Small Business Loan
Small Business Loan




Small Business Loan

Everyone knows that small businesses are an important component of a country's economy.
Unfortunately they struggle when they look for financing.
This is the reason why the Canada's Government decided to increase the availability of loans for establishing, expanding, modernizing and improving small businesses.

The Canada Small Business Financing Program encourages financial institutions to make their loans available to small businesses and helps you secure up to $500,000 by sharing the risk with lenders.
The principal objective is to help new small businesses get started simplifying the access to loans otherwise hard to reach.

There are about 10,000 loans available for use in Canada each year, up to a maximum of $500,000 for any one business.
To be considered eligible, small businesses need to be operating for profit in Canada, have annual gross revenues lower than $5 Million.
The program can't be applied to farming businesses (they have already similar program), profit organizations, or charitable and religious organizations.


A small business must apply directly to a participating financial institution, which will be fully accountable for approval of the loan.
The financial officer will review your business proposal and make a decision on your loan application.
Once the decision is made to offer financing under the program, the financial institution will register the loan with Industry Canada.

The loans can be used for cover 90% of the costs to:
- purchase or improve land or property;
- purchase leasehold improvements or improve leased property;
- purchase new equipment or improve used equipment.

The loans cannot be used to finance items such as goodwill, working capital, inventories, franchise fees, research and development.

The cost of the loan is determined by your financial institution. Quoting what the Program says about the interest rate, it may be variable or fixed:

- Variable rate: the maximum chargeable is the lenderís prime lending rate plus 3%.
- Fixed rate: the maximum chargeable is the lenderís single family residential mortgage rate plus 3%.
A registration fee of 2% of the total amount loaned under the program must also be paid by the borrower to the lender. It can be financed as part of the loan.

The registration fee and a portion of the interest are submitted to Industry Canada by the lender to help offset the costs of the program for the government.
Lenders are required to take security in the assets financed. Lenders also have the option to take an additional unsecured personal guarantee, which cannot exceed 25% of the total amount loaned.



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