Virtual Accountant | What Is The Canada Small Business Financing Program
Many people have been taught that debt is bad, but entrepreneurs should understand that only bad debt is bad, and that good debt is a powerful tool says Virtual Accountant. This is a quote from Robert Kiyosaki is the author of Rich dad poor dad, and is a good reminder that as long as debt can be utilized as a tool to help business owners, itís not a bad thing. In fact, business owners can utilize goods debt as a tool in order to help them build their business. By utilizing financing in their business, and leaving the cash thatís in their business as operating capital, business owners can use financing to help fund their asset purchases, which can allow them to grow their business. Since 50% of all entrepreneurs close their business within five years, and 29% of them say that the reason why their business had to close was because they ran out of money. By utilizing financing as a tool to help grow their business, entrepreneurs can avoid being forced to close their business because they ran out of money.
The biggest problem with this, is once this is owners consult their virtual accountant, they may discover that they donít qualify for traditional loans with big banks. This doesnít necessarily mean that business owners are completely out of luck, and also doesnít mean that they have to use high interest financing companies. There is a program designed for small businesses to get loans that businesses may not be able to secure from traditional banks. This is the Canada small business financing program, and small businesses that make up to $10 million in revenue a year are qualified to apply for. This is a huge threshold, and almost all small businesses can apply for this loan.
The reason why this is a loan that businesses can qualify for when they canít qualify for traditional loans, is because it is a loan that is backed by the federal government. Since the federal government is acting as a guarantor, banks that were not willing to loan money to businesses before, may change their mind knowing that the federal government is guaranteeing the amount. Business owners need to understand however that this doesnít mean that it is a risk-free loan, and it doesnít mean that it is a guaranteed loan. Business owners still need to work with their virtual accountant in order to qualify for the loan, and once they do, business owners should also understand that there is a risk associated with defaulting on the loan.
Banks who are working with the federal government on this program, can request security on the loan up to and including the entire amount, and require a personal guarantee from the business owner. This means that if a business owner defaults on the loan, the bank may go after the business and business owner, or the government in order to get that money paid back.
Business owners often run into cash flow problems in their business, and once they consultant their virtual accountant, can discover that utilizing financing can be a powerful tool to help them avoid cash flow issues, and purchase assets that they need in their business in order to help them grow. The biggest problem, is that most businesses that have been in operation for a few years, no longer qualify for traditional loans from traditional banks, because the older business plans, the higher likelihood that there business will run into cash flow issues. That doesnít mean that there is no hope for business owners who need financing, it just means that they need to investigate all their options.
Business owners should have a meeting with their virtuals accountant, and find out what all of their options are in terms of nontraditional loaning. Business owners may find that the Canada small business financing program exactly fits what theyíre looking for. What this is, is a loan that is guaranteed by the federal government. All small businesses that make up to $10 million in revenue can qualify to apply for this loan. Banks that may otherwise have rejected business owners may decide to loan the money to them, since the federal government is acting as the guarantor.
Just because the federal government is guaranteeing the loan, doesnít mean a business owner can going to any financial institution in order to get this loan. Large banks may be less interested in doing all of the paperwork that is associated with this loan, and therefore the the security that business owners have to guarantee on the loan is extremely high, that no business owners would agree to it. Virtual accountant says that business owners should then approach smaller banks as well as credit unions in order to see if they be interested in helping them qualify for the Canada small business financing program loan.
This doesnít mean that business owners can use this money to finance anything they want in their business, what business owners can finance with this money is very specific. Business owners can purchase vehicles or equipment, or any hard assets, or leaseholder improvements. They can secure up to $350,000 in order to make those purchases. Virtuals accountant says that businesses that are looking to purchase real estate that will be used in the active business, can get secured up to $1 million. Businesses that are interested in purchasing a combination of these things, can get loans up to $1 million for both real estate as well as asset purchases. Itís very important that business owners also understand what cannot be financed by this loan, advertising, marketing including websites, payroll or operating capital cannot be used with this money.
By being able to work with their virtual accountant, to come up with non traditional financing solutions, business owners can obtain the leasing they need in order to grow their business.