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While this is a great strategy for many entrepreneurs, qualifying for financing is sometimes more difficult, and entrepreneurs that have been rejected by their own bank, they believe that thereís no options for them. They should work with their virtuals accountant, to explore all of the nontraditional financing options that exist. One such option is the small business financing program, which is designed to help small businesses. Entrepreneurs that qualify for this loan, need to be operating small businesses that make less than $10 million in revenue a year.
Because this is a federal program, the federal government is acting as the guarantor for the loan. This means that where banks have previously denied loan applications, they may reconsider because the federal government is guaranteeing the loan. Business owners should work closely with their virtual accountant in order to approach banks who will help them with this application. The biggest reason why this is important, is because not all banks are willing to accept this loan. The reason is because there is a large amount of paperwork than usual, and banks often have to work outside of their usual bank processes in order to qualify process the loan. Keeping that in mind, smaller banks because they are more likely to work outside of their typical methods in order to help business owners qualify. Small banks like ATB, or credit unions like Servus credit union are great options for entrepreneurs to approach.
Business owners should understand however that even though this is a federal program, it doesnít mean thereís no risk involved. Banks still can ask for security from entrepreneurs to qualify for the loan, including personal guarantees. This means, that if an owner deforms and loan, the bank still only approach the business owner in order to get their money back. Itís important that business owners consult with their virtual accountant in order to decide if this is the right financing program for them.
By exploring some traditional financing options, business owners can utilize strategies in their business in order to help them remain cash flow positive in their business. This can go an extremely long way to helping business owners avoid the second most common reason for businesses to fail in Canada, and thatís running out of money.
When entrepreneurs first open their business, they may be using cash to purchase assets says virtual accountant, which sounds like no problem, until to a cash flow problem. They have all the assets they need for their business, and yet they have the money. Qualifying for loans for operating capital is much more difficult for businesses, and by writing the business this way, they put their is at risk for running out of money. The reason why 29% of all failed entrepreneurs set their business failed. A much better strategy, is for business owners to keep the cash in their bank account, and use financing in order to get asset purchases. Even if they have enough money to purchase assets, by using financing, they can get the assets they need, and avoid running out of money later on.
While this is a great strategy, many entrepreneurs find that fine for loans a bit more difficult. Business owners should work closely with their virtual accountant in order to help them qualify for loans. Business owners should hear boat, that can help them significantly. The Canada small business financing program is a program designed to help small businesses. The federal government guarantees the loan, which in turn puts banks at ease that theyíre going to get their money back, so they are more agreeable to loan small businesses. Thereís a very wide range of businesses who can qualify for this loan they must be small businesses, they must be making more than willing dollars a year in revenue.
An important aspect to consider when deciding on if this is the correct loan for the business, is understanding what interest rates are and loan application fees. Virtuals accountant says that the Canada small business financing loan has set interest rate of prime plus 3%. This is not a low interest rate, but itís also not filing either. Business owners should be fairly satisfied this is a fairly average midrange commercial loan rate. On top of that, there is a 2% application fee which is only charged in the first year and thatís designed to help pay for the processing of the loan, which could be significant.
If entrepreneurs are serious about wanting to apply for this, they should contact their virtual accountant early, and work on the business plan before they apply for the loan. The reason this is necessary, is so that the business owner can be far more likely to qualify for the loan. A great business plan will also ensure that a business owner has a plan in place to help them pay back the loan. Banks like to say that there is a plan in place to help repay the loan, and being proactive in general is a very positive move banks like to see when a business owner is applying for money. By being proactive when applying for the Canada small business financing loan, business owners can be more certain of getting it.
