Business Loans: The Full Guide 

To get a small business loan, make sure you meet the criteria first. For traditional loan approval, you need to have a good credit score, sufficient collateral and need the money for an unexpected expense or to back your needs for inventory. If your credit score is lower, create a business plan for the lender so you can show how you plan on securing the funds to repay the loan financing.

If you don’t have a solid plan to repay the loan or insufficient capital, you need to get your financial house in order first. Don’t take out any business loans unless you can show that you can repay the loan amount and can provide financial proof of repayment.

Absolutely. Applying for small business loans or even bad credit business loans can be easily done online, and is more convenient and simple than visiting a traditional financial institution, such as a bank.

To get a first-time business loan, decide on the type of loan you need. If you need a short-term loan or long-term loan, you need to provide your credit score, your payment history, the reason for the loan, and the amount of collateral for your business. 

A line of credit loan can also be secured by providing the same details. You should have a debt-to-income ratio that shows the amount of income you make is notably greater than the debt you currently carry. You can conveniently apply for any business loans online.

To deal with business loans Canada based lenders, you need to take the following steps.

1. Check and Perfect Your Business and Personal Credit Scores

Your personal or business credit score shows our ability to repay your personal and business debts, respectively. Usually, lenders of small business loans will ask for your credit score so they can see how you manage your debt. You can receive 1 free credit report per year from the credit reporting agencies TransUnion and Experian.

To improve your credit score quickly, you should check your credit report and clear any errors or inaccuracies. Make sure you regularly pay your bills on time each month as well. 

If you have a more established company, you will need to provide your business credit score. To establish business credit, you need to make sure your public standing is good and establish trade lines. You can prove your creditworthiness in this respect when applying for government loans for businesses or making an application for long-term traditional funding.

2. Find Out The Minimum Requirements of the Lender

Before you apply for any start-up business loans or traditional business loans, you need to make sure you can meet the minimum requirements set by the lender. These requirements usually center around credit scores, a company’s yearly revenue, and its years in business. However, lenders will show some degree of flexibility if you are stronger in certain areas even though you may be weaker in others.

When applying for government small business loans, make sure your business meets the criteria for being “small.” Also, make sure you are up-to-date with the payments on any government of Canada business loans and that you have no defaults.

If you wish to take out one of the online small business loans or a traditional business loan, a bank or online lender will require specific documents, such as relevant accounting data. However, an online lender usually is less stringent when it comes to providing bad credit business loans. If you are dealing with a financial institution, such as a bank, you need to have good to excellent credit.

3. Gather the Necessary Legal and Financial Documents for Business Loans

Traditional lenders require that you provide the following documents when applying for government small business loans, startup business loans, or business line of credit loans.

• Tax return (both business and personal)
• Balance sheet and income statement
• Bank statements (both business and personal)
• Driver’s license or government-issued I.D.
• Any commercial leases
• Professional business licenses
• Articles of Incorporation
• Resume showing relevant experience
• Business plan, showing financial projections if you are a start-up

Online small business loans Ontario-based lenders may streamline the application process with fewer documents. If your credit is strong and so are your finances, some online lenders offer rates competitive with traditional financial institutions.

4. Provide Collateral

To qualify for small business loans Canada funding, you will probably need to provide collateral to back the financing. Business collateral is any business asset, such as inventory, real estate, or equipment that can be seized and sold if the loan is not repaid. A lender can recover its money if your business defaults on the financing. 

Some online lenders do not require collateral but do want you to provide a personal guarantee. Other lenders may take out a blanket lien on a company’s assets to recoup their money in case of default. It is essentially the same as providing collateral. Each lender has its own rules regarding this facet of the loan process, so ask questions when applying for business loans Canada based funding.

If you don’t want to take out one of the secured business loans and provide collateral, you can always opt for a small unsecured business loan. Your interest rate will be higher, but the loan is much less risky.

You will need to develop a business plan for getting startup business loans. Doing so will let lenders for small bad credit business loans and regular small business loans see how you plan to use the financing. Your business plan should include the following:

• Description of your business
• Product and service offerings
• Management team (and resumes)
• Industry analysis
• Operations and facilities plans
• Current and projected financials
• Marketing and sales strategy
• SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis

A business plan for small business loans should clearly show that you will have a sufficient cash flow to meet ongoing costs and new loan repayments. Doing so will give a lender more confidence in approving financing, which of course increases your chance of getting your loan approved.