The Government Small Business Loan in Canada , aka the ‘ SBL ‘ is undergoing some dramatic changes in the program. Are you up to date on the good, bad and ugly (there’s very little ugly!) and the ‘ who cares’ of this very popular program that finances thousands of new and existing businesses every year? Let’s dig in.
Many clients we meet and talk to have not even heard of the program in some cases, so a super quick ‘ primer ‘ just might be in order. Patterned similarly to the U.S. equivalent ( there it’s called can ‘SBA’ loan ) this financing was created by the Canadian government many years back to allow Canadian business owners and entrepreneurs to have access to capital where they might not normally access traditional Canadian chartered bank financing .
Although it can be debated how seriously the banks embrace the program the reality is that over the years tens of thousands of businesses have qualified and been approved under the program. The government guarantees a large portion of the loan to the banks in case of default.
If the government guarantees default why wouldn’t the banks fall in love with the program? The main reason is… which you might not believe, is ‘ paperwork’ at the bank level. Yes, it’s correct that top experts in the field tell us that the ‘ administrative burden’ that come with banks filing for the loan had become too much.
So… enter Change! And while significant, on balance they still in our opinion make the program robust and a solid solution.
So what are those changes? First of all the old program had a personal guarantee scenario that was quite attractive to borrowers, in that they only had to guarantee 25% of the loan from a personal liability perspective. New legislation via INDUSTRY CANADA (the program administrator/manager) allows banks to take a full personal guarantee on the amount. What’s our take on that one? Pretty simple actually – since almost 99.999% of all business in the SME financing sector requires shareholder guarantees anyway what’s really the issue here.
Oh, and by the way , under the SBL small business government loan no personal collateral can be taken or secured, which definitely isn’t the case for most normal bank borrowers under SME Commercial Finance conditions.
Other changes to the program include small fees to be charged for set up, documentation and registration of SBL loans in Canada. The truth is that in any financing in the SME sector the borrower almost always pays the legals and doc fees anyway, which are often in the several thousand dollar range or more. So the few hundred dollars charged for an SBL loan is somewhat of a moot point, don’t you think.
It would initially appear that the old cap of 350,000.00 for equipment and leasehold financing may be lifted. So. Does that mean ‘ unlimited financing ‘? Hardly, we think given that new borrowers still have to meet the same equity requirements and working capital requirements of the program.
Rates, terms, and overall structure of these loans still remains the same, and they are ultra attractive in our opinion given the often start up or early stage nature of businesses that apply.
So, while Mr. Dylan might still be right ( ” The times they are a changin’ “)
the CSBF program – the ‘ SBL ‘ Government Business Loan is still a great deal and should be considered by all borrowers who can’t qualify for full traditional financing. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can guide you successfully through changes to the program.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
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Canadian Business Financing