Loans for small business enterprises by JasoRobinson


									      SMALL BUSINESS

                                    L                 O           A               N              S

                         SMALL BUSINESS



                       INVESTING IN                   they are willing to include     WHICH BUSINESSES
                       CANADA’S FUTURE                their personal assets as loan   ARE ELIGIBLE?
                                                      security. Those wanting to      Most small businesses
                       Small business is one of the   start up new businesses face
                       fastest growing segments                                       starting up or operating
                                                      similar problems. Under the     in Canada are eligible for
                       of Canada’s economy.           SBLA, the federal govern-       SBLA loans, as long as their
                       Imaginative entrepreneurs      ment partially offsets any      estimated annual gross
                       with drive and spirit are      losses on SBLA loans. The       revenues do not exceed
                       creating thousands of new      result is that financing is     $5 million during the fiscal
                       jobs and new opportunities     more accessible, and owners     year in which they apply for
                       for our country’s future.      do not have to provide per-     a loan. Eligible businesses
                       The Small Business Loans       sonal assets as security to     include professional prac-
                       Program was created to         support their business          tices but exclude farming
                       help small businesses reach    financing requirements.         and charitable or religious
                       their potential by making                                      enterprises. Businesses may
                       it easier for them to get
                                                      WHO ISSUES                      be sole proprietorships,
                       term business improvement      THESE LOANS?                    partnerships or incorpo-
                       loans – BIL – to finance the   Chartered banks, caisses        rated companies.
                       purchase or improvement        populaires, Alberta
                       of fixed assets for new or     Treasury Branches, most         HOW CAN LOAN
                       expanded operations.           credit unions, and many         PROCEEDS BE USED?
                                                      trust, loan and insurance       Loan proceeds may be used
                       Administered under the
                                                      companies are authorized to     to finance:
                       Small Business Loans Act
                                                      make loans directly to small
                       (SBLA), the program is a                                       • the purchase of land,
                                                      business owners. Lenders
                       joint initiative between the   are required to make SBLA         including any structures
                       Government of Canada           loans with the same care          thereon required to oper-
                       and private-sector lenders.    they use in their other areas     ate the business (land
                                                      of business, to assess credit     loans);
                       WHY AN SBLA LOAN?              worthiness and draw up          • the renovation, improve-
                       Owners of small businesses     agreements following              ment, modernization,
                       frequently lack the funds      normal lending practice and       extension, construction
                       they need to pay for busi-     to administer the loans in        or purchase of premises
                       ness improvement or expan-     accordance with specific          (premises loans);
                       sion. Financing may not be     program requirements.
                       available to them unless
• the purchase, installation,    case with land and premises        The lender may charge a
  renovation, improvement        loans made to tenants. The         penalty for prepayment
  or modernization of new        lender may take personal           of a fixed-rate loan.
  or used equipment              guarantees not exceeding, in
  (equipment loans).             aggregate, 25 percent of the       ANY OTHER COSTS?
                                 original amount of the loan.       Lenders are required to pay
DOES THE SBLA EXCLUDE            These guarantees may not be        a one-time loan registration
ANY LOAN PURPOSES?               secured with personal assets.      fee to the government equal
Loan proceeds cannot be                                             to 2 percent of the amount
used to:                         WHAT ABOUT LOAN                    loaned. The fee is recoverable
• purchase shares or other
                                 REPAYMENT?                         from borrowers who may
                                 The period during which            reimburse the lenders when
  types of ownership in a
                                 a loan must be repaid will         their loans are advanced or
  business enterprise;
                                 generally coincide with the        have the amount of the fee
• acquire working capital                                           added to their loan balances,
                                 expected economic life of the
  (finance inventory,                                               provided that the individual
                                 asset being financed, up to a
  accounts receivable, etc.);                                       borrower’s loan maximum
                                 maximum of 10 years.
• pay off existing debt          Instalment payments on             of $250,000 in total is not
  (unless the loan is used       the loan principal must be         exceeded.
  to refinance eligible          scheduled at least annually,
  fixed-asset purchases          but monthly payments are
  made or committed              usually called for depending
  within 180 days of the
                                                                    HOW DO I APPLY?
                                 upon arrangements between
  loan approval date);                                              Contact the lender of your
                                 the borrower and the lender.
                                                                    choice to find out more
• purchase real estate
                                 HOW ARE INTEREST                   about the SBLA.
  for resale;
• purchase or improve            RATES DETERMINED?
  real estate for lease or       Under the SBLA, borrowers
  sub-lease purposes (hos-       may choose between:
  pitality, health care and      • floating-rate loans, where
  mini-storage industries are      the interest rate fluctuates
  exempt from this                 with changes in the
  exclusion).                      lender’s prime lending
                                   rate over the term of the
ARE THERE                          loan, but cannot be more
BORROWING LIMITS?                  than
The maximum value of               3 percent over the lender’s
loans a borrower may have          prime lending rate; and
outstanding under the SBLA       • fixed-rate loans, where the
cannot exceed $250,000.            interest rate is fixed for the
Loan proceeds may be used          term of the loan, but can-
to finance up to 90 percent of     not be more than 3 percent
asset acquisition or asset         over the lender’s residen-       Small Business Loans Administration
improvement costs, subject

                                   tial mortgage rate for           Industry Canada
to credit approval and at          the applicable term.             235 Queen Street
the discretion of the lender.      This 3 percent includes          OTTAWA, ON
Lenders are obligated to take                                       K1A 0H5
                                   an administration fee
security on the assets             of 1.25 percent payable by       Info line: (613) 954-5540
financed and on other busi-        the lender to the govern-        Fax:       (613) 952-0290
ness assets, as may be the         ment annually.                   October 1996

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