Thinking of a Small Business Loan in Canada?

“Money is the lubricant and the fuel. It makes possible the smooth design, production and marketing of a product and it keeps the administrative functions efficient. Money also moves the company forward by fuelling growth and expansion.” – Victoria Duff, a start-up facilitator who specializes in entrepreneurial subjects.

Small Business Loans: Benefits and Challenges

Below are some of the benefits and challenges that entrepreneurs must assess when thinking about getting a loan.

Advantages

• Retaining Business Ownership – retaining equity ownership and autonomy in running your business should always be the goal, you have worked immensely hard to set it up to give it away or whatever control over it. Unlike equity investors, lenders will not try to influence business owners on the day to day activities of the business.

• Protecting Personal Wealth – going for debt financing instead of using personal resources (e.g. house, emergency life funds) and putting personal stability on the line.

• Lower Interest Rates – lenders tend to offer much more preferable terms for small business loans, especially those with good credit standing.

• Establish Good Credit History – taking small loans and paying it efficiently gives an opportunity to build a good credit standing over time.

• Convenience and Accessibility – with the boom of the SME industry in Canada, loan programs offered by banks, private lenders and the government have also grown and made more accessible.

Challenges

• Loan Eligibility – some small loan programs might have stricter application requirements thus limiting eligibility to specific businesses only.

• Requirement of Personal Guarantee – as most of the small business owners or say start-ups have not yet established a credit history, banks or some private lenders will require a personal guarantee. This might be in a form of credit guarantee from another individual or through personal assets.

• Requirement of Good Credit History – some banks or private lenders might require a good credit history before granting a business loan.

• Lengthy Application Process – depending on the type of the loan and the related requirements, the application process might take a long time to process. With this, thorough research and assessment of the different options is definitely needed.

Small Business Loans: Types and Where to Get Them

 

Government Financing

Through the Canada Small Business Financing Program, the Government of Canada agrees to share the risks of lending to start-ups and small businesses with a lender, acting as guarantor of the loans made. It’s run through traditional banks, trade unions, and caisses populaires (credit unions in Quebec).

Small businesses or start-ups operating for profit in Canada, with gross annual revenues of $10 million or less might be eligible to apply. Under this program, business owners can use the loan to finance purchases or improvements on real estate, business equipment and leaseholds. Depending on the financial institution, interest rates might be variable or fixed (a plus rate of 3% on top of the base).

Traditional Bank Loans

Several programs and options are being offered by banks on small business loans. List below shows several of these financial institutions and what they are offering.

Micro Financing

Smaller institutions (e.g. credit unions, etc.) and government agencies have developed programs that offer microcredit (small business loans of under $20,000) to people who would have difficulty getting a traditional business loan. Hereunder are some of those institutions offering such.

  • Vancity – offers loans from $15,000.00 to $75,000.00 with payment terms ranging from 24-84 months.
  • Coast Capital – offers a variety of financing options – short-term loans, business loans, lines of credit and letters of credit
  • Interior Savings – offers term loans, line of credit, operating loans, letters of credit, project financing and equipment loans
  • Envision Financial – offers other business loans, operating lines of credit and letters of credit
  • Libro Financial Group – offers different types of commercial and agricultural loans, from business visa card to leasing to operating lines of credit to mortgages
  • Alterna Savings – offers a full range of financing solutions – loans, lines of credit, letters of credit and community microfinance program

Community Investment Funds

Community Investment Funds are non-profit organizations dedicated to helping people who can’t get the loans they need to get on their feet from a traditional lending institution (such as a bank or credit union), often because they don’t have the credit history or collateral that a traditional lending institution demands. Some of these Community Loan Funds will also assist people with poor credit histories (although they will likely insist that you go through credit counselling).

Online Loans

The newest generation of lenders focused on giving access to financing as easy as possible. Feedback on loan applications is immediately given, with information on how much you can borrow and the related payment terms. They also tend to offer better interest rates and smaller service fees (if any) than traditional banks because they don’t have the same overhead costs as banks and credit unions with physical branches. Below are some of the lenders offering this type of loan.

  • Lending Loop – offers loans from $1,000.00 to $500,000.00 with an annual percentage rate (APR) starting from 4.96%, to help build a business with no early repayment penalties.
  • Ferratum – offers loans from $500.00 to $15,000.00 with an annual percentage rate (APR) ranging from 18.9% to 54.9% and payment terms of 6-60 months
  • Loans Canada – offers loans from $500.00 to $50,000.00 with an annual percentage rate (APR) ranging from 3.0% to 46.96% and payment terms of 3-60 months. Funds are transferred within 48 hours.
  • Loan Connect – offers loans from $500.00 to $50,000.00 with an annual percentage rate (APR) ranging from 4.6% to 46.96% and payment terms of 6-60 months. Funds can be transferred as early as 12 hours after approval.
  • Borrowell – offers loans from $1,000.00 to $35,000.00 with an annual percentage rate (APR) ranging from 5.6% to 25% and payment terms of 3 and 5 years. Funds can be transferred from 24-36 hours after approval.

