How To Receive A Government Loan For A Small Business?

A Small Business Loan

Over the past 10 years, the Government of Canada has made it possible for over 63,000 borrowers to receive a sum amount of $9.5 billion in asset-based financing. So, there’s no really wondering why the economy in Canada is currently powered by SME’s.


If you’re running a small business, there are a few reasons why you might find the need for a small business loan. Government-granted loans for your business may have their unique benefits, making them a suitable choice for borrowers with specific preferences and needs.


Find out what you need to know about government loans by reading through this quick, concise guide.


What is a Government Loan?


In essence, a government loan is much like any other type of loan – it grants you a sum of requested money in order to serve the purpose you state in your application. If you’re applying for a government loan for your small business, then the purpose of your request should be towards improving your SME.


Government loans for small businesses in Canada are granted by the Canada Small Business Financing Program. They grant business loans for enterprises with a gross annual income of $10 million or less. As long as your business isn’t an agricultural business, non-profit, charitable, or religious, then you can apply for this type of small business loan.


How to Apply for a Government Loan


A Government Loan


The process of securing a small business loan for your enterprise is fairly simple. For the most part, the entire application will be coursed through any eligible financial institution. These lenders will review your application and make the approval based on your eligibility to pay off the loan. Once the funds are disbursed into your account, the lender will list your transaction under Innovation, Science, and Economic Development Canada.


Of course, as with any other loan, you will need to submit specific requirements to help the lender factor out your eligibility. Some of the requirements you might have to have at the ready include:


  1. Proof of income – Any documents from your employer or business that can serve as your proof of income. Pay stubs, tax returns, bank statements, and certificates of employment from your employer can be suitable documents to support the income stated in your application.


  1. Detailed business plan – What do you intend to do with the funds? It’s important to detail the improvements or commodities you intend to use the money on so that the lender can determine whether there is viable collateral in the transaction. A government-granted small business loan can be used for: (1) the purchase or improvement of land or buildings for commercial use, (2) purchase or upgrade of equipment either new or used, (3) payment for improvements and renovations towards existing properties.


  1. Proof of residency – A government small business loan is granted only to Canadian citizens who have been permanently residing in the country for at least 1 year. Providing proof of your address and residency is an important aspect of the application process to support your eligibility for the loan.


  1. Proof of collateral – A collateral loan is essentially supported by a property of value that you’re in possession of. Lenders are often more willing to grant loans to borrowers who can provide collateral, since it makes them feel more secure that they won’t be left empty handed if you end up unable to pay. Properties tied in with your business like machines, equipment, and land or buildings can be used as collateral for your small business loan.


  1. Financial projections – Some lenders want to see a clear-cut plan as to how you intend to repay the loan they will grant. This can be done by providing them a detailed financial projection that demonstrates your anticipated cash flow over the course of the loan term.


Showing your lender that you’d be able to make more than the loan amortization will help demonstrate your eligibility. Often, lenders will feel more confident granting loans to business owners who can generate more than just their amortization on a monthly basis.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

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.