By Marija on August 5th, 2012
Stan Prokop is the founder of 7 Park Avenue Financial. The firm specializes in business financing for Canadian companies in the areas of working capital, asset based lending, SR & ED tax credit financing, equipment financing, and banking. Stan won one of our monthly contests – we asked him a few questions about SBL (Small-Business Loans), here is what he said:
What are some suggestions to get a Small Business Loan?
To answer the question indirectly, we’re big fans of the Boy Scout movement. By that we mean that being prepared is critical when it comes to a Small Business Loan application. And just to clarify, we’re talking about the Government of Canada Small business loan, whose formal name is the BIL / CSBF loan. Sorry for all the acronyms.
But getting back to our suggestions Canadian business owners can significantly increase chances of final approval by understanding the key offerings of the program , putting together what we call a solid ‘ package ‘ ( by the way it’s not rocket science) and understanding the types of issues that might come up in the process and how to address them .
Don’t be concerned about the ‘government ‘aspect of the program – they underwrite and monitor the program but designated local financial institutions are the facilitators of your loan.
How do you crack the SBL loans code and get a fast approval?
Most customers are shocked when we advise them we can get them an approval for a Government Small business loan in a matter of days. One of the reasons is they have already spent months trying to accomplish the same thing! . But our real point here is that it’s the work that goes into the transaction up to the presentation point that most business owners find frustrating. At the end of the day there are only 6 or 7 key requirements in a proper package , and knowing how to address those points will guarantee almost every applicant success if they can meet the general criteria .
We would point out that if you don’t work with a supportive and street smart banker of advisor on your transaction you might well be doomed from the beginning. Not all parties that can provide the loan have the same interest in the type of transaction you are trying to achieve. We have met certain lenders under the program who view their own process internally as too cumbersome or time consuming to in fact process your application properly.
Exploring SBL loans, what are the cans and cant’s of business improvement loans?
That’s a good question because there is a lot of misinformation about the program. Many applicants might think the funds can be used for working capital, or inventory purchases, etc. That’s not the case. There are only three items that can be financed under the program – they are:
By the way, if you firm either have, or projects revenues over 5 million dollars you are unable to apply for the program. I guess that’s the definition of ‘small ‘then when it comes to the SBL. We would point out also that a lot of SBL’s are for start ups and franchises. Clearly business financing in Canada when its not under the SBL program is very difficult if your firm is new, pre revenue, or experiencing financial losses, etc .
Would you recommend a SBL? Why or why not?
We at 7 Park Avenue Financial constantly recommend the program to clients who are suitable candidates for the program. Where else can you get financing that’s similar in pricing to what larger more established firms get – with benefits that even the big boys can’t achieve? For example a properly structured SBL has no prepayment penalties and only requires a 25% personal guarantee on your borrowing. Try and get that outside the program and call us if you’re successful! We’re not personally convinced the SBL is the right vehicle for a commercial real estate acquisition, but it’s certainly there if you need it.
If the business owner has poor personal credit or government tax arrears the program is absolutely not for them and we would not recommend consideration of this method of financing.
How does a business owner know if he/she should apply for a SBL?
We’re got a simple answer for a good question. If your firm needs equipment, leasehold improvements, or you are considering a real estate transaction how could you not consider the program? It has solid rates, terms, and structures otherwise not achievable for many businesses without the government guarantee.
When is the right time for a business owner to apply for a SBL?
Currently the program caps out at 350,000.00 for equipment and leaseholds and $ 500,000.00 for real estate. Given the challenges of the SME sector to achieve proper financing the SBL loan should always be considered if your company is within the revenue range we mentioned and can satisfy some very basic requirements under the program. While we all might have out opinions on what the government does or is doing for business and the economy the reality is that in the last year or so almost 8000 businesses got their share of several billion dollars of financing under the program.
To view Stan’s articles click here!
Tags: acronyms, asset based lending, boy scout movement, business financing, business owners, canada small business loan, canadian business, equipment financing, facilitators, final approval, financial institutions, government of canada, loan application, monthly contests, park avenue, prokop, rocket science, small business loans, tax credit