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

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Virtual Accountant | What Our Government Loans Do For Us?

Business owners may discover that as their business operates, they become less likely to qualify for loans, even for asset purchases advises virtual accountant. The reason for this, is because the longer a business is in operation, the higher chance they have of running into cash flow problems. This is problematic for businesses who are trying to strategize by using financing as a way of increasing their cash flow in their business. As Robert Kiyosaki, the author of Rich dad poor dad has been quoted as saying, ìgood debt is a powerful tool, but bad debt can kill youî. Businesses that use financing is a powerful tool, use financing anytime they need to purchase assets, so that they can keep cash in their business to be used as operating capital. This is extremely important, because it is far easier to qualify for assets loans then it is to qualify for operating capital loans.

Business owners that are not able to qualify for traditional loans, should not consider that they are out of luck. They should work with their virtual accountant, and discover some of the more nontraditional loans that are out there including government loans. One such loan is the Canada small business financing program, which is a program that is built by the federal government. The federal government acts as the guarantor for the loan, which in turn makes banks that have traditionally denied loan applications be more amenable to accepting the application. Businesses who would not otherwise qualify for the loans, can qualify for these.

The biggest disadvantage to this, is that not all banks are willing to accept applications for this type of the loan. Virtuals accountant says that the reason for that is because there is a lot of people work thatís involved with getting a Canada small business financing loan, as well, a business owner must also work with the federal government, this can mean additional work, or working outside of the typical scope of their bank. Since it is additional work, and a lot longer process, many banks, especially large banks arenít interested in taking on applications for the Canada small business financing loan. That does not necessarily mean that businesses canít find a bank who is willing to work with them, business owners should approach smaller banks or credit unions because those banks are more likely to work outside of the banks processes in order to help entrepreneurs. That means businesses Alberta should approach banks like ATB and Servus credit union.

Business owners should consult with their virtual accountant in order to decide if this is the right path for them, if it isnít, they can apply for a maximum of $350,000 for asset purchases, or up to $1 million for real estate purchases, or a combination of real estate and asset purchases. While they can do a lot for their business with that money, they also need to understand that there are certain things that cannot be financed with this money. Websites, payroll, operating capital and advertising or marketing.

Entrepreneurs often run out of cash in their business says virtual accountant, and when that happens, they often need to turn to loans to help them grow their business. If entrepreneurs are having a hard time secure loans, that doesnít necessarily mean there are no options for them. There is the Canada small business financing program, which is a federal government program that is designed to help small businesses qualify for loans.

How it works, is the federal government acts as the guarantor of the loan, making things that have previously denied applications more apt to approve the loan knowing that the federal government is guaranteeing the loan. This doesnít mean that every bank that receives an application for Canada small business financing loan will entertain it. Certain banks, especially very large banks are less interested in working with business owners on this loan, simply because there is a lot more work involved. In addition to the significant amount of paperwork, it also often goes outside of the bankís usual parameters for what they will accept, and it takes significantly longer amount of time to qualify and process the loan.

Business owners also need to consider that there will be interest on top of this loan, while the interest rate is not superhigh, itís also not a lower rate either. Business owners need to consult with their virtual accountant to see if they can agree to the interest rate of this loan, because the interest rate doesnít change. It is set at prime plus 3%, which means that it is currently at 6.5%. in addition to that, business owners can expect to have an application fee of 2% of top of that, thatís charged in the first year as a way of paying for the long application process that the bank has to go through.

Itís also very important to note that even though this is a government-backed loan, that does not mean that they business owner has zero risk with it. The bank can still request that a business owner but security on it, in the form of assets or even personal guarantees. The bank can also ask for a guarantee on the entire amount, which means that even though the federal government is offering acting as the guarantor for the loan the bank may also go after the business owner if they default on the loan.

If reviewing all of the terms of the loan a business owner and their virtual accountant decides that this is still something they want to do, the next step would be to create a formal business plan before a business owner applies. The reason they should do that, is to increase the likelihood of approve the loan, as well as proactively come up with a plan on how the business owners planning on paying that loan back once they get approved.