Startup loans are for new businesses that meet specific eligibility criteria, such as a good credit history and strong sales potential.
In some cases, new businesses are eligible for small business grants through programs offered by the Government of Canada .
Working capital loan
Equipment financing loan
Purchase order financing
Purchase order financing is a type of loan that businesses can use to purchase materials needed to fulfill current contracts or orders.
Loan for the acquisition of a business
A business acquisition loan is used to purchase another business, often a competing business.
Commercial real estate loan
A commercial real estate loan is a long-term loan used to purchase commercial real estate. This type of business loan is suitable for upgrading or purchasing new real estate for businesses.
How to Apply for a Small Business Loan
Applying for a business loan is often a lengthy and intimidating process for many small business owners. However, by following these four steps, you can save a lot of time and frustration.
1. Understand why you need a business loan
While this step may seem obvious, it is essential to understand why you need a business loan.
As noted above, there are many business loans and borrowing products available, and some loans are better suited to specific goals.
Understanding why you need a loan will also help you prepare the appropriate documents before applying and understand if a loan is the best product for your financing needs, as business credit cards and business lines of credit might be more appropriate.
2. Prepare the required documents
If your business is already registered with the Government of Canada (and Revenu Québec if you live in that province), you can start preparing the necessary documents.
Some of the most common documents include proof of a bank account in your name or business name, a personal credit score, and a business credit score.
You will also need financial statements or tax returns from the last two years, as well as financial projetions for the next two years.
Some lenders may require a business plan to understand why your business needs financing.
3. Compare loans
Now that your documents are in order, you can start comparing the best loan rates available to Canadian businesses.
When comparing, consider the loan term, the interest rate, the percentage the financial institution will finance, its flexibility and the guarantees it requires.
When you find a loan that meets your business needs, read the fine print and understand the requirements and terms of signing the loan.
4. Apply for a loan
After you submit your loan application, a representative will contact you to tell you whether the loan was approved or denied.
Final Thoughts on Getting a Business Loan in Canada
Applying for a loan for your business shouldn’t be an intimidating process. Although applying for a business loan can take time, securing appropriate capital can help your business take the next big step toward success.
The business financing process can be simplified with the help of the Cubeler MD Business Portal . This no-fee platform helps speed up the application process and connect you with lenders looking for businesses to finance.
FAQs
Can a new business get a business loan?
A start-up business can be financed through the Canadian Small Business Financing Program. The lender will review the business plan to ensure that the borrower has enough experience so that the business can generate sufficient revenue to cover all expenses, including repaying the requested loan.
This check may impact your personal credit score. Additionally, poor business loan performance will affect the credit rating of the owner, who is tied to the loan as a guarantor.
Is a business loan better than a line of credit?
Both loans and lines of credit serve different purposes. Business loans are suitable for larger purchases, medium to long term needs, or any purchase that requires more than 12 months to repay in full. In contrast, commercial lines of credit provide permanent access to capital and are suitable for short-term, revolving needs that can be settled in a short cycle.
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