A ‘ How To ‘ Primer On Canada’s Government Loan . SBL Small Business Financing Makes Sense

Industry Canada sponsors, but does not administer the SBL small business financing government loan program. Government initiatives are solid source of start up and growth capital for thousands of start up and medium sized firms in Canada. The government small business loan is suited perfectly to provide you a source of funding you might otherwise not be able to achieve.

We also might add that many clients approaching us for assistance and info on financing often ask about ' grants ‘, or info on Community Futures funds . These two programs are also a source of Canadian business financing, but not one we'll be discussing today.

First things first in our ' how to ‘... and that’s simply that Canadian business owners and financial managers need to understand the government is the guarantor of the loans, but not, we repeat ' not' the administrators of the ' SBL' (Small Business Loan) program. That clears up a lot of confusion for our clients, who often mistakenly perceive having to deal with the government on a loan as potentially being somewhat bureaucratic. That’s not the case.

So who does administer and run the program - you might have guessed by now that is our Canadian chartered banks, and some other miscellaneous institutions, but primarily the banks. Adding to the confusion is often the perception that the government crown owned business bank, commonly know as ' BDC ' offers the program. Would make sense right? Guess what, they don’t have anything to do with the program.

The basics of the program are simply that your firm can finance up to $ 500,000.00 under the government guarantee to the bank. (In actuality the government guarantees 90% and the bank assumes a 10% risk scenario) However, you need to understand the500k limit pertains only to real estate; typically the cap on the program is 350k.

What can be financed under the program? It's not as broad as you think. Items financed are essentially equipment, leaseholds, software, etc; the bottom line is assets and software .A major mis conception we often have to explain to clients is that cash and working capital is not part of the program.

Terms? They are great. Really great. Rates are only several points over bank prime , terms can be up to ten years, and oh yes, guarantees, only a limited guarantee is required by the business owner, you in fact are not required to co sign or guarantee all of the loan . We can categorically assure you that thousands of others business in Canada do have the owners personally signing for the full amount of the loan.

Pre payment? Although we find many business owners in Canada ask us about pre payment the reality is that most loans probably run to maturity. But if you did choose to pre pay this is one of the only business financings in Canada that you can pre pay without a penalty.

To qualify for the loan the business owner must have a reasonable personal credit history, some element of a down payment to cover the 10% which the bank is on the hook for, and of course a solid executive summary or business plan that is typical of any business financing request. These can be prepared efficiently for a low cost by a trusted , experienced and credible Canadian business financing advisor, who can steer you through the ' how to's ) of the Canadian government loan for small business financing . You'll want to investigate the SBL!




Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/how_to_government_loan_small_business_financing_.html

The Power Of The Government of the Canada small Business Financing Loan - SBL 101 !

Power - The dictionary defines it as the possession of control. You want it? We're going to give it to you as it relates to the government of Canada Small Business Financing Loan... we affectionately call it the ' SBL ‘! (That’s small business loan by the way ...)

So clients are always asking whats so great about the program? We'll give you thing things, actually four! Rate, term, structure, and by the way, a very limited (in our opinion) personal guarantee.

Industry Canada is the government agency that sponsors this great loan program. We're sure the department is staffed by some great people - it must be, because it’s a great program, right? However, you are never going to really meet these folks, as the government has chartered the Canadian banks and other miscellaneous financial institutions to run the SBL loan program on their behalf. So essentially its small business financing at the street level, which is right where you want it.

So how does the program work...? In fact an even better question might be why this type of financing should appeal to your firm.

The bottom line is that your firm is a ' for profit ' (we’re all for profit!) company and are either a start up or revenues under 5 Million dollars then you are a prime candidate for a government SBL small business financing loan.

So why banks don’t just makes these types of loans without all the government backing. Simply because (and we think you might have experienced this already) you might not qualify for what us folks in the real world of Canadian business financing call ' traditional financing '. Traditional of course refers to borrowers who are viewed as strong applicants because of high net worth, ultra solid personal credit history, strong balance sheets, and outside collateral. Who wouldn’t have problems coming up with those these days?!

The Canada Small Business Financing program in fact is very specifically designed to appeal to borrowers such as yourself who perhaps might not qualify for the traditional financing and criteria we've just spoken about.

I don’t think we have ever had a client meeting where the question ' how much can we get?" comes up. Our answer, plenty! If in fact you think 350,000.00 $ is plenty - we do. That’s the current cap on the program - but we'll share a tiny secret here, if you were to utilize the program for a real estate purchase for your business the program caps out at 500,000.00$ . Wow!

