Virtual Accountant | How Do Entrepreneurs Qualify For Loans
Business owners can run into significant financial difficulties when they run out of cash and either need operating capital or to purchase assets to help grow their business, and come to this conclusion by consulting with their virtual accountant. Many business owners should take the quote by Robert Kiyosaki, the author of Rich dad poor dad to heart which says, ìgood debt is a powerful tool, but bad debt can kill you.î By being smart about how they finance their business, and asset purchases, business owners can utilize good debt as a tool to help them get the financing they need in order to purchase assets they need to grow their business. Businesses that run out of money in their business, end up being forced to close those businesses. 29% of entrepreneurs who fail say that is the biggest reason why their business did not succeed.
While new businesses usually have no problems qualifying for loans, businesses that have been in operation for a few years, often find that this is not that easy. Through consulting with their virtual accountant, business owners who have been looking for nontraditional financing, often hear about the Canada small business financing program. This is a loan that business owners can apply for, as long as they make less than $10 million in revenue each year. This loan can help business owners secure up to $1 million for real estate, estate and assets, or $350,000 only for hard assets.
This loan can be a good option for businesses that are having a hard time qualifying for traditional loans. Virtuals accountant says that this is because the federal government is actually guaranteeing the loan. Banks are more apt to agree to finance the loan, when the federal government is backing it. Business owners should understand, that although the federal government is the guarantor, this doesnít mean that it is a risk-free loan, that doesnít mean that they are guaranteed approval.
In order to qualify for the loan, business owners should work closely with their virtuals accountant, to ensure they have the best business plan they can, to help them qualify. Not only does a business plan help business owners qualify for the loan, but it also can ensure that a business owner has a plan in place on how theyíre going to pay it back once they get approved. Using their virtual accountant to get a formal plan in place is an entrepreneurís best chance of succeeding at securing this loan.
It also means that just because the government is guaranteeing the loan, doesnít make it risk-free. Banks are still able to require security on the loans, and can ask for a personal guarantee on the entire amount. This means that if a business owner defaults, they can personally be on the hook for the amount. Another important thing to understand what this loan, is that there is interest rates that apply and application fees as well.
Even if entrepreneurs are having a hard time securing loans from traditional banks, that doesnít mean they are unable to secure any loan says virtual accountant. Business owners should be made aware of the program called the Canada small business financing program that can help small businesses secure loans when they traditionally werenít able to. Since running out of money in a business is an extremely common problem, business owners should utilize financing as a tool to help them grow their business.
The biggest advantage of the Canada small business financing program, is that the federal government is guaranteeing the loan. The bank can be assured that the business owner is never going to default on the loan, and if they do, the government will guarantee it. Because of this, business owners that work with their virtuals accountant can qualify for this loan when they arenít able to qualify for other loans. This can be great for businesses that need to make asset purchases in order to get their business to the next level, businesses that are working on risky projects, or entrepreneurs that donít have as much financial history in their business.
Business owners should also understand that there is actually a disadvantage to this loan. Virtuals accountant says that the amount of paperwork can actually make this type of loan be not desirable for banks. And primarily larger banks. Because the bank must also coordinate with the federal government on this, this project often falls outside of the bankís typical processes, or takes bank managers far more time to get qualified and to process the loan than normal. Because of that, many business owners may discover that larger financial institutions are less enthusiastic to utilize this loan. Virtual accountant says that banks canít outright rejected, but they are allowed to choose their own security on it, and may ask for such a high security that most business owners find itís not worth it.
Itís also very important to note that when it comes to the Canada Small Business Financing Program loan, there are still interest fees and loan application fees. Virtuals accountant says that the Canada small business financing loan has an interest rate that is completely sent, and only changes if prime changes. It is prime plus 3%. This is not low interest rate, but itís also not a high one. Business owners should consider this a decent midrange commercial loan interest rate. The application fee is a one-time fee that exists only in the first year thatís designed to help the cost of getting the paperwork done for this loan and is 2%.
By understanding what the non traditional loans exist in Canada, business owners can continue to use financing as a tool to help them grow their business, and avoid cash flow issues that can cause their business to fall apart. The Canada small business financing program may be the perfect solution for many entrepreneurs says virtual accountant.