Business loans in Canada are an important way to fund your startup business. These types of loans are usually provided through banks or other lending institutions. As you may know, the business environment in Canada has become very competitive due to the many opportunities available. In fact, there are thousands of companies set up every year. With that said, many small businesses fail because they are unable to obtain the funding they need to get started.
Unsecured lending: Factors to keep in mind
There are a number of options when it comes to getting a loan in Canada. Most small business loan in Canada are unsecured. This means that there is no collateral needed to back up the borrower’s promise to repay the loan. Many lenders are willing to provide businesses with the money they need in order to keep them open. However, you do have much more flexibility in regards to what you are able to do with a personal loan versus a business loan through a bank. Here are some options you may want to consider for your business:
Unsecured business financing can be obtained from most traditional lenders such as banks and credit unions. One of the advantages of this type of financing is that it carries less of a risk for the lender. In addition to that, most conventional lenders in Canada do require some form of tangible assets as collateral for the loan. They also require a business plan that is presented to show why the financing is needed and how the business will profit from the investment.
Two other sources of business loan in Canada are the Canadian Commercial Bankruptcy and the Canadian Small Business Association (SBA). While these two financing sources do require the borrower to have tangible assets as collateral, they also offer stronger underwriting standards. The Canadian Commercial Bankruptcy follows a similar underwriting process to that of the larger US banking institutions. This essentially means that the borrower will not have to go through a lengthy application process with the credit unions or the banks.
Lending from Private vendors
Another alternative for those looking to apply for small business loans in Canada is by looking to nontraditional lenders. These are individual investors who have enough money to invest in a business without having to rely on the banks. Non traditional lenders in Canada can be investors such as family and friends. Many investors prefer to invest their own money in order to receive better interest rates than the banks offer. Nontraditional lenders can also help a business to secure the funding that it needs through corporate loans. Many investors are willing to lend up to 50% of the equity of the business in return for a loan.
Private investors are not the only option for Canadians who are looking to obtain financing for their business. Many organizations exist that will loan funds to small business owners without requiring them to provide collateral. These organizations often have a higher interest rate than other sources of financing because of the increased risk involved. Because the organization does not rely on the banks and credit unions for collateral, there is also an increased chance of a default on the loan.
One way that a Canadian business owner may be able to obtain funding through traditional lending institutions without having to provide collateral is through what is called an unsecured lender. An unsecured lender is a lending arch that does not require borrowers to provide any type of collateral in order to obtain funding for business purposes. The lending arch will usually lend up to a hundred thousand dollars at a time to a borrower. While this is a more expensive method of obtaining a small business loan in Canada, it does offer a higher interest rate than most bank lending arbors.
Before applying for a loan through an unsecured lender, business owners should thoroughly research all of the lending institutions available in their area in order to find the one that will offer them the best interest rate. Many business owners will find that obtaining a loan from a traditional bank will always be more affordable than going through an unsecured lender. However, there are some benefits to applying through a traditional bank especially if the business has strong financial records and is currently profitable. A traditional bank may also be willing to work with a business owner in order to get the loan approved. By working with a traditional bank, business owners can obtain a small business loan at an affordable interest rate through a lender that does not have a financial guarantee.