Government loans in Canada, specifically the ‘ SBL Small business Loan ‘ program often seems ‘ unattainable’ to clients we meet who don’t understand the program. So if there is a key, or in our words, a ‘ fool proof ‘ formula for success in financing here its understanding eligibility. Let’s dig in.
We feel that because the program is so straight forward the only reason you can not be successful with such financing is simply because you didnt know if you or your firm/project qualified. So let’s review some of those key qualifiers.
The true benefit of the program is of course the ‘ government guarantee ‘ that the Canadian government loans come with. So your ability to put forth a solid proposal hinges on ensuring that guarantee is available.
That goes for every use of the program, which predominantly finances assets and leaseholds, and in some cases actual real estate. Franchisees contemplating entry into the Canadian franchise financing industry also make maximum use of the program.
It’s also critical to understand ‘ sizing’ of the program. This loan program maxes out at $ 350,000.00, and finances 90% of all items up to and including this cap. That means two things of course:
Any financing you require over 350k must be met or arranged by the owner/owners
You will need a minimum personal equity investment, aka the ‘ down payment’ of a minimum of 10%. You should ensure that you should be able to meet two other key criteria of the program – a debt to equity ratio that is reasonable, and a positive ‘ current ratio . That item simply signifies your need to show that a combination of cash, inventory and prepaids is able to meet 1st year debt repayments.
A great way to look at your potential success in Small business loan financing is simply to walk a mile in your banker/lenders shoes. That’s because unlike your suppliers that supply you with goods and services your financing sources is lending with the sole expectation of loan repayment, with interest income as their only profit.
Here’s where a solid business plan and cash flow kick in, as your ability to demonstrate realistic cash flow repayment becomes a key critical element in the SBL loan formula approval. That repayment is going to come from sales revenue and profits, receivables collections, sale of assets, etc.
Businesses that aren’t cash flow based should also be able to, within a reasonable amount of time, utilize business credit lines that help offset revenue bulges versus cash collections.
While many clients we talk to at first believe an SBL loan process takes weeks or months, the reality is that a properly prepared proposal should only take a matter of days for adjudication. The key? A properly prepared package that consists on owner information, business plan, cash flow, and financing requirements for assets and leaseholds to be financed.
The bottom line – the winning formula in government SBL loans really revolves around understanding eligibility and providing a tight package of the basic requirements which certainly are NOT onerous. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can fast track your SBL small business loan with maximum chances of success and minimum expectation in timing!