Is The Government SBL Loan For Your Firm? Business Financing That’s Pretty Close To Perfect?

Is business financing via a government SBL loan the best thing since sliced bread? For the record we’ve always thought that ‘ sliced bread’ comment is a bit over rated, given than people rarely eat the whole loaf… but we digress…

Business owners in Canada, whether they are a start up or established firm use the BIL/ CSBF program ( that’s the technical name for the program ) either to raise funds for a start up or to grow their business . It’s worth spending a moment on the word ‘ SMALL ‘ as it is important to note that the program has two key size elements to it:

1. Your business must be new or under 5 Million dollars in actual or projected revenue

2. The loan size is limited to a maximum of $ 350,000.00, which isn’t exactly chump change!

In our experience with clients we use the concept of a short concise road map as the best way to achieve loan financing success when you’re looking to complete an SBL loan, either on your own, or utilizing a trusted, experienced advisor.

Let’s look at some of the elements, or components of that road map. Key to the whole process is a business plan and cash flow project. That should not scare the would be entrepreneur or business owner , because completing that document is just a common sense overview of you, your experience, your business, and some responsible projections for your growth and cash flow . The cash flow is clearly the key to the document in many ways, as it is there that a final decision is made around your ability to repay the loan.

SBL loans in Canada typically range from 3-7 years. More often than not a 5 year term is the typical loan amortization. Rates are currently just several points over bank prime, and numerous other elements of the financing should appeal to the business owner.

Other key benefits of the loan are:

Only a 25% owner personal guarantee

Repayable without penalty

You can also finance leaseholds, as well as equipment, computer, application software, real estate, etc

Only a 10% permanent equity or down payment scenario is required as your contribution to the financing

We seem to spend a lot of time coaching clients around the fact that the whole process is not as complicated as some people maintain. By the way though, if you are unprepared for an application point of view, or if you by inexperience are working with a banker that doesnt know the program the bad news is that you’re doomed to failure.

Contrary to most business owners beliefs your loan approval isn’t really subject to whether the bank has an emotional attachment to your industry. They do have an emotional attachment to high risk and loss though, so that’s where a solid common sense business plans and loan application backup data make total sense. Your plan and loan package simply give the bank, and the government as your guarantor a strong sense that you know where you are going.

One final tip or piece of advice – ensure your package reflects something that appeals to a banker, not a venture capitalist. The typical VC is looking for high growth and tremendous profits and valuations. Your government SBL business loan application should reflect basic loan repayment. Simple as that!

Need help? Seek out and speak to a trusted credible and experienced Canadian busines financing advisor who can help you limit personal risk, fine tune your plan, ensure financials make sense, and ensure you’ve answered the key questions .