Loan Articles

Business owners who look for financing can apply under the Canada Small Business Financing Program and secure up to $500,000. This program aims to increase the volume of financing available to businesses, enabling them to start, modernize, and improve operations. Under CSBFP, financial institutions are encouraged to offer financing to small businesses.

Loans under this program cover 90 percent of the costs associated with purchasing and improving property and land as well as improvements of leased property and purchase of leasehold improvements. Funds may be used to improve existing equipment or purchase new machines and equipment. If the loan is to be used for purchasing premises, 50 percent of the existing floor space should be used for the company’s activities. If eligible purchases were made over the past 6 months, they may be financed under the program.

To apply for a loan, businesses have to be operating for profit on the territory of Canada. Their gross annual revenues should not exceed $5 million. Companies should apply with their credit unions and banks, and participating financial institutions are fully responsible for approving the loan. When submitting an application, business owners should present a business plan, including projections and financial statements. Financial institutions may also request personal guarantees, but they will be not more than 25 percent of the loan amount.

Before applying for a loan, business owners should become familiar with the terms and conditions that go with them. Depending on the assets to be financed, terms are in the range of 7 – 10 years. Variable rate loans are offered with a maximum interest rate equal to the prime rate plus 3 percent. Fixed rate loans go with a rate that is equal to the residential mortgage rate plus 3 percent, including the annual administration fee. This fee is set at 1.25 percent, payable to the government. Applicants also pay a registration fee to the Canadian government. It is a one-time fee in the amount of 2 percent of the loan.

If you are applying for small business financing with the RBC, for instance, you should present your most current statements, along with a copy of your bank account statements. Those who want to purchase business assets, such as property, equipment, or vehicle, should present a copy of purchase agreement or a bill of sale with description, serial number, and price. Startup companies, which are less than two years old, should present cash flow projections and an opening balance sheet, together with their business plan. Required documentation includes income statements for business and personal earnings, along with copies of deposit and investment statements, not held at the Royal Bank of Canada. Finally, businesses should present copy of registration incorporation or business registration documents, which may be held on file with your banker. Copies of mortgage statements and MPAC for properties in your business or personal name are also required.

Business owners can also apply for business loans with financial institutions, as an additional source of financing. TD Canada Trust, for instance, offers loans starting at $10,000. They are featured with flexible payment options, such as amortization up to twenty years, and terms between 1 and 5 years. Applicants can choose between floating and fixed rates, as well as unsecured and secured loans. Note that personal guarantees are required and setup fees may apply.