Sounds great so far? We have always thought so, so bringing new converts on board is a pleasure. Seek out a trusted, credible and experienced Canadian business financing advisor. You'll then focus on how the program works, if you qualify, next steps, structure, and finally, your approval!

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Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/sbl_loan_government__small_business_financing.html

Four Reasons Small Companies Fail

Depending on whose statistics you believe - the odds are stacked against entrepreneurs. Folk wisdom says that only 1 in 10 business survive the first year. And of those, only 1 in 10 make it to the 5th year. I doubt these statistics are accurate but I know for a fact that most start up companies won't make it past their first year.

Why do these businesses fail? Many books have been written about this subject. However, I'd like to pitch in my 2 cents.

Being in the front lines of the purchase order finance industry gives me a front row seat into this phenomenon. I speak to entrepreneurs every day of the week. Many of these fail to realize their dreams. Now, I can usually tell whether the start ups will take off or not by asking four questions. I believe these questions also provide an answer as to why many start ups fail.

1. What led you to start this company?

This question always gets interesting responses. Answers range from "I want to get rich",to "I saw an opportunity" to "I want to be free". The latter one is good for laughs since most entrepreneurs work harder than most folks.

I ask this question because it gives me a good glimpse about the person running the company.

2. Where did you learn the industry?

Many people learned their industry from their current jobs and are branching out on their own. Other learned a brand new industry by speaking to experts. Some, even learned it by reading a book - or many books. Regardless, I always prod them by asking technical questions about their business. How they answer those are a very good predictor of their knowledge and critical to their initial success.

I ask this question because it gives me a good idea of the depth of their experience.

3. How long have you been at it and have you made your first sale?

This one is obvious, companies without sales don't last. But there is a hidden undertone here, I know of successful company that went on for 9 months before closing their first client. I this this shows stamina and determination. Starting a business is a marathon and requires a certain single mindedness. By the way, that company owner that took 9 months to close their first client was none other than me!

I ask this because it gives me a good idea of their current level of sales and their stamina.


4. How much money did you put into the business?

Business books are full of stories of millionaires and billionaires that started their company with $100 or $1000 dollars..... These are the exception and not the rule. Most businesses, even single person companies, require a substantial investment. A few thousand dollars minimum. Many times, tens of thousands of dollars. Sometimes even hundreds of thousands. The easiest way to get your company disqualified is to tell a prospective business financing company that you only put $1,000 into your business. If you are not committed, why should they? I also wrote about this on this post.

I ask this because I want to know if they (figuratively) put their money where their mouth is!

Although my method is not very scientific it works very well, at least for me. It's a good predictor of who to focus on. I suspect that on some level, many business finance professionals use these or similar questions themselves.

In summary, small business owners fail when they have:

1. Unrealistic expectations
2. Little experience
3. Little or no income
4. No/Minimal investment

Sounds obvious, doesn't it? That's because it is.

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Looking for information on purchase order financing? Read the purchase order finance blog

A Tool for Small Businesses

In previous posts, both in this blog and in my other blog (invoice factoring blog) I've talked about the mistakes that small business owners make when they are looking for business financing - specifically factoring and purchase order financing. Today I am going to talk about PO financing true potential.

Most businesses -at least the successful ones - are limited by the capital or funding they have. Those that have it grow. Those that don't, stagnate or perish. Purchase order funding provides you a way out of that problem, provided your business meets certain criteria:

1. It must resell products (i.e. be a dealer)
2. It's must buy products for re-sale from another business or alternatively, have a 3rd party facility provide all manufacturing services.
3. It must have high profit margins (say > 20%)
4. Lastly, it must have credit worthy clients

The last point is crucial. If you are selling goods to creditworthy clients, such as large companies, po financing may be able to provide the funding you need. Basically, po financing covers the costs of paying your suppliers and enables you to handle large purchase orders.

Purchase order financing is also very different from conventional products such as business loans. For starters:

1. It's less cumbersome to obtain than a conventional business loan
2. There are no month-long-waits. Most approvals/denials are done quickly
3. The line limit is based on the size of the po, the credit quality of your clients and the quality of your suppliers

Although not a panacea, purchase order financing can provide the needed financing for many small companies.


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Looking for information on purchase order financing? Read the purchase order finance blog