Do you own a small business in Canada? Then you should take into account small business loans. These may ultimately help your source of living stay afloat in this cutthroat world.
On the other hand, applying for a loan should not be taken casually. If it is a first time for you to borrow money from a lender, there are guidelines you need to consider.
• Contemplate. Before jumping into the world of loans, you should first think about what you really need. All the how’s and why’s should be answered. Ask yourself the exact amount you are lending and why you need it. How will you use the money? You should also consider the current state of your business before applying for small business loans in Canada. This way, you will be able to find out if you can pay what you borrowed within the deadline the scheduled by the lender. Also, think if you have collateral to use as most lenders would require you to have one.
• Lender Types. There isn’t just one type of lender. There are different kinds and knowing some information about each can help you determine which route to take.
Conventional Bank Loans. Borrowing money from the bank usually don’t offer strict terms compared to other types of lending. With conventional bank loans, you only need to pay low interest rates. In addition, the application process is faster. On the other hand, this type of loan may require a shorter repayment time. At the same time, it is more difficult to get an application approved in conventional bank loans.
Small Business Administration Loan. The great thing about this type of lender is that it helps finance different business types. This means that an SBA loan could meet the needs of your business no matter how small or big it is. This lender is actually in partnership with the government and therefore most of the loans SBA grants businesses come from the former. So what? As a business owner looking to borrow money, you have the guarantee that you don’t have to worry about lending risks. Also, borrowers may find this type more favourable for their needs. On the other hand, approval of this kind of loan may take some time and you might file more paperwork as compared to conventional bank loans.
Alternative Lenders. For many small businesses in Canada, alternative lenders pose the most tempting offer when it comes to loans. For one, you don’t have to provide them documents showing consistently good financial history. In addition, their terms are the least stringent out of the three types. Also, alternative lenders usually review and approve loans in a matter of hours, so if you need the money, you can have it as soon as possible. The downside to this type, however, is that interests can be really high.
• Loan Types. It was already mentioned that you should first know what you’re using the loan for. This way you can sift through the different loan types being offered by banks, SBAs and alternative lender. Some lenders are strict when it comes to where you are using the money for so make sure that when you apply for the loan, you are exclusively using what you borrowed to finance whatever it is that you have written on your application. Small business loan types in Canada include working capital loans, accident