Finding capital injection for small business owners

The silver lining around the dark economic cloud we have been under is it has sparked the entrepreneurial spirit in many people. Whether it is from the lack of finding employment or the disdain for the '9 - 5' , more people have taken steps to become self employed. If you have taken this courageous step, but you have started worrying about financing, it is likely that you could do with capital injection from the bank. It does not matter if your business venture operates from your home or a warehouse, there are various financial options available to help you build a successful business. Today we will discuss the Canada Small Business Financing Loan or (CSBFL) as it is commonly referred to.

CSBFL is a financing program created by the Federal government to make it easier for small businesses to get loans from the banks. It is used to finance leasehold improvements and fixed assets such as equipments and buildings. The funds can be used to start a business, buy a business or expand an existing business. It cannot however not be used to finance goodwill, inventories, franchise fees, operating capital or research and development.

In order to be eligible for the CSBFL, the following requirements have to be met:

-Your business must operate in Canada

-Current gross revenue has to be less than $5 million

-Eligible purchases must have been made in the last six months and should include receipts or invoices to support them . Your business cannot be a farm, charity or religious enterprise.

-The assets purchased or improved must be used in your business

Financing Details

Loan amounts are available for up to $500,000 for real estate loans and 350,000 for equipments and leaseholds. Financing is available for up to 90% of eligible costs mentioned above. Repayment options can be made in monthly installments with a fixed or variable interest term. A discussion with your banker will help you determine whether a fixed or variable interest term will be suitable for you. The maximum interest rate on variable rate loan is Prime + 3%, and on fixed rate loans, it is the residential mortage rate + 3% which includes an annual government administration fee of 1.25% . Generally, amortization is up to 10 years but the length of your amortization may be influenced by the asset being financed. It is noteworthy that Personal guarantee is required for up to 25% of the original loan amount. The CSBFL comes with a one time government registration fee of 2% of the loan amount. For instance, if you borrow $100,000, be prepared to pay $2,000 dollars extra in fees. Some banks may allow you to include the 2% fee to the loan amt for financing.

I recommend being open and honest with your banker when discussing repayment options. This gives them an opportunity to tailor solutions that will accommodate your needs. I have seem many cases where the banks will even defer principal payment and take interest only payments for 90days to give you some breathing room. Before you decide if CSBFL is a suitable option for you, book an appointment with a business banker and have a thorough discussion about a financing option that will support the growth of your business.

Photo Via user BostonTx : Flickr creative commons

Amma Bonsu
		About the author:
		Amma Bonsu is the creator and host of a content rich online talk show called AmmazingSeries. This self proclaimed conversationalist was born in Ghana and lives in Toronto where she has built a rewarding career as a relationship manager for a leading Canadian Financial Institution. Her natural instinct to learn about people is matched only by her commitment to giving back. Amma's column will cover social trends and social issues with wit, sass, and substance.
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