The vast majority of people who apply for business loans in Canada do so through their banks first and foremost. Banks offer some of the best interest rates and competitive products out there, but in most cases, you’ll need excellent credit in order to qualify. Here are some of the types of business loans that your bank might offer.
When you borrow a lump sum of money that you will repay over a period of time that is longer than one year, it is considered a long-term loan. These may be secured or unsecured, and they will often have fixed monthly payments with interest built right in. If you have good credit, you can obtain long-term loans with competitive interest rates and no collateral. However, if you have less-than- average credit, you might need to put up collateral and pay a much higher interest rate.
A short-term loan is a lump sum of money that you repay in a year or less. In fact, some short term loans have repayment periods as short as two weeks or 30 days. These are great ways to help sustain your business during a rough patch, but once again, you will likely need excellent credit to obtain this sort of loan from your bank. Even those with good credit find themselves paying higher-than- average interest rates on these types of loans.
Most major banks offer business lines of credit to those who have good to excellent credit. These work much like credit cards in that they consist of revolving credit that you can use and repay as you see fit. You can use a business line of credit for pretty much anything at all, including the purchase of equipment, renovations, acquisitions, accounts payable, and more. These usually have higher interest rates than even term loans, however, so it is important to use them wisely.
If you have a business mortgage, meaning that your bank holds a lien on your property and equipment, you may qualify for a business equity line of credit if your business is worth more than the amount you still owe on your mortgage. For example, if your business is worth $2 million and you owe the bank $500,000, then you have $1.5 million in equity that you can borrow against. This is a great solution for business owners who have less-than- perfect credit ratings but who need access to cash.
Banks offer a variety of products designed to help business owners get the cash they need in a variety of circumstances. While some are best used in emergency situations, others can be obtained to help your business grow into its true potential.
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