Virtual Accountant | How To Canadian Small Business Financing Loans Work?

The biggest problem with businesses financing all assets, is when business owners often require assets in their business, they can no longer be approved for many business loans. The reason for that says virtuals accountant is because when businesses have been in operation for a few years, the cash crunch potential in their business means that they qualify us often for loans. For business owners who still need financing, but are able to qualify for traditional loans, the Canada small business financing program may be a great option for them. Businesses that are unable to qualify for traditional loans may be able to qualify for loans given out by this program because the federal government is the guarantor for them. Banks that may not loan businesses otherwise may be willing to loan businesses once they know that the federal government is guaranteeing the loan.

This loan gives businesses up to $350,000 to purchase hard assets and leaseholder improvements, or up to $1 million for real estate, or combination of real estate and hard assets. Business owners can consultant their virtual accountant in order to find out if they would be a good candidate for the Canada small business financing program. Business owners need to understand however that there are certain things that cannot be financed through this loan, and that would be operating capital, payroll, or advertising and marketing programs including websites.

One thing that business owners should keep in mind is even though this is a loan where the government is backing it, it doesnít mean that it is a no risk loan. Banks are still able to request whatever security they feel is necessary, and can often ask for personal guarantees on the entire amount. That means if a business owner defaults on the loan, the bank may go after the business owner personally to collect on the debt. Virtuals accountant says that this is owners also need to know that even though itís a government back the loan, that doesnít mean that acceptance is guaranteed. Business owners still need to work with their virtual accountant in order to create a business plan that will help them get accepted for the loan.

A great strategy that business owners can utilize in order to help improve the cash flow in their business is obtaining loans for asset purchases whenever possible recommends virtual accountant. That way, a business owner can keep all of the cash they have in their business to use as operating capital, and business owners can use financing as a tool to get the assets that they need to run their business, while remaining cash flow positive. If business owners are having a hard time qualifying for traditional loans, the Canada small business financing program may be a great option. Thereís an extremely high threshold of businesses who can qualify for this loan. They must be small businesses, who are making anything under $10 million in revenue per year.

One of the largest advantages of this loan is that the federal government is the guarantor for it. Because of this, the bank knows that the business owner is never going to default on the loan says virtual accountant, and if they do they will be able to collect the money. This means businesses who otherwise havenít qualified for traditional loans may be able to qualify for this one. This can be an excellent option for businesses that donít have as much credit history in their business, or who need to fund risky projects.

The main disadvantage of this type of loan is the sheer amount of paperwork. The bank must coordinate their efforts with the federal government, and often goes outside of their usual processes, or takes them more time than usual in order to qualify and process the loan. Because of this additional work, large banks may be less willing to work with businesses who are utilizing this program. Businesses may be able to work with their virtuals accountant to find smaller banks or credit unions who are more agreeable to work on loans that fall outside of the banks processes. In Alberta often means service credit union or ATB are the most utilized banks for this type of program.

Business owners should understand that while this is a loan that is easier to qualify for, that doesnít mean it has no or low interest. Business owners should expect to pay interest as well as an application fee. Virtual accountant says that the interest rate on the Canada small business financing loan is at a set rate of prime plus 3% which is not a low rate, but itís not a high one either. Business owners also should expect a one time application fee of 2% in their first year.

We have a business financing program can be a great option for business owners who donít qualify for traditional loans with their bank, but still want to be able to utilize financing as a way of getting assets in their business so that they can keep the cash in their business as operating capital.