How to Qualify for a Small Business Loan Canada

Equipment Lease vs Finance

According to recent statistics, 98.2% of businesses in Canada employ less than 100 workers. This qualifies them as small businesses which are said to fuel the Canadian economy. They exist in a variety of industries, and usually have a positive reputation among buyers because they’re close to the grassroots and thus appear more trustworthy.


If you’re hoping to enter the realm of business ownership with your own small sized enterprise, then you need to come prepared. Despite more than half of small business in Canada employing less than 4 workers, they still require quite a bit of capital. And more often than not, Canadians might not have sufficient savings to pay for that capital in full.


Fortunately, there are other options if you’re looking for a way to finance your new venture. For instance, a small business loan can provide you just the money you need to jump-start your enterprise. Similar to other loans, the small business loan does have an application process, and lenders will want to figure out if you’re qualified. That can be done by fulfilling these requirements and documents:


Detailed Business Plan

The first thing that a lender might want to see is your business plan. This should give your lender a clear picture of your objective and the ways that the borrowed funds will be used. The purpose of the business plan is to show your lender that your venture will be sustainable. Of course, they want you to be able to pay back the amount you borrowed. And that will become easier for you if your business proves to be a viable source of profit.


Capital Assets

Your capital assets are properties of value that can be used as collateral for your business loan. These can include the property or land that your business will be established on, or the machinery and equipment that you’ll need for your business.


Most traditional lenders will require a specific asset that should cover a large percentage of the amount you’re borrowing. However, these days, any individual deemed capable of making repayments can secure a business loan even without the collateral. For instance, some online lenders would be happy to approve your application with just a general lien on your business.


Financial Projections

Your financial projections take into account your capital expenditures, your operating expenses, and your profit. These numbers will largely rely on your understanding of the industry you’re in, as well as the scale of your venture.


Presenting these numbers to your lender will help them determine how realistic it will be for you to meet your monthly payments on top of the other expenses associated with your business. What they want to see is that the profit you make will exceed all of your payments, leaving you some portion to set aside as savings. Numbers that demonstrate break-even might not be as attractive.


Personal Financial Information

Another thing that your lender will want to determine is your own personal financial capabilities. This can be determined by a variety of documents, including proof of income, tax returns, and even your credit report. Although most online lenders won’t require a credit report, it doesn’t hurt to have it at the ready. You can request a credit report from the Office of Human Affairs or any other business credit bureaus.


Proof of Collateral

If you’re applying for a collateral loan for your small business, then you might have to provide your lender some proof of the collateral you’re using. This can be property, equipment, inventory, stock, or bonds, or simply anything of financial value that the lender can use to secure your loan against. Often, the purpose of providing this proof is so that your lender can calculate the value of your collateral. In most cases, it should hold enough worth to provide the ideal security.


Professional Resume

In some cases, a lender might also want to have a look at your professional resume. The purpose of this would be to learn more about your history. If you had previous engagements with the lender, then you might have a more favorable application. Other things that your lender might want to see in your resume are your references, or any previous business engagements that can prove your reputation in your chosen industry.


Securing a small business loan in Canada isn’t quite as hard as it used to be, thanks to the flourishing economy that these small ventures have created. If you’re hoping to open up your own small business, then you might want to seek out a suitable lender. While many of these requirements are common among most of these financiers, there are others that will make it even easier for you. Just browse through our extensive database of trustworthy, reliable lenders in Canada to find the ideal partner for your new venture.

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Khadija Bilal

Khadija holds a bachelor's degree in business administration. She is a professional writer with 7+ years' experience in the industry. Khadija has a small family and loves spending time with them.