FAQ: Choosing a Small Business Lending Company
Need a Loan for Your Small Business from a Top Merchant Lending Company?
As a small business, there are more and more options than ever before to raise capital and invest in yourself and your work. Online lending for small business is at an all time high, as independent brokers compete with traditional financial institutions to offer you the best deal. But what questions should you be asking these lenders? What kind of loan does your small business require? Here are some of the most frequently asked questions to give you the advice you need to invest in your future.
Why choose online lending for small business?
In Canada, scores of new online business lenders are opening their doors to merchants and offering loans at unbeatable rates. Technology gives you access to brand new funding programs, from instant decisions on loans and swift access to cash, or online market places where businesses can be flagged up by individual investors. Technology also allows for greater scrutiny of data, which allows top merchant lending companies the ability to look closely at your finances. If you are a small business with good credit and great potential, data can be pored over to quickly decide the best course of investment. It also allows for loans to be repaid according to turnover.
What kind of small business loans are out there?
Merchant advance loans are one immensely popular funding model offered by online lenders. These small business loans are calculated based on monthly sales, examining the data from credit card and debit card sales to decide how much of the loan is repaid each month, at a rate that is comfortable for your business. This technology means that slower months are fully taken into account, and that busier times of year result in higher repayments to get your loan paid off faster. There are also cash lenders who specialise in giving small businesses fast access to cash reserves, sometimes referred to as a payday loan. For emergencies and times of desperation, a cash loan is an attractive proposition to merchants. With a good credit score and steady business, better interest rates are available for this type of instant decision micro loan.
How long do I need to have been in business?
Canadian small businesses usually must be operational for at least one year to get access to a small business loan. Some companies do offer shorter time frames, but six months is usually the minimum amount of time that your business should have been trading profitably. Other aspects of your finances may affect your application, such as personal credit history, your business credit, cash reserves and other aspects of your finances. A good financial adviser will instruct you on the best kind of loan to suit your needs.
Are government funding channels available to me?
The Canada Small Business Financing Loan (CSBF) is one such government programme that is designed to help existing small businesses improve. The loan provides up to $1 million, of which up to $350,000 can be used on leasehold improvements and new equipment for the business. The advantage of a quality option like the CSBF is that the government supports the merchant in the financing requirements without having to use personal assets as security against the loan. There are a number of rules to consider in the application, such as making sure that your gross revenues fall below $10 million, that purchase of premises must involve at least 50% of the floor space for your chose business activity. There is also a 2% government registration fee, although this fee can be covered by the loan itself. However, for this preparedness and a solid business plan, merchants get access to an attractive interest rate typically paid between seven and ten years. It can also used to be covered eligible purchase from within the past six months.
What will I need to get access to the top small business lending in Canada?
You will usually need to have been in business for at least six months, be turning a profit but without exceeding the thresholds that would class you as a “big business.” To apply online or in branch you will need to provide formal identification, such as a valid drivers license or passport. You will need to discuss with the broker in question any requirements with paperwork and proof of finances to make your application is a speedy and successful one. Your credit score is likely to be scrutinised more by top merchant and cash lenders, to breed confidence in your ability to repay the loan unlike with merchant cash advance companies.
How crucial is a solid business plan to any application for a small business loan?
Demonstrating you and your business’ long term planning and predicted growth is a sure fire way to encourage the best lenders to invest in your business. Credit history and collateral are always important to any lending application but brokers and lenders will be further impressed by strategy and sound financial plans. A strong business plan will enable you access to the best rates and the best repayment model that is tailored to your individual needs. It will also help to forge strong bonds with the lender, potentially opening up further financing options in the future.
What other things should I be looking out for in a small business loan?
The best Canadian lenders will offer you advice along every step of the way, from application to funding and beyond. You should also be made aware of all the terms and conditions associated with the loan, from the repayment terms to any additional fees that you may be charged along the way. Early repayment fees are one area to be particularly aware of, especially if you are taking out a micro loan that you will want to pay off as soon as possible. In emergency loans, how quickly you can access your money is another pertinent question, as well as any restrictions on spending in your chosen industry. For example, if you require funds for upgrading your premises you should look out for a small business loan directly suited to your needs.