Securing lines of credit or loans for your business can be a challenge, especially if you don’t have the personal equity to guarantee the financing. If you find yourself in this position you should look at all of the financing options offered by the Business Development Bank of Canada (BDC). BDC offers a variety of lending options. Its biggest lending criteria is not equity, it’s having a good personal credit rating. If you are in this credit position, you are eligible for the small business loan of up to $100,000.
What can I use the $100,000 loan for?
In order to apply for the $100,000 loan you must be using the money to:
- buy equipment
- attend a tradeshow
- purchase extra software or hardware
- apply for a patent, trademark or other intellectual property protection
How do I qualify for the loan?
In order to apply for the $100,000 you and your company must meet the following criteria:
- The business must be in a revenue-generating position for at least the last 24 months.
- Therefore if your company is a start-up, and you are in product development stages only, you will not be able to apply for this loan
- Your company must be Canadian-owned and operating in Canada
- Your personal credit score must be 700 or higher
How do I apply for the loan?
In order to apply for the loan online go to: bdc.ca/en/financing/pages/default.aspx
Once the application is submitted online it will take up to seven business days to approve. If you are approved you will then be able to access your funds in two to five business days.
If your personal credit score is a problem in securing a business loan, there are strategies you can use to improve your credit rating in as little as six months:
1 Pay your bills on time
Paying your bills on time is a good way to avoid interest and penalties and the best way to build your credit history, improve your credit rating and show your banker you are a reliable business partner.
2 Have the right credit mix
Credit rating bureaus look at what types of debt you have when determining your credit score. Having too many credit cards could negatively affect your score, especially if you are using one card to repay money you’ve borrowed on another.
Similarly, opening multiple credit accounts at the same time will have an impact on your credit score. The same goes for making too many credit inquiries with the credit bureaus. To avoid negatively affecting your credit rating, make sure you only apply for the credit you need and believe you will be approved for. And don’t apply for multiple credit products at the same time.
3 Keep your credit use rate low
The amount of credit you use is considered a predictor of default risk and will have a direct impact on your credit score. The rule on credit usage is that a low utilization is better, less than 10% is preferred. Also, always pay back credit cards and unsecured lines of credit as soon as possible.
4 Separate your business credit from your personal credit
Your business’s credit score is separate from your personal score and includes reports from firms that do business with your company, such as suppliers and financial institutions.You should separate your business credit from your personal credit as much as possible. Use business loans, your business line of credit and business credit cards to finance investments, purchase supplies and top up working capital.
5 Check your credit report regularly
Checking your credit report regularly will ensure the report is up to date, that all the information is correct and that you have not been the victim of fraud. Your personal credit report can be easily obtained from either of two service providers in Canada: Equifax Canada or TransUnion. Visit their websites to learn how. For your business’s credit bureau report, there are three options: Equifax Canada, TransUnion and Dun & Bradstreet. Because agencies don’t share information, it’s a good idea to review your credit history from all the credit agencies.