Wondered How The Canada SBL Government Business Loan Works?

Although the majority of Canadian business owners and financial managers have heard of or have some knowledge of the ‘ SBL ‘ , aka the government business loan most do not fully comprehend how this financing program works.

Although the word ‘ government ‘ is sprinkled liberally through all the jargon and conversations we hear about the program the reality is that you have essentially no direct involvement with any government personnel or the perceived bureaucracy that we as Canadian business owners associate with the program.

We’re going to assume you’re taking that as good knows, although we’ve got nothing against the good folks in Ottawa…. (When they are doing things properly!)

Industry Canada is the department that sponsors, administers, and to some extent markets the program. They are committed to getting businesses like yours capital, via Canadian chartered banks, that you need to grow and operate your business.

The government in effect guarantees your lender. Since the inception of the program Billions of dollars have been funded under the program.

In general terms the program is designed to help your business secure equipment, land, and leasehold financing for long term needs. Unfortunately many business owners in Canada misinterpret the SBL government business loan as a potential cash or working capital loan. That is 100% not the case; it finances assets and real estate.

When you fully understand the program you comprehend that your local lender, predominately Canada’s chartered banks are the ones that actually spur financing growth under the SBL. So if you have a need tor debt that falls under the program parameters you fund your transaction locally.

Understanding the lending parameters of the program is key to your success in completing the financing in a timely manner. Oh, and by the way the program has a lending cap of $ 350,000 ($500,000.00 on real estate), which we think takes the ‘ small ‘ out of the small business government loan. That’s not chump change!

The essential loan parameters of the program are as follows – 5-7 year amortizations are typical, giving you ample time and low monthly payments. Rates are 3% over Canadian prime, and a small admin fee is assessed by the government as part of the application. (You can often have this admin fee financed as part of your transaction!)

Banks in Canada of course typically evaluate loans on the basis of personal credit, income and collateral. Under the SBL you do in fact need a respectable personal credit history, but even if your firm is a start up with no historical cash flow info available you are still 100% eligible for the financing. Here’s where a slick business plan or executive summary comes into play quite nicely – simply demonstrate how future cash flows will repay the loan.

The government guarantee is for the majority of the loan and can only be invoked if your business defaults on the loan, so the risk is jointly shared by the bank and the government, but mostly by the government.

Understanding how the SBL government business loan works is key to a successful financing. And by the way, getting approval is half the battle, you also need to have an understanding of how the loan is administered, so that’s worth some time investment also.

Speak to a trusted, credible and experienced Canadian business financing advisor on ensuring you understand the process, due diligence and financing of this program which will finance billions of dollars this year for your competitors, and hopefully you!