May 16 2012

What Are Government And Non-Government Business Loans

Small business owners in Canada can choose from government and non-government business loans and use the funds to finance their business operations. Government loans are available under the Canada Small Business Financing Program, and businesses can borrow in the amount of up to $500,000. Of this amount, they can use up to $300,000 for the purchase or improvement of new or used machinery or equipment and for the improvement of leasehold property or the purchase of leasehold improvements. Money in the form of small business funding can be used to finance franchise leasehold equipments, commercial vehicles, land and buildings, and production equipment. Businesses can use the funds for restaurant and hotel equipment, computer and telecommunications equipment, software, etc. Financial institutions that participate in the program offer secured business loans meaning that they take security in the assets (equipment, land) being financed. In addition, banks may take unsecured guarantees, but these cannot be in excess of 25 percent of the funds advanced. Government business loans are a good option for startups and established businesses that seek to expand or make improvements. They can choose from fixed and variable interest rate, but the rate of interest is determined by the different financial establishments. Borrowers also pay a registration fee equal to 2 percent of the loan amount. This fee is payable to the lender. Financial institutions are tasked with advancing and administering loans under the Canada Small Business Financing Program. The same procedures should apply as for standard business loans. With regard to financial institutions that participate in the program, businesses can apply for a business loan from Scotiabank, National Bank of Canada, Bank of Montreal, Canada’s credit unions, etc. As an alternative to government business loans, businesses may check with a credit union or bank of choice. Requirements and lending criteria vary from lender to lender. Many financial establishments will want to look at income and expenses including other loans. Applicants may include a list of securities such as buildings and land, equipment, fixtures and settings, commercial vehicles, etc. Business owners should own any buildings and land they offer as collateral personally or by the business. Financial institutions typically advance about 60 percent of their value. Businesses that use equipment and machinery as collateral should present description and values. Financial establishments usually lend 50 percent of their market value. The same is true for fixtures and settings – banks lend about 50 percent of their realizable value. Business owners can offer commercial vehicles against the loan, and most financial institutions lend about 60 percent of the vehicle’s realizable value. Regarding shares, financial institutions advance around 60 percent of the shares’ current market value. Most financial institutions will not accept goodwill as collateral. Applicants may offer life insurance policies against the loan. In addition, some banks require guarantors, and business owners should be able to offer names of friends, relatives, or partners who will act as guarantors. Persons with a high credit score and reputable business can act as guarantors. This web site has tons of useful information.

By MyAt_45 • Credit Cards For People With Bad Credit • 0 • Tags: government business loans, small business financing, small business funding