Finance Banner

Canadian small business loan



Overview: Small businesses play not so small a role in the economic as well as social growth of a region in particular and the country as a whole, as they contribute both in form of finance as well as job placements to aspirants. This holds good for Canada also. The federal and the provincial governments therefore provide financial help thru various loans and grants programs in order to encourage people who are enthusiastic about starting a concern on their own. In fact, about 20 billion dollars are being set aside by the Canadian government towards its financing programs for small businesses. In addition, government grants are also available for eligible persons for starting or expanding their businesses.

Types of government funding programs: Eligible businesses may be provided amounts ranging from $1500 to $10 m, according to the nature and size of the projects thru the programs mentioned below:

  • One-time and renewable subsidies and grants: The funds approved under these programs are to be used under certain terms mentioned and need not be paid back. The government provides grants and subsidies realizing the fact that certain areas are less developed economically than others and need to be specially addressed. After selecting such areas, government approve billions of dollars for helping eligible businesses across the nation. The important thing to note is that once you are approved such a grant; it may be easier for you to obtain more from the same authority as you have proved your worthiness already. At present, there are 39 federal programs along with 57 provincial ones to choose from which offer amounts ranging from $1,500 - $5,000,000 as support.

  • Loans without interest or a low interest: Funds received through these are to be paid back within a preset period. Loans without interest are advantageous for obvious reasons though they may be less flexible in terms of the amount and the loan period. Currently loans ranging from $1,500 and $10m are on offer under 83 federal programs and 82 provincial ones.

  • Tax refunds or credits: Under these programs, an interval in the tax time is allowed during which time the flow of your business funds can be facilitated which can save you big amounts of money. About $3,500 to $2m of funds are allocated for these programs thru 11 Federal and 23 provincial programs.

  • Insurance against business risks: With the support of government sponsored insurance, you can take loan from banks free of worry. Insurance programs without premiums or with low premiums are on offer through 7 federal programs and 8 provincial programs, together providing $20,000 to $10m.

  • Relocation grants: For eligible businesses, government will provide funds necessary for the relocation of your business. $5,000 to $500, 000 are provided this way through 7 federal programs and 6 provincial programs.

  • Guaranteed government purchase: This helps the initial promotion of your product and the speeding up of the establishment of the same in the market.

  • Information and services: Government offers training programs and other informative programs which will help you in your management of your business and to attain bigger profits. These are particularly helpful while starting a new business.

  • Repayable contributions: These are funds for which returns are necessary only if your business project is successful and makes monetary gains.

  • Grants for Property taxes: In order to encourage business investment in selected areas, government offers a relief on the property taxes. In effect, you receive finance as a grant since you otherwise wouldve needed to repay it.

  • Equity financing: Under this program, government invests in your business though unlike normal investors, you wont be pressurized for returns.
  • Sources of Financing: This is an internet portal of Industry Canada, where conventional and alternate sources of small business funding programs in Canada could be searched for. Its objective is to promote awareness to small and medium enterprises about the choices of funding available for them to choose from a wide range of choices. The site will offer vivid information about banks, caisses populaires and credit unions; leasing and lending; angel investors, venture capitalists, and various supportive programs of the provincial as well as federal governments.

    Getting access to a loan: Chartered banks are the commonest funding source for small businesses. Working capital for your businesses can be had thru short and long term loans, mortgage loans etc.

    Among other financial sources are the insurance companies, credit unions capital and loan companies and trust companies. Finance could also be arranged through leasing for which though, the rate of interest will be relatively high. Leasing are generally used for equipments, machinery, vehicles etc, where it is worthy to reduce the capital cost outlays.

    To increase your chance of getting a loan: keeping in mind the following points will help in your cause of getting the right loan for your business.

  • You should be able to convince your banker about your experience in the areas concerned in the business you intend to start. This is because every banker will look upon the ability of you in the overall management of your business to make it a success and for that experience counts above all.

  • You should analyze and prioritize your borrowing needs in advance so that you could save time later while negotiating on select terms with your banker or lender.

  • You should be prepared to take calculated risks but should not gamble as the banks will prefer to be on the safer side.

  • Unless you have an established line of credit, keep away from borrowing through overdrafts.

  • Update yourself regularly of the lending practices that exist and set your management of assets and earnings accordingly.