Business stress caused me to have a panic attack

It is only four days into the new year, and I already have three friends talking to me about wanting to start on a new path for their career.  I wrote a blog post previously covering considerations for anyone looking to leave their job to start a new career in entrepreneurship, link to that is here.

In this post I want to talk about my own personal challenges that I’ve faced in making my journey to entrepreneurship.  I’m always one to encourage people to embrace being an entrepreneur, but I also want to be real about what this actually means.  Owning your own business means that you are accountable for everything that happens, and somehow you have to find a way to deal with that.  In early 2018, I was so consumed with the stresses of starting a business that it was starting to take a toll on my health.

I was dealing with a brand new team that did not seem to be coming together and needed my constant support, a very difficult client that treated our service like a round-the-clock personal finance team, and some potential legal risks among other things.  My phone was ringing off the hook most days and my designated inexperienced assistant was not helping.  I slept after midnight, and sometimes woke up in a panic at 5am.

One day I woke up and had a panic attack.  I was panting, my heart was beating really quickly and my head and body felt I was going through some kind of extreme hangover.  I called my friend who told me to slow down and take the day off.  Here’s a photo of me doing a cardiology test.  I didn’t take the day off, but the panic attack was a big signal to me that I had to do something to change.  Over the next few months, I slowly started making changes.

Stop the barrage of communication

I realize that the constant barrage of communications was annoying and stressful.  I turned off phone notifications for almost every single app.  Rather than having my team message me about non-urgent items at all hours of the day, I had designated office hours.  Eventually, I’ve come to a point where I don’t answer phone calls unless they are scheduled, or I know who is calling and for what purpose.  As a listed business number, there are so many solicitation calls that come in throughout the day.  It simply isn’t possible to be productive if you’re constantly being interrupted.

Letting people go their own way

I knew I needed a team, but there was a serious problem with my team.  I eventually made the decision to let go my only full-time employee.  I realize that I had made the wrong choice with the hire and it was an uphill battle to train someone who was not motivated.  I also let go of my interns who were not looking for a long-term position in the field.  My entire approach to internships has changed, and that will be a separate blog post.

The client that was giving us a hard time?  I was at first reluctant since they came in as a referral from a friend.  As I thought about it more, I don’t think that any true friend would want me to suffer and so I also let go of this client.

Being able to let go of my full-time employee and realizing that I should let go of unnecessarily troublesome clients were two tough decisions that I attribute to my company finally being able to get back on track.

Prioritizing events

If I was invited to an event that could potentially benefit my business and I was free that evening, I would plan to go.  While networking can be insightful and can bring some new sales opportunities, most events don’t result in anything tangible.  Going to every single start-up event in town is a good way to waste time and not be focused on the real goal.  I’m now much more selective about which events I go to, and most events I go to nowadays are due to the social aspects and not business.  If an organic business connection happens from these events, then that’s a bonus.

Paying money to alleviate stress

In some cases, money can alleviate stress.  The obvious case is me paying my masseuse for a massage.  I also paid a lawyer to help with my business’ legal exposures and it made it easier for me to sleep at night.  It wasn’t cheap, but some things (such as professional services) are worth paying for.  I think of it also as an investment in my own mental health and so that I can spend more time focused on growing my business.

Being in control

Taking control of the stressful situation and then minimizing the stress factor is key.  The way that I handled my stressful situation and took control of it is more important than the specific actions taken.  My message for those wanting to go down this path is that each business idea will come with its own execution challenges.  Facing challenges should not come as a surprise when embracing entrepreneurship.  Remember to take a step back for the clarity to deal with these challenges and take control of the situation.

5 Lessons that I’ve learned in my first year of starting a cloud accounting firm

It has been several months since I’ve last blogged and I have a good excuse for that. I’ve been busy! Like any entrepreneur trying to make their vision come to fruition, the first year of building a business is just immensely challenging. I’ve been busy learning some really critical lessons in my industry and as a new business owner of a cloud accounting firm.

Documenting the process of becoming the president of a cloud accounting firm was something that I’ve wanted to do, but in this first year this process took precedence to the actual documenting. Moving forward, I will be blogging regularly and sharing my journey through various mediums including this blog. I have also been sharing this journey through social media, Twitter and Instagram @fintcloud .

Here are some critical lessons that I’ve learned in my first year of starting a cloud accounting firm, which I plan to elaborate on in more details in future blog posts.

#5 Partnering with the right people

Networking and meeting new business contacts can be really exciting, but sometimes some skepticism is warranted. I’ve learned that treading carefully is a good idea, and doing some background research on those you partner is worthwhile. It’s kind of like checking out a Yelp review before trying a restaurant.

