Things to Do Before Applying for a Small Business Loan

Whether you’re considering starting a business or currently own one, small business loans provide a beacon of hope for those looking to boost their operating capital.

I Canada alone over the past ten years, small businesses have received over $9.5 billion in asset-based financing. That measures out to over 63,000 loans made.

More often than not, the money is there for the taking lending. Your ability to qualify and determine the amount you qualify for, however, requires a bit of preparation.

Here are some things you should do before applying for a small business loan.

Research All Available Options

Small businesses are the lifeblood of the Canadian economy, employing over 8.2 million people nationwide. Many are eager and actively looking for ways to support local businesses.

As you consider applying for a small business loan, evaluate your options. Your first thought may be to go directly through your bank, but there are plenty of other sources worth comparing as well.

Here are just a handful of alternative options:

●      The Government of Canada’s Small Business Financing Program

●      BDC Xpansion Loan

●      Shopify Capital

●      CBDC Small Business Emergency Working Capital Loan Program

●      Women’s Enterprise Centre Business Loans for Women

●      Corporate small-business grants (hello, free money) like Facebook’s Small Business Grants Program

Do your research and compare their terms. You want to partner with an institution that aligns with your business goals and repayment plan.

Prepare Your Business Plan and Financial Statements

Speaking of plans, yours should be in tip-top shape. Be ready to present your business plan, in addition to recent cash flow, balance sheet, and income statements.

Any lender you apply through is going to need reassurance that you’ll be able to pay them back. Unfortunately, you can’t just tape an IOU to their door and be on your merry way.

Beyond the financials, it’s important to express your long-term vision. The more prepared and forward-thinking you are, the better it speaks to your ability to achieve the business goals you’ve set out to accomplish.

Create a Cash Flow Forecast

Borrowing money is easy, but you have to repay it. If you regularly keep tabs on your cash flow and financials, running a forecast shouldn’t be anything new. Incorporate information gathered during your research phase into your forecasting for a sense of what the small business loan will actually cost you. This includes any interest and fees to accumulate during the repayment period.

Review Your Personal Credit and Bank Statements

As you’re reviewing the financials for your small business, don’t forget to consider your personal financial history as well. This includes credit history and recent bank statements.

Lenders will be interested in the story your personal records tell. If it’s not a good one, you don’t have to give up on your small business dreams entirely—but you should be willing to take a step back and regroup around a new set of responsible goals that take the bigger picture into account.