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How to Get a Government Small Business Loan in Canada

Guest post by: Stan Prokop

Article Overview: The article reviews key aspects of issues surrounding what Canadian business owners need to know to get a government Small Business Loan

How to Get a Government Small Business Loan in Canada

Most Canadian business owners and financial managers are not aware that if they have been 'refused 'a loan by a Canadian chartered bank that they can still apply, (to that same bank!) For a government guaranteed Small Business Loan.

We have observed this loan is called a number of things by a number of people -Borrowers refer to it as an 'SBL '(Small Business Loan), or a 'government small business loan. Bankers tend to refer to it by its more formal and legal names, the BIL loan, or the CSBFL.

Whatever you want to call it, the loan is a great part of the governments focus on assisting business with financing.

So how do you get the loan, and what's involved?

Although the loan is directly guaranteed (90%) by the government, the loan is actually administered by the Canadian chartered banks. The government emphasizes that they like the banks to participate in this program, and the government guarantees to the banks the 90% of the loan amount.

The biggest issue, we think, with the program, is the misconceptions that come with the program - business owners think they cal get a 'line of credit 'under the program. This is not the case. In certain instances the program tends to be confused with another program called the COMMUNITY FUTURES program. This is a separate program that is funded by certain economic regions to promote employment and business in that particular area or geography. It tends to be a bit more 'rural 'in focus. Again, we emphasize, the Community Futures program is not the government guaranteed Small Business Loan. (In the U.S. our government loan is called an 'SBA' loan, as it's administered by a separate organization set up by the government).

So, who qualifies? Hopefully your business! You must have revenues under five Million dollars per annum.

So when should you proceed - We would recommend right now, not when your venture is in desperate need, at which point your chances might be less than successful.

What is the 1 Million dollar issue on the program?! It's as follows - Dealing with banks and paperwork requires proper preparation, detail, and you need to allow for some reasonable time frames. That is your 1 Million dollars worth of advice!!

So what are those key next steps? Ensure you have a crisp financial package - balance sheets and income statements, your personal financial statement of net worth (more on that in a moment) and a clear business plan and summary of your business, the funds needed, and the purpose of the loan. A proper description of any assets being purchased (quotes / invoices, etc) helps also.

The application must re handled by a Canadian bank. Here is where we recommend that if you either don't have a banker, or if you don't have a strong relationship with a bank/banker that you used the resources of a business financing advisor /expert in this area. The nominal fee you might pay this person (1-3% usually) is worth its weight in gold if they have solid contacts and experience.

In our experience many government small business loans are not automatically approved on the first time - they are in fact reviewed and adjudicated by people at the bank that you will never meet. So be prepared to enter into healthy dialogue on any questions or issues that might come up! It is not unusual to go back and forth a bit clarifying any of your issues that might have come up in the application.

So whets the bottom line? It's as follows: this is a solid government financing program. Business owners should understand it's administered by the bank, but not run by the bank, so to speak. Prepare a good package, if you can't, enlist an expert. And be patient, and hopefully those government funds will be 'flowing 'into your firm shortly?

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Article Tags: business loan in canada, canadian business, government business loans, small business loans Canada



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