SBL Loans, aka the ‘ Federal Government Small Business Loan’ program in Canada can sometimes is the financing lifeline for the Canadian business owner – Start ups included by the way. Oh and that includes potential franchisees in Canada’s franchise industry also. Let’s dig in.
It is no secret that many business owners and entrepreneurs are pointed to Industry Canada’s ‘ CSBF program when they are looking for business funding. Although Canada’s version of this popular U.S. program ( They call it ‘ SBA;) is somewhat limited in nature ( it finances only 3 asset categories – more about those later ) its not hard to see the appeal of this method of financing a business , growing a business, and yes, even buying a business .
The simple reason? Great rates, structures, and terms – simple as that. Business owners/entrepreneurs can be forgiven for thinking they have to deal with ‘ government ‘ for this loan program. That’s not the case, as that typically might conjure up visions of red tape, bureaucracy, etc.
Instead the government simply provides loan guarantees to our Canadian chartered banks, which effectively run and administer the program under govt guidelines. They in effect promise to repay the large majority of the loan in event of a default – not every client we speak to understand that sometimes.
We spoke of the different asset categories of SBL loans that can be financed. Those 3 categories include:
Equipment (new of used)
Real Estate – (Note: we believe very few real estate deals are accomplished via the SBL loan but its certainly available)
The somewhat ‘ inconvenient ‘ truth about Govt small business loans in Canada is they can not be used for working capital and cash flow needs. That’s a common misconception. So essentially its term debt vs. asset monetization strategies. Businesses of all credit quality can still access other cash flow needs via A/R financing, inventory finance, PO financing, etc.
So the $64,000 question? Do you qualify for an SBL loan?! Eligibility boils down to some very basic issues:
You must be legally allowed to borrow in Canada – for example Cdn citizen or landed immigrant status
You must have reasonable good credit and a reasonable net worth – By the way no personal assets are collateralized under the loan – the only guarantee you provide is a’ partial loan guarantee personally ‘ and a ‘promise to pay ‘ via your business
Typical business packages we prepare for clients of the program include owner bio, business plan, cash flow forecast, and financing breakdown for the loan.
Are there disadvantages to the program? Most clients we speak to are concerned about timelines for approval – the truth is that a properly prepared and presented package can easily be approved in a few business days. You should be able to properly position that your net worth at least covers the portion of the loan that isnt guaranteed to the bank from the government
In many cases that we have seen clients have tried to align themselves with bankers that dont fully understand or like the program. Nix those quickly and choose instead to work with a trusted, credible and experienced Canadian business financing advisor that can assist you with federal govt loan program financing that works for your venture.