What’s the lender’s flexibility on repayments? This will decide how big of a personal investment you need to make and whether it makes sense to work with a second bank. What percentage of the project cost is the lender willing to finance? Longer repayment terms do mean higher borrowing costs over the long term, but also lower monthly repayments so that you can make sure you don’t run into any cash flow problems. how much the bank was willing to negotiateĪpart from the relational aspects, what factors should you consider when comparing business loans between banks? 1.what the bank looked for in a loan proposal.The first thing you may want to do is reach out to your network of business contacts and ask them about their experiences with a given bank. It’s important to look at what different lenders are willing to offer you, because various banks offer different loan products.ĭo your research to find both the bank and the loan that’s right for you. Loan structures can take many different forms. What is the interest rate on a small business loan?īDC calculates the interest rate on our small business loan as follows:Ĭurrent floating base rate + variance based on your personal and business information = interest rateĪs a result, the interest rate varies by client. It cannot be more than $100,000.” He says that’s a common formula banks use to measure their risk. “Say, you're making $100,000 in sales per year and you have no debts, and you want to take out your first loan. Lenders will also look at your sales when assessing your eligibility for a loan.Īccording to Joseph, the size of your loan will depend on the amount of sales you’ve been recording. Borrowing capacity = Net income + depreciation of your project When you’re thinking about the size of loan you want to request, think about how much you can afford.Īn easy rule of thumb is to think of your net income (which is your net profit, earnings, or bottom line) in relation to the depreciation of your project (which is the asset or project losing value over time). You can also consult our list of the most frequently asked questions that BDC receives about small business loans. More details can be found in our article on getting a business loan in Canada or by contacting us. These all help assure the bank of your company’s viability. Larger business loan applications require several supporting documents, such as financial statements, financial projections, and marketing and production plans.

They’ll also ask for financial projections detailing your monthly cash flow forecast for the next 12 months. If those are not available, you’ll need to at least provide your tax returns. Company financialsįor larger loans, banks will typically want to review your financial statements to evaluate your capacity to repay debt. That means the loan request process is very fast and easy, but it also means that having a good credit score is extremely important to you getting a loan. “Whatever tendencies you have on the personal side, you usually bring them to the business side.”įor loans under $350K, having a good personal credit score is the most important requirement for your application.įor those in business for at least 24 months, the whole process for a loan under $100K takes place online. Sound financial decisions in your personal life can help your eligibility-the opposite is also the case: “If you’re buying a boat and cars, and you have a lot of debt that you incur every year, that would be a red flag,” says BDC’s Wesly Joseph, who spent several years assessing borrowers both inside and outside BDC. Make sure you have this information before you meet with your banker, and that you’ve reviewed it, so you can be ready for any questions they may have.

the credit bureau report on your business.

A sound credit scoreĪ bank will look at two things before granting you a business loan: To be eligible for BDC financial support when your business is at the start-up phase, you must demonstrate realistic market and sales potential, possess experience or expertise in your field, provide personal or credit references, demonstrate a reasonable investment of financial resources and provide a solid business plan.

At least 24 months of operations and generating revenueįor most types of loans, you need to have been in business for 24 months or more. Whether it’s a business bank account or a personal account, the account needs to match the name of your business. Growth & Transition Capital financing solutionsĪ bank account that matches the name of your business Kauffman Fellows Program Partial Scholarship Venture Capital Catalyst Initiative (VCCI) Industrial, Clean and Energy Technology (ICE) Venture Fund

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