Free consult & free copy of book

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

Contact Us


Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Virtual Accountant | Nontraditional Financing Options

Often, when business owners are operating their business, they believe that if they can pay cash for asset they should says virtual accountant. However, this is not a great strategy if business owners want to increase cash flow in their business later on. By using financing as a tool to help increase cash flow, business owners can get the assets that they need to grow their business, while keeping the cash that they have on hand in their business. Entrepreneurs can use this as operating capital to can help increase the cash flow. Another reason why this strategy is so important, is because itís far easier for entrepreneurs to qualify for loans for assets than it is to qualify for loans for operating capital. If business owners find themselves in a cash crunch later on in their business, applying for a loan for assets will be much easier than trying to apply for a loan for operating capital.

The biggest problem with this strategy is that as entrepreneurs operate their business, their business becomes less likely to qualify for loans. Businesses can talk to their virtual accountant who can tell them about the Canada small business financing program. This is a federal program designed for small businesses to qualify for loans to be used in asset purchases. Because the federal government is acting as the guarantor, banks that have otherwise previously denied financing to businesses may agree to this one. This can be a great fit for businesses that need to fund higher risk projects, if they have a lower credit history in their business, or businesses that have operated their business for a few years, and are no longer eligible for traditional loans due to the cash crunch potential their business has.

The downside to this is on behalf of the bank, who are less happy about the amount of work that must go into qualifying this loan. Since they have to work directly with the federal government, which can present its own unique challenges, banks also have to do significantly more work says virtuals accountant, work outside their typical bank processes, and work longer and later in order to qualify as well as process the loan. Virtual accountant says that many large banks simply wonít do that amount of work in order to get a loan, however smaller banks or credit unions often donít mind going outside of their processes and bending over backwards to make their customers happy. In Alberta that means business owners should approach banks like ATB, or credit unions such as Servus.

If business owners want to apply for this loan, the best thing that they should do is create a formal business plan. Business plans can go a long way in helping business owners apply for this loan, just because it is a government program, doesnít mean that itís a guaranteed loan. Having a formal plan in place is the best chance for business owners to succeed. Not only is it important to have a business plan to help secure loan, itís also going to help a business owner have a plan on how to pay that loan back.

Entrepreneurs should learn early on in their business how they can use debt as a powerful tool advises Virtual Accountant. The reason for that is because if they utilize debt in order to purchase assets, business owners can keep as much cash as they can in their bank to uses operating capital in their business. Itís far easier for business owners no matter what stage their businesses and, to qualify for loans for assets than it is to qualify loans for operating capital. Since half of all entrepreneurs who have businesses fail within five years, and 29% of them say the reason their business failed was because they ran out of money, increasing cash flow can make a significant difference the a lot of business owners who can succeed. As Robert Kiyosaki, the author of Rich Dad, Poor Dad said ìGood debt is a power tool, but bad debt can kill you.î if entrepreneurs utilize this method of financing, they will be able to utilize good debt is a tool, that can help them stay successful in business by increasing the cash they have on hand.

The biggest help that business owners can have when they are trying to implement this strategy in their business, but can no longer qualify for traditional loans, is by approaching their virtual accountant who can help them. They may talk about the Canada small business financing program. This is a federal government program that aims to help small businesses who earn less than $10 million in revenue year qualify for loans when they have not been able to otherwise. The main advantage of this financing program is that the federal government acts as the guarantor of the loan. Banks will often loan money knowing that they federal government is guaranteeing they get their money back.

Business owners should be well aware before the apply for this loan what this loan is able to be used for. Virtual accountant recommends that businesses only apply for this loan if they need hard assets such as equipment in their business or vehicles, leaseholder improvements real estate. This means anything that falls outside of that cannot be financed. Websites, payroll, advertising and marketing as well as operating capital are not eligible to be funded through this program. Businesses who want to use this for assets and leaseholder improvements can secure up to $350,000. If business owners want to purchase land, they can qualify for up to $1 million for real estate, or a combination of real estate plus assets and leaseholder improvements.

Just as in traditional loans, this program also has interest to be paid back as well. The interest on this loan is a set rate of prime plus 3%. This actually is not a lower rate, but itís not a high rate. Business owners can both satisfied that this is a mid-range commercial rate.