Are you looking to obtain capital for your existing business or start-up in Canada? If you are, you are not alone. According to the Government of Canada, by the end of 2015, 31% of businesses had applied for financing at some point that year. People look for financing for a number of different reasons that could include hiring new employees, to cover marketing costs, purchase new equipment, pay for repairs, fuel expansion or initiate a new project. There are more business financing options available today than ever before, but making an informed decision regarding which type of financing is right for your business can be challenging.
With that in mind, you should ask yourself the following questions:
- What is the loan for?
- How much money do I need?
- How long will it take me to pay it back?
- What does my credit profile look like?
Based on your answers to the questions above, there may be more than one financing type that will work for your small business. Whether it’s a long-term loan, a short-term loan, a line of credit or a merchant cash advance, there will likely be a number of options for borrowing the capital you need. Once you figure out the type of loan that fits your loan purpose, the next step is to find the right lender.
To do that, you’ll need to take a good look at your credit profile. Do you have a good personal credit score? Do you have a strong business credit profile? Applying for a loan at the bank, for example, will require both of these. Nevertheless, there are options available even for businesses with a less-than-perfect credit profile—provided they have an otherwise healthy business.
Seeking a loan from a bank has been a common choice for many businesses. With low interest rates, competitive products and longevity, the local bank has been the traditional small business-lending partner. Under the right circumstances, a loan, or line of credit at the bank could still be a good option provided your business meets the rigid credit criteria at the bank and has been around for a few years.
Nevertheless, the bank is not the only option available anymore. And, depending upon your credit profile, time in business, and the health of your business, there are other small business loan options available that you might want to consider for your business.
Many online lenders, for example, offer both term loans and lines of credit along with a streamlined loan process and an easy online application, a fast approval process, and the option to speak with a loan specialist who will answer any questions you might have about a potential loan to ensure that all terms and fees are understood and disclosed before you sign on the dotted line. You may even have an answer to your loan application within a day or two—and your funds may be available 24 hours after that.
...your funds may be available 24 hours after that.
Conversely, the loan process at a bank can be fairly lengthy and will include strict credit standards. You will likely be asked to provide a guarantor or necessary collateral to secure the loan. Many banks will also ask for a copy of your business plan, detailed financial statements and insurance information. As mentioned above, you will also likely need to prove that you have a personal credit score of 700 or better, along with a strong business credit profile. Once all of your information has been provided, approval may take up to 90 days while the bank evaluates your application. Funding usually arrives a few days after final approval, making the process a lengthy one. Repayment is typically done on a set schedule, such as a set monthly payment to repay the business loan.
Online lenders operate all over Canada and leverage technology to help their loan officers make approval decisions more quickly than the local bank. They understand that a less-than-perfect personal credit score of a business owner doesn’t necessarily mean an unhealthy business; so they also weigh other factors that look closely at the health of the business rather than relying exclusively on the personal credit score of the business owner or the specific collateral they can provide.
The industry that you operate in is undoubtedly changing and evolving each year. As such, it is paramount that your business remains competitive with up to date inventory, assets, personnel and expansion when necessary. Having access to capital can allow you to grow and to provide the best goods and services to your customer base. Choosing the right lender to get you the capital you need fast is an important decision to make. Contact OnDeck today if you’d like to learn more about an online business loan or line of credit and to see how we can help with your funding needs.