The SBL federal government loan. As the commercial says, we’re ‘ lovin it’. And here’s why we think it’s one of the best business loans around when it comes to businesses that are start up to the lower end of the SME sector. That’s where it gets just a little technical, since firms with revenues over 5 Million dollars annually actually can’t qualify for the loan.
This loan program is somewhat modeled after the U.S. program called ‘ SBA. While that program was actually developed to help businesses recover from the Depression of the 1930’s its safe to say that our Canadian program simply was put together to provide loan guarantees for business which to start and grow – financing their equipment needs, leasehold improvements, computers, software , and even real estate .
We rarely see our clients acquiring real estate through the program, but each year between 7000-8000 businesses in Canada reach out to this program for billions of dollars of financing annually. That includes businesses within our revenue cap as mentioned above, franchises, and start up entrepreneur financing.
There’s always a huge reluctance for the Canadian business owner to get involved in anything that has that tine of ‘ government ‘. While that may or may not be a reality (its certainly a perception) many Canadian business owners and financial managers don’t realize that you are never, we repeat, never in direct contact with the government (aka INDUSTRY CANADA that sponsors the program). The direct lender of this program is actually the Canadian chartered banks who administer the program on a daily basis.
Here’s the difficulty though as you try to ‘ self assemble ‘ your SBL federal government business loan. The challenge is simply finding the right banker and bank to assist you in facilitating the loan. While many business owners simply choose by convenience or location to address their SBL loan request the reality is that you need to locate a bank and banker that is familiar with and supports the program in a positive manner. No banker is going to do all the work or bend any rules to get your SBL loan approved, so in some cases you actually might need to find a new banking relationship if in fact you get a sense that your banker is not on board . Some are… many are not!
When businesses borrow, whether its an SBL loan or not the bank focuses on what the finance text books call the 4 C’s of borrowing – capacity, character and capital/collateral.
In the case of SBL federal govt loans you do need to have reasonable personal credit as the owner/owners of the business. However no external collateral is required by the program, and your business plan and cash flow summary just needs to show repayment ability.
So what do our clients tend to use this program for? Many purchase franchises, others modernize facilities through leasehold improvements, and still others acquire assets such as rolling stock, equipment, furniture, application software and computers, telecom assets, etc.
The shorter answer is what in fact does the program not finance, and here its important to understand that it does not finance working capital or inventory. We wish it did, it does not. For working capital and inventory needs you require other solutions such as: receivable finance, inventory financing, sale leasebacks, asset based none bank lines of credit, and yes, even commercial bank lines of credit for working capital.
So, could your firm be ‘ lovin’ it ‘ ?If you want to self assemble your own SBL loan consider speaking to a trusted, credible and experienced Canadian business financing advisor who can assist you with asset and leasehold finance needs.