Money, money, money. No business can function without it. At Silver + Goren, we help minimize the stress involved with securing financing.
Outside of personal funds, the next door to knock on is the banker’s. All Canadian chartered banks offer services and loans to small business. As you probably know, it’s not as simple as walking in and asking for money. You need to demonstrate that your business is viable and will be able to repay the loan.
Banks will always ask for security to ensure their loans will be repaid. But they aren’t interested in claiming that security. Put simply, banks want to be convinced that your business will be successful in generating sufficient cash flow and profits so you can pay back the debt itself.
To get started, you need a clear business plan and financial projections that effectively communicate the viability of the business and its growth potential. Details should include how much money needs to be borrowed and when and how the loan will be repaid.
You should also provide the bank with personal information about you and other members of your management team. Describe your history in the industry and your previous experience in management. Remember, the goal is to show the bank that you have the skills and experience necessary to profitably run your business. As a finishing touch, invite the prospective banker to your business premises so they can see the efficiency of your operation.
Being successful in the loan department is about more than numbers. You need to develop a relationship of trust and credibility with your bank manager. Once you get that loan, it’s even more important to make sure this relationship is never damaged. This means being open about how you and your business are doing, so your banker is never surprised by your annual statement.
Free Download Things to Remember when Relationship Building with Bankers
If they give you a loan, your bank will always ask for a personal guarantee too. If your business fails without enough money to fully repay your bank loan, the bank will look to your personal assets to satisfy the debt. This could mean losing your house. It’s a serious commitment that should be considered very carefully. See our Risk Management section for ideas on how to manage this.
There are also government programs that can help with financing. Our firm can navigate them all with you, but one is worth mentioning here. The Small Business Loan Financing Program manages loans up to $500,000 that are given out by Canadian banks, but guaranteed by the Canadian government.
Many small business owners are worried about the rate of interest that banks will offer them for their loans. While it is always good to spend as little as possible, it is our experience that your rate of interest is far less important than obtaining access to capital to grow your business. You should be able to earn far more in profits than an extra 1% of your loan. Establishing a relationship with a banker who will work with you to grow your business is far more valuable.