#4 Managing growth

When I first started the business, I was super gung-ho for new clients and growth. I realized that I really had to pull back on business development in order to for me to first build the operations in a way that was sustainable. It’s a good problem to have.

#3 Having the right software stack

There was a bit of tinkering to figure out the best software stack for my company. Keeping an open mind and staying flexible really helped here. I plan to blog more in future about the cloud applications my company uses on a daily basis.

#2 Taking on the right clients

When I first started the business, I wasn’t choosy about the clients that I took on. As long as they knew how to use e-mail, it was a green light. I really had to take a step back from that to redefine my ideal client. This is still a work in progress, but long story short, we had to let go a few clients who were not a good fit. Letting go the wrong client can have a positive impact on profitability, resource availability and staff morale.

#1 Hiring the right way

When I hired my first employee for Fint, I was very naive in thinking that anyone can learn anything. This isn’t true, and that’s a hard fact. Motivation, drive, ambition, discipline are just a few factors that go into determining whether someone can do the job. When hiring employees, contractors or even interns, it is so important to do this the right way, consciously. Not everyone can do the job. I will most definitely go into more details about my learning on hiring in a future blog post.

Your Start Up and E-Commerce Accountant

Jenny Tran, CPA, CMA

@fintcloud

Should you split the restaurant bill with your friends?

Personally, I hate splitting bills when dining out.  With partners, close friends, and family where dining out occurs regularly, I think that taking turns paying just makes things simpler.  There is one bill, one payment and everyone involved saves the effort and time required with splitting bills.  I also think it is friendlier and it feels less petty to have to split everything fair and square.  Coming from a family that thinks about money as a communal resource and seeing close friends adopt this turn-taking method, I thought it was a social norm.  In more recent years, I realize it actually isn’t the social norm, and sometimes it is just more practical to split the bill.

Ideally, I feel that it is on the restaurant to split the bill. I’ve seen this done really well at some restaurants that are able to easily split an appetizer seven ways.  This is unfortunately not an option most of the time.  Another reason why I hate splitting bills is because being a financial professional, the group typically turns to me to do the bill splitting!

Luckily for me, recent advancements in OCR (Optical Character Recognition) has made way for some really cool bill splitting apps.  One that I’ve tested is called Tab Bill Splitter.  It is an app that you can download to your phone that allows you to take a picture of your bill, enter your name and select the items you purchased.  The app spits out your total with tax and tip proportionately.  I can confirm that it can in fact split your appetizer amongst the table.  You can download this FREE app here:

Tab Bill Splitter for Android

Tab Bill Spitter for Apple

Note: I am not a partner nor do I get kick-backs.  I just simply thought this app was really cool!

One caveat that I have to add is all of the cool apps that allow you to actually exchange money between your friends is unfortunately not yet available in Canada.  OCR technology is not perfect either, and Tab failed me when I tried to split a massive Costco bill, but overall it is a nice solution and much better than me crunching out numbers manually or with my calculator phone app.

I am actually interested in what you think about splitting bills with your partner, your friends and your family.  Do you split bills or take turns or use a different method?

Your Start Up and E-Commerce Accountant

Jenny Tran, CPA, CMA

Our Mission: Servicing Forward-Thinking Start-Ups

I am a strong believer that the technological movement will revolutionize the accounting profession, and I want to be on the forefront of it all. Earlier this year I left my consulting job to start my own practice centered around cloud accounting. I targeted the startup scene. The business leaders that needed an accountant or bookkeeper were sold and they kept referring me to more of their entrepreneurial connections. Somehow they just didn’t connect with the brick and mortar accountants. It was rather easy to win these entrepreneurs over because my firm stood for much of the same things that they stood for, namely forward-thinking innovation.

What I want to address in this blog post are not the clients that I’ve won, but actually the few that have decided not to go with my firm unless we did their accounting the way that they are used to. As a new business owner, it is difficult to turn away business. I found myself preaching the benefits of what I could do for their business. When they start telling me that they don’t want or trust technology they leave me with two choices: take their business and do it their way, or tell them that I cannot service them.

Today, I had an interesting chat with Jamie Shulman, co-CEO of HubDoc about this very topic. He offered this tidbit that came from one of his business partners. Business data needs to be stored somewhere and there are limited number of choices. Paper? Your local computer network? Nothing is perfectly secure. A business needs to be able to weigh the risks to make a well-informed IT decision and not just make a blanket statement about not trusting technology. Being overly cautious about making a technological investment can be risky in and of itself.

There are many small businesses and not all of them are ready for cloud accounting. This is okay because there are many accountants that will service these businesses. I decided quite early on that Fint Cloud Services would put the interest of innovative businesses first and focus on what these businesses need. Putting our forward-thinking clients first means minimizing activities that would take resources away from this mission.

I will be showcasing some my clients through this blog in the coming months so stay tuned!

Your Start Up and E-Commerce Accountant

Jenny Tran, CPA, CMA