How Canadian Government Small Business Loans Work . Is the SBL Loan For You?

‘So, exactly how does it work?’ If we had the proverbial nickel for every time a client asked us that question about how Canadian government small business loans work we would be .. well, you guessed it.. rich!

Because the players, the mechanics of the SBL loan are widely misunderstood it’s worth taking the time to understand how this valuable Canadian business financing vehicle works.

Quite often the criticism and perceived dissatisfaction with the program relate back simply to misinformation about the mechanics of the financing.

If we had to focus in on two issues that come into play time and time again with clients its either their dissatisfaction with the timing it takes to get approved , or , even worse, the fact that they are not approved!

The Canadian government small business loan is formally known as the BIL/CSBF program, and is operated under the auspices of INDUSTRY CANADA, a federal department. Our humble opinion is that the SBL loan is in fact very well managed, but where things fall apart always comes back to clients not knowing, or understanding the very basic qualifications for the program. Winning, via an approval under the program provides you with a great method of securing long term capital for business needs such as equipment, leaseholds, computers, software, and yes… even real estate if you choose.

Not every Canadian business owner knows the cap of the program… i.e. the infamous ‘ how much can we get ‘ question! For any non real estate item the loan cap is $ 350,000.00 ( is it just us , but that’s not exactly a small amount relative to ‘ Small’ business loan ) and if you choose to finance real estate only you can actually finance 500k , the program cap under real estate.

Once you start getting in and understanding the program you start to appreciate its true value. Why? Because it becomes readily apparent that normal traditional financing in Canada could never satisfy some of the financing needs of start up businesses, small businesses, new franchises, etc. Those 3 key business segments are by far the most popular users of the SBL loan.

From a Canadian chartered bank or commercial independent finance company it’s all about risk. So the ability to finance your business with as little risk as possible is paramount to a bank or finance firm.

That’s why using government small business loans allows you to leverage your business, even if it is a start up or a franchise to 90% leverage.

Understanding of the program essentially comes back to the following point; it’s simply that the government is providing a guarantee or an ‘ enhancement ‘ we could call it to your loan. So all of a sudden the bank that told you your business might be too risky is in fact able to complete your financing satisfactorily.

When it comes to our two client issues, timing and approval we can only say that if you spend some time in understanding the small handful of criteria you eliminate both of those issues nicely.

Criteria for the program couldn’t be more basic – a permanent equity injection of 10% of the financed amount (that’s the ‘ down payment) and clean credit history of the busines owner or owners. Other miscellaneous items are the same as any other form of traditional financing, a business plan and cash flow, some supporting background info on the owners, etc. And by the way, don’t consider applying for a government guarantee if you haven’t paid or filed your taxes. That’s common sense, right.

Oh, and that timing issue. If you do things right it should take a couple days, if you choose to stumble around in misinformation it will take you much longer. Fast track your loan even faster by speaking to a trusted, credible and experienced Canadian business financing advisor on the SBL loan.