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Top Considerations Startup business Loans In Canada


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Considerations Startup business Loans

Getting a loan to start a small business from scratch is an important task facing a novice entrepreneur. Banks are in no hurry to provide this type of loan. This is associated with a high risk of business development failure. But there are a number of ways that you can increase your chances of getting loan approval.

Small business is a form of a commercial enterprise, the number of employees of which does not exceed 100 people, and the annual income is 800 million rubles. Companies enjoy a special taxation regime and simplified bookkeeping. To start a business, an entrepreneur will need to use seed capital or take out a loan to develop a business from scratch. How to get a loan to start a company? What to do to increase the likelihood of loan approval?

Conditions for obtaining a loan for business development from scratch

A potential borrower must meet the following requirements:

  • have no criminal record;
  • with a clean credit history;
  • no debts, fines, unpaid taxes;
  • be solvent;
  • have a permanent registration in the region of the bank’s presence;
  • between the ages of 30-40 and married;
  • have your own property.

Types of loans for small businesses

Several types of loans are suitable for the development of entrepreneurship from scratch.

  • A consumer loan is issued for starting a business from scratch, for increasing working capital, purchasing new equipment.
  • Overdraft is available to credit card holders. It allows you to withdraw from the current account the amount of funds in excess of the balance. The interest rate is determined individually and depends on the degree of trust in the bank, the duration of cooperation and the company’s turnover.
  • The bank guarantee is a surety for the fulfillment of obligations under the tender.
  • The credit line allows you to receive funds in installments to pay off current expenses.
  • Specific loans are designed to solve narrow problems. These include factoring and leasing.
  • Mortgages are issued for the purchase of commercial real estate.

Stages of obtaining a loan for starting a business from scratch

Before contacting the bank with an application, you should complete the following steps:

  • develop a business plan;
  • choose a franchise;
  • prepare a deposit.
    Let’s take a closer look at each of these points.

The business plan includes a complete description of the project and the direction of development. In some cases, attracting investors who are ready to invest their finances can increase the chances of obtaining a loan. The business plan includes market overview, accounting calculations, vision of work and loan repayment schedule.

The likelihood of getting a bank loan for an independent business is low. Lending institutions are more likely to issue loans to buy a brand. You just need to make sure that the chosen franchise is proven and profitable.

Providing property as collateral increases the chances of approval of the loan application. The security is vehicles, production equipment, real estate or securities. In the absence of collateral, a novice entrepreneur will have to contribute start-up capital in the amount of 30% of the estimated project budget. An individual and legal entity can act as a guarantor for a loan to start a business from scratch.

When contacting the bank, you must follow these steps:

  • choose a lending program;
  • register and tax an LLC or individual entrepreneur;
  • submit an application and provide the bank with a complete package of documents;
  • issue a deposit, get money.

Most banks provide the ability to apply online for small business loan approval. To do this, fill out the form on the website, indicating your contact details. The bank’s preliminary response is received on average within 3-5 working days.

When choosing a loan program, pay attention to the following points of the agreement:

  • payment schedule;
  • interest rate;
  • the procedure for calculating penalties for non-payment of a loan;
  • conditions for early repayment of the loan.

Banks develop programs with different conditions and requirements for the borrower. If you need to receive small amounts, in some cases it is more profitable to take a consumer loan or to issue a card with a replenished limit.

Documents for issuing a business loan from scratch

Regardless of the bank chosen, when submitting an application, you will need to provide:

  • passport and military ID (for citizens liable for military service);
    income statement (2-NDFL);
  • an extract from the USRIP for individual entrepreneurs, –
  • USRLE for LLC;
  • TIN;
  • documents for the ownership of property on bail;
  • compiled business plan;
  • confirmation of surety;
  • franchise agreement;
  • confirmation of temporary registration, if necessary;
  • lease agreement for premises, contracts with suppliers.

Advantages and Disadvantages of Getting a Business Loan

Many novice entrepreneurs are interested in the question of how to open a business from scratch, where to get a loan for development. It is impossible to answer unequivocally, since applying to the bank for financial support has its pros and cons.


  • Fast receipt of the required amount of money to start a business from scratch. In some cases, a loan is considered the best option for the development of a company and making a profit.
  • Most banks provide loans for entrepreneurs on favorable terms with the ability to submit an online application for consideration of the application.
  • For each client, a convenient payment schedule is selected, taking into account individual characteristics: the timing of settlements with counterparties, the seasonality of work.
  • Reduced rate for LLCs and individual entrepreneurs. Especially for those who receive a loan secured by property. The interest on loans for small businesses is lower than for individuals.

Potential risks

  • High requirements for the borrower. Banks carefully check the solvency and reliability of the company when issuing subsidies. Getting a loan for small business development from scratch is not as easy as it might seem. For individual entrepreneurs and LLCs, a high percentage of refusals remains.
  • If it is impossible to pay off the debt or the termination of the functioning of production, there is a risk of loss of collateral.
  • High interest rate for a short loan period. Thus, the bank insures itself against debt repayment.
  • Difficulty making monthly payments if the entrepreneur makes a profit on an irregular basis.

As part of supporting small businesses, the state provides grants, guarantees and subsidies for the development of individual entrepreneurs and small companies. When applying for a loan, a novice businessman needs to assess the possible risks, familiarize himself with the requirements of the bank, and provide a full package of documents for checking the solvency. Issuing a loan for small businesses is an effective solution to financial problems and assistance in developing a new business from scratch.

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