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E-Myth – “Why most small businesses don’t work & what to do about it”

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Virtual Accountant | Can Small Businesses Qualify For Loans?

One thing that business owners should keep in mind when they start their business, is that itís much easier to qualify for financing hard assets than it is financing operating capital says virtual accountant. Because of this, business owners should finance hard assets whenever they can, so that they can use the cash they have in their business as operating capital. Business owners who werenít aware of this, they have already maxed out there loans, and yet need to purchase hard assets for real estate in order to grow their business. While many entrepreneurs think that they have no options, there is options out there for small businesses.

Many entrepreneurs donít know about the Canada small business financing program, which is a program that is backed by the federal government can help small businesses qualify for loans. There is an extremely high threshold of businesses who can qualify for this loan, as long as they are business that make less than $10 million in revenue, they qualify. Virtual says that since the federal government is effectively guaranteeing the loan, banks are more willing to loan this money, knowing that the business owner is never going to default on that loan. Businesses that have been turned down from traditional financial institutions may qualify for this loan.

Although might think that since the loan is backed by the government, that it is no risk and that is not the case. Virtual accountant says that even though itís guaranteed by the federal government, the bank can still request security from the business owner on it. If entrepreneurs sign a personal guarantee on the entire amount, this means if they default on the loan, the bank can still collect their money. Business owners should so undertake the same due diligence when applying for this loan that they would any other loan.

The thing to take note of, is even though it is a government-backed loan, that doesnít mean itís going to have an extremely high on extremely low interest rate. The set rate is prime plus 3% which is a very standard midrange commercial loan rate. Thereís also an additional application fee that is a one time fee in the first year to help assist with the costs of setting up the loan. That is 2%.

For business owner decides to apply for this loan, they should do their due diligence and create a business plan with their virtual accountant. The reason this is so important, is not only so business owner can actually qualify for the loan, is that a business owner can make plans on how theyíre going to pay back once they are approved. Getting a formal plan in place is a business ownerís best resource of succeeding.

Entrepreneurs who have been rejected traditional banks for loans should not consider themselves unable to get any loan. By learning about the Canada small business financing program, business owners can access funds that they previously did not know were available to them to help them grow their business.

Entrepreneurs should not wait until they are running out of cash and need operating capital says virtual accountant. Since itís far more difficult for entrepreneurs to qualify for operating capital, whenever possible business owners should finance hard assets in their business, and keep the cash they have in their business to use as operating capital. As businesses age, there is a higher potential that their business will run into a cash crunch, which puts them at a higher risk for paying back loans, meaning traditional banks tend to avoid loaning money to small businesses that have been operating for a few years.

This information might be too late for many entrepreneurs, who arenít able to qualify for loans, and yet they still need to purchase hard assets in their business in order to grow. For those businesses, there is the Canada small business financing program which is a loan that is guaranteed by the federal government. Since itís backed by the government, many businesses who have not qualify for loans traditionally, they qualify for this. Business owners can speak to their virtual accountant in order to find out more information on whether they qualify.

Business owners should understand that even though the federal government has guaranteed the loan, this does not mean that it is a risk-free loan either. Banks can still request security on this loan, even a personal guarantee up to the entire amount of loan. This means that if a business owner defaults, the bank made off to them, or the federal government in order to get their money back.

Business owners should also understand that despite the fact that this is a federal government loan, there is a limit can be financed what is not able to be financed. Businesses that are purchasing vehicles or equipment, or any hard assets leaseholder improvements or land, specifically real estate that is to be used in the active business. Business owners can be proved up to $350,000 for assets and leaseholder improvements, or up to $1 million for real estate, or a combination of real estate and assets or leaseholder improvements. Business owners should understand from their virtual accountant that there are several things that cannot be financed under this program expenses such as websites, advertising or marketing, or expenses like payroll are not able to be financed from this loan.

When business owners believe that they are completely out of options, and they still need to qualify for loans in order to help them grow their business, entrepreneurs should hear about the Canada small business financing program, secure loans up to $350,000, for asset purchases or up to one million dollars for real estate purchases, or a combination of real estate and assets. This can be a huge game changer for businesses and able to qualify for traditional loans, for a variety of reasons. I understanding this loan exists, business owners can qualify, the purchases they need to continue to grow and become successful.