Although most Canadian business owners and financial managers have heard or have some knowledge of the “SBL”, alias the loan for government companies, most do not fully understand how this funding program works.
Although the word “government” is disseminated freely through all the jargon and conversations we hear about the program, the reality is that there is no direct involvement with any government personnel or the perceived bureaucracy that we as Canadian entrepreneurs associate with the program.
We will assume that you are taking it as you know, even if we have nothing against the good guys in Ottawa …. (When they are doing things correctly!)
Industry Canada is the department that sponsors, administers and to a certain extent markets the program. They are committed to making sure that companies like your capital, through hired Canadian banks, need to grow and manage your business.
The government actually guarantees your lender. Since the start of the program, billions of dollars have been funded under the program.
In general terms, the program is designed to help your company protect equipment, land and the financing of third-party assets for long-term needs. Unfortunately, many entrepreneurs in Canada misinterpret the SBL government commercial loan as a potential cash or working capital loan. This is 100% is not the case; finances assets and real estate.
When you fully understand the program, understand that your local lending institution, in particular the banks hired in Canada, are the ones that stimulate the growth of funding under SBL. So, if you need a debt that falls within the parameters of the program, you finance the transaction locally.
Understanding the loan parameters of the program is the key to success in completing financing in a timely manner. Oh, and by the way the program has a loan limit of $ 350,000 ($ 500,000.00 on real estate), which we think takes away the “small” from the small business government loan. It is not a change of chump!
The essential parameters of the program loan are as follows: amortization of 5-7 years is typical, offering ample time and low monthly payments. The rates are 3% compared to the Canadian prime and a small administrative fee is assessed by the government as part of the application. (It is often possible that this administrative commission is financed as part of the transaction!)
Banks in Canada usually rate loans based on personal credit, income and guarantees. Under the SBL, in fact, you need a respectable personal credit history, but even if your company is a start-up with no historical cash flow data available, you’re still 100% eligible for funding. This is where a clear business plan or executive summary comes into play: just show how future cash flows repay the loan.
The government guarantee is for most of the loan and can be invoked only if your company is in default, so the risk is shared by the bank and the government, but mainly by the government.
Understanding how the SBL government corporate loan works is key to successful financing. And by the way, getting the approval is half the battle, you also need to have an understanding of how the loan is administered, so it’s also worth some time investment.
Talk to a reliable, credible and knowledgeable Canadian financial adviser to ensure you understand the process, due diligence and funding of this program that will fund billions of dollars this year for your competitors, and I hope you!
