Accounting

How to get approved for a Business Loan fast and easy

Effective ways to get approved for a business loan

Nov. 19, 2021

If you are looking to start or expand your business but don’t have enough budget to do it, getting financial assistance can be difficult. You need to have a clever strategy in finding the best option the fits your business financial situation. Most lenders look not just on your business credit history but also oversees your personal credit scoring to find out if you are eligible. You have to established a good reputation and lay out a clear business plan. Have your best foot forward by preparing answers to these 3 questions most lenders will ask you:

1. How much do you need and how will you use the money? - Your answer to this should be specific

Example: 

I need $150,000 to put up a small flower shop.

40% ($60,000) will cover the rent for 6 months.

10% ($15,000) will go to minor shop renovation and then 

30% ($45,000) will fill up my inventory

20% ($30,000) is for my logistics and technology.

2. Does your business have the ability to make the payments required under the loan? - Existing business need proof of solid cash flow sufficient to the terms of the loan, for new business owner’s they can show that they’ve been profitable in a business venture in the past, or have a strong expertise and have done their research in the particular industry of the business. Your business structure also plays a huge part on this part. Incorporated business gives business more credibility not just with lenders but also with suppliers, customers and even investors, they see corporation as being more stable than sole proprietorship. Find out why you should incorporate your business 

3. How will you repay the loan – You need to assure the lender that you are able to pay your loan even when the market is low. Showing them you have enough savings, or got some assets or other collateral will give them security that you can repay what you owe.

Create a Business Plan

A well thought business plan is your first step for loan approval. This will show the lender that you have a clear roadmap for growth, backed by research, financial data, and product strategy, this will also determine the right loan program, based on your needs, goals, and financial projections. Your business plan should tell a story about your business, the importance of a business plan go beyond securing a loan, it is your key to a successful business

Planning is needed to grow or start a business. The main source of planning for a company is the business plan. A business plan definition is a document that details the strategy of business owners on how they intend to run their business

Register your Business

This secures your reputation as a legitimate business, your registered business name will appear in all your contracts or agreements including loan agreement. If you are planning to start a business and you already have a name for it secure the name by registering it so that no one else can use it legally. Take few easy step to secure your business name and have it registered

FOR YOU

Register your business in Canada today

GET STARTED

"A successful business requires one simple thing: PASSION." - Teresa Collins

Decide which type of lender you would want to go to

Most small business owners don’t know their option when it comes to getting funding assistance so here are the different types of lender you can turn to:1. Traditional banksIn Canada there are 5 big banks that dominate the banking industry and can help you secure a loan

  • Bank of Nova Scotia
  • CIBC
  • Royal Bank of Canada
  • Bank of Montreal

Bank of MontrealTheir lines of credit are perfect for covering day-to-day operating costs or pursuing a unique and time-sensitive business opportunity. A loan, on the other hand, is best suited for one-time, larger expenses. Small business and commercial loans come with a range of terms and payment options that give you the flexibility to successfully manage your business, and your money.Bank of Nova ScotiaThey Customize your business credit needs with multiple products under one global credit limitCIBCFrom covering your daily operating costs to opening a new storefront, they'll help you get access to funds for your business goals up to your approved limit, with a CIBC Business Line of Credit. Use it to support your cash flow and meet your short-term business goals.Royal Bank of CanadaWhether you’re an emerging start-up or an established business looking to expand, you can find the financing solutions to help your business reach its full potential. From short-term operating loans to long-term financing to help secure the future of your business.

2. Alternative LendersThis are private companies that operate like banks by providing loans to businesses. Alternative lenders in Canada currently offer all types of business loans, except for long term instalment loans and commercial mortgages.

Government Grants

Government loan depends on your industry and your region. Most especially during the pandemic the government of Canada took different measures to support small businesses. There are different economic response plan businesses that can help business owners facing hardship due to the COVID-19 outbreakIt is best to shop for options to see which ones fit your needs and best suits your financial abilities.

Prepare the needed Financial Documents

1. Bank Statements – your bank account must prove the legitimacy of your business. They will more likely to approve your loan if they your business is earning profit and you can mansge your cash flow very well.2. Income Statement – lenders use the income statement to analyse how efficiently your business is able to translate expenses into revenues.3. Balance Sheet - Lenders uses the balance sheet to see your ability to collect payments and repay debts. It also shows that you have a track record of managing assets and liabilities responsibly.4. Budget and cash flow projections - Lenders uses cash flow to predict the net cash flows of the business over a future period. This also helps them Identify potential shortfalls in cash balances

Give yourself enough time to study, review and plan

Let's Wrap it up!

In order to secure a loan approval you should clearly define your goals and needs and knowing your option is an advantage in securing the right loan for your business. Preparing for the potential requirements will make it easy for you to prove your credibility.

Veronica Postanes

Executive Journalist

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