Wednesday, 3rd November 2021 | Small business financing Canada
How do Canada small business loans work?
Understanding how a Small Business Loan Works can help you secure one easily. Read our blog to know everything about Small Business Loans in Canada and how Capital is the perfect choice for securing your business loan!
Every small business will need to acquire financing at some point in order to remain competitive in its market. Perhaps there are growth plans in the works, or a new marketing strategy needs to be funded. Small enterprises in Canada rely heavily on loans to stay afloat. This article delves into the workings of Canada’s small business loan programs and how iCapital can help small businesses with easy loan approvals.
What Is A Small Business Loan?
A loan is a type of debt that a small business takes on. The borrower receives a sum of money from the lender, which is frequently a corporation, financial organization, or government. In exchange, the borrower agrees to a set of terms, which may include finance charges, interest, a repayment schedule, and other stipulations.
What Is A Small Business Loan Used For?
Small business loan fixed assets and cover day-to-day working and operational capital expenses. Cash flow, equipment upgrades, inventories, renovations, staffing, marketing, tax payments, and supplier payments are all examples of this.
Documents Required to Qualify for Small Business Loans
Various documentation may be required to validate your information when applying for a small business loan:
Plan of Action
By giving a copy of your business plan to the lender, you can demonstrate why you need a loan and how you plan to use the funds. This paper will assist you in gaining the lender's confidence.
Bank Account Statements
Lenders may want to check your company's cash flow.
Balance Sheet
Your lender usually requires this to assess your complete liabilities and assets.
Income Statement
Your income statement will show your lender what your expenses are, as well as your cost of goods sold and net income.
Returns on Income
This will be used by your lender to verify that the income you stated matches what you reported to the CRA. Any differences may endanger the approval of your application.
Financial Records of Individuals
Some lenders may request a copy of your credit report to assess your financial situation. A “good credit score” depending on the type of loan is defined as:
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Short-term Business Loan - 550
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Equipment Financing - 600
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Small Business Administration Loans (SBA) - 640
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Bank Loans - 700+
Purchase Information
Some lenders might also want to review information pertaining to the assets you wish to purchase, purchase agreements, and sales contracts in effect.
What Is The Cost Of A Small Business Loan?
The amount that the lender will charge determines the loan's cost. The amount, or interest rate, will be determined using the current Canadian index rate, your estimated credit risk, and the loan term duration. A long-term loan with a strong credit score will cost less in interest than a short-term loan with a bad credit score.
The interest rate may be fixed or fluctuating. A fixed rate does not alter during the life of the loan. A variable rate is based on the Canadian index rate and will fluctuate as per the index rate.
Fees may be charged before, during, and after the lending transaction. Application, cheque processing, paperwork, late payment, prepayment, and returned payment are all examples of fees.
In Canada, Where Can You Acquire A Small Business Loan?
Established Banks
Small firms frequently borrow money from large banks as they prove to be a common source of capital.
Credit Unions
Credit unions are financial cooperatives that offer their members standard banking services. As they are not-for-profit, they can at times provide better loan rates compared to a regular bank.
Microloans
Microloans are designed to assist small firms that are facing difficulty obtaining finance from a bank or credit union. Normally, the sum is less than $50,000. Microloans frequently come with limits on how the money can be spent.
Community Loan Funds
Non-profit organizations that provide loans to local initiatives and develop entrepreneurship in the community are supported by community loans.
Canadian Small Business Financing Program
Small businesses and start-ups with less than $10 million in gross revenue can apply for financing for land improvements, renovations, and equipment through the Canada small business loan program, which is run in partnership with financial institutions.
Lenders On The Internet
Alternatives to typical bank loans include online lenders. Online lenders like iCapital differ from banks in terms of measuring creditworthiness, their approach to processing a small business loan, and the technology used.
Why iCapital is Your Choice Lender
iCapital is one of the most trusted online lenders in Canada. We help you secure loans quickly without having to go through cumbersome and time-consuming paperwork. We’re also here for companies in industries unable to secure a loan from a bank or those rejected on the grounds of credit score.
Since 2007, we’ve been committed to helping small businesses expand their business with easy loan approvals within 48 hours. Our technology and security are top-notch, keeping your money and account safe from hackers. We follow a 100% automated process that eliminates the scope of any human errors. Contact iCapital at (877) 251-7171 today to know more about small business loans and how we can help you secure a loan quickly.
Read Also
Simple Strategies to Manage Your Seasonal Inventory
When managing seasonal inventory in the retail sector, careful planning is critical. Many retailers find themselves in a balancing act between avoiding leftover inventory and also empty shelves. To escape heavy markdowns at the end of a season and potential cash-flow problems, follow these strategies for profitable results.
Planning for Success
- Start Early: Begin planning well in advance of each season, reviewing last year's sales data to identify trends and patterns.
- Create a Detailed Plan: Organize your information into a comprehensive plan, breaking down each season's data by category or time frame. This will help you visualize your inventory needs and make informed decisions.
- Leverage Data Analytics: Utilize data analytics tools to gain deeper insights into customer behaviour, demand forecasting, and inventory performance. This can help you optimize your stock levels and avoid overstocking or understocking.
Timing is Everything
- Anticipate Demand: Forecast demand based on historical sales data, market trends, and upcoming events or promotions. This will help you determine the optimal time to order and replenish inventory.
- Avoid Stockouts: Ensure you have sufficient inventory to meet customer demand, especially during peak seasons. Stockouts can lead to lost sales and customer dissatisfaction.
- Stagger Shipments: Consider staggering shipments throughout the season to avoid excess inventory and reduce the risk of markdowns.
Repeat Success
- Identify Best Sellers: Analyze your sales data to identify your top-selling items for each season. Prioritize these items for replenishment and ensure they are always in stock.
- Optimize Reordering: Implement a system for reordering popular items based on sales velocity and demand forecasting. This will help you maintain optimal stock levels and avoid stockouts.
- Monitor Inventory Levels: Monitor your inventory levels to ensure you have enough stock to meet demand without overstocking. Use inventory management software or tools to track stock levels and identify potential issues.
Making the Most of Seasonal Cash Injection
If you've secured a seasonal business loan to support your inventory needs, here are some practical ways to use the funds:
- Inventory Investment: Allocate funds to purchase additional inventory, particularly for high-demand products or new offerings.
- Marketing and Promotions: Invest in marketing campaigns to drive sales and increase brand awareness during your peak season.
- Staffing and Training: If needed, hire additional staff or provide training to ensure efficient operations and meet increased customer demand.
- Equipment Upgrades: Consider upgrading equipment or technology to improve efficiency, productivity, and customer experience.
- Debt Reduction: If applicable, use a portion of the loan to reduce existing debt and improve your financial health.
Marketing and Customer Engagement
- Leverage Seasonal Marketing: Create targeted marketing campaigns to promote seasonal products and drive sales. Utilize email marketing, social media, and in-store promotions to reach your customers.
- Engage with Customers: Seek customer feedback to understand their preferences and adjust your inventory strategy accordingly. Offer personalized recommendations and provide excellent customer service to encourage repeat purchases.
By following these strategies and staying informed about market trends, you can effectively manage your seasonal inventory, minimize waste, and maximize profitability. Remember, consistent planning, data-driven decision-making, and a focus on customer satisfaction are essential for success in the retail industry. Contact iCapital at 1.877.251.7171 to apply for a business loan and get the funds you need in 48 hours.