought a major piece of equipment 5 months ago it can be refinanced under the program, bringing additional cash flow and capital into your business.
Can the program be used for cash flow and working capital? Simple answer = No! Unlike the U.S. equivalent of the program the government small business loan is massively understood by many, thinking it’s a cash flow loan. The program only funds equipment, leaseholds, and real estate.
And on to our final question. Can you purchase a whole business via SBL federal loans in Canada .Categorically yes if the business purchase is within the government loan cap you absolutely can purchase a company, competitor, franchise, etc using this program? Some very basic steps apply, including an appraisal of the business you are buying for example.
Well there you have it, 5 answers to common questions we get from clients everyday on Canadian government small business loan. Want more info, or wish to explore other issues pertaining to your financing needs around this great program? Seek and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing benefits of the program.