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If entrepreneurs have been turned down by their banks for financing on assets, they should consult with their virtuals accountants, to see if there are any options that are available. There is the Canada small business financing program, which can help small businesses with less than $10 million in revenue per year qualify for loans. The reason for that is because they federal government is acting as the loans guarantor, which gives the bank reassurance that the business owner is not going to default on the loan. And even if the business owner does, the federal government will guarantee that loan to the bank. Businesses who have been turned down by their traditional bank, may find that this is a great option for them. This is great for businesses who have been in operation a while and no longer qualify for loans, businesses that donít have a long history, and businesses who need to find riskier projects.
The only disadvantage with this type of loan, is the fact that it involves a significant amount of paperwork. The bank that helps the business owner secure this loan will also have to coordinate with the federal government. Virtual accountant says since they can set their own policy, doing all of the work, and usually have to work outside of their usual processes and take them significant amount of time, some banks especially larger ones are less likely to want to take on this loan. Business owners should approach smaller banks in order to get approved on this, simply because they are usually more willing to work outside of their processes in order to get approvals.
Business owners who are looking to utilize this program, should understand that it can only be used to finance a few things. Hard assets, leaseholds and real estate. Get up to $350,000 for assets as well as up to $2 million for real estate or real estate as well as assets. Working with their virtual accountant, business owners can come up with the right combination figure out how much money they need to borrow to help their business.
Many entrepreneurs should understand that utilizing financing to fund asset purchases whenever possible can significantly increase the cash flow in their business recommends virtual accountant. One of the main reasons for this, is since half of all entrepreneurs that open businesses end up closing the within five years, and 29% of these entrepreneurs say that the reason why their business failed was because they ran out of money. By using financing as a tool to increase their cash flow, by allowing business owners to keep more cash in their business to use as operating capital, business owners can significantly increase their chances of succeeding in business, and avoid running out of money.
If that if there traditional bank has not approved them for a loan, that they donít have any options. By consulting their virtuals accountants, business owners can learn about the Canada small business financing program that can help entrepreneurs qualify for loans if they have previously been turned down. The reason for that, is because with this program, the federal government guarantees the loan, making banks that were not willing to finance loans for more agreeable to finance now, since loans are backed by the federal government.
This does not mean that the loan is zero risk, the business owner can still be personally guaranteed for the loan, so if the business owner defaults the loan, the bank may approach them or the federal government to collect. Not only the business owners be asked to send personal guarantee, but they may be asked to send personal guarantee on the entire amount of the loan. This way, if the business owner defaults, the bank make off to the business owner or the government in order to collect.
Another thing to keep in mind says virtual accountant that there are interest charges and loan application fees to consider as well. There is a one time loan application fee of 2% the first year that the loan is approved in order to help pay for the processing of the loan. Itís a significant amount of paperwork, and business owners need to budget. There is also interest is the loan, virtuals accountant says that itís not an extremely low rates, but itís also not a high interest rate either. Business owners should consider this an extremely average midrange commercial loan rates. It is a prime plus 3%, which is operating this is 6.5%. As prime fluctuates, so does the interest rate, but itís never deviates from this amount.
Business owners should also understand that not everything can be financed, business owners cannot finance operating capital, payroll, advertising or marketing for things like websites. Most finance just hard assets like equipment or vehicles, or leaseholder improvements and land, that can only be used in the active business. For example not rental properties or the business ownerís house.
Working with their virtual accountant, business owners can qualify for a loan when they thought they were previously unable to qualify. By utilizing financing, business owners can keep the cash in their business which can help them stay cash flow positive in their business.
