Thursday, 7th April 2022 | Small business financing Canada,Management
How large of a business loan can I afford?
Read our extensive blog to learn how much of a business loan you can successfully afford and how iCapital's finance team can help you achieve financial success.
When researching small business loans, there are a couple of things to consider. First and foremost, you must evaluate whether or not taking on debt is the best course of action for your company. For example, your company could require extra funding to alleviate the stress of a looming financial constraint during the slow season or fund a new, exciting business prospect.
The second step, which many ambitious business owners overlook, is one of the most crucial aspects of the business loans application process: determining whether or not you can genuinely afford to take out business loans in Canada.
How can entrepreneurs seeking company capital be sure they can afford to take out a small business loan and repay it on time with extra interest? Here's how to figure out if you'll be able to repay your small business loan.
Identifying what your company can afford
Suppose you're just getting started looking for business loans in Canada. In that case, you should figure out what type of monthly payments and interest rates your company can afford before diving into the process. Calculate your debt service coverage ratio to understand what you can afford when a loan is offered.
What is the maximum amount you may borrow for a business loan?
Business loans in Canada can be anywhere from $5,000 to $500,000. With iCapital, you may qualify for up to $250,000 in 48 hours with our 98% application approval rate. Personal factors like credit score, debt-to-income ratio, and business revenue influence the amount you may borrow.
If you have a well-established business, a good credit rating, and a reasonable sum of excess income, you'll be able to borrow more money. On the other hand, if you're just starting out or have a bad credit history, you'll be able to borrow less or may not qualify at all.
How do lenders determine the loan amount?
Across the board, lenders give the most significant loan amounts to the borrowers they believe are the best qualified—in other words, the borrowers that they think will be able to repay these big loans in full and on time. All lenders want to make sure they're dealing with responsible borrowers to avoid losing money.
Banks aren't entirely stranded if borrowers default on their loans because of collateral. Any item that the borrower puts up for the lender to seize if the borrower fails on their loans—such as automobiles, equipment, real estate, accounts receivable, or cash—is considered collateral. In such an instance, the lender will attempt to collect and dispose of those assets to reclaim as much of the loan as possible.
Other forms of collateral include blanket liens, which allow the lender to claim any tangible or intangible asset owned by the borrower, and also personal guarantees. Although most internet loans do not demand collateral, most of them do require a personal guarantee. If the business cannot pay for any reason, you must agree to repay the loan from your assets. Lenders make every effort to reduce risk. But how can banks know if a borrower is trustworthy enough to manage the most significant loan amounts? They'll look at all areas of a potential borrower's business loan application to figure that out.
Business loan application
Your company loan application may be comprised of the following items, depending on the lending institution and the type of business loan you're applying for:
- Business loan request letter
- Bank statements
- Personal and business tax returns
- Profit & loss statements
- Balance sheets
- Your income
- Personal credit score
- Business credit score
- Annual revenue
- Time in business
- Business plan
- Industry type
Banks require all of the information shown above. Banks use this information to calculate your DSCR (debt service coverage ratio), personal creditworthiness, profitability, etc. These numbers give the lender a comprehensive picture of your company's financial health. The bank will use this information to determine the amount of money it will loan your business.
Ways to qualify for more funds
Here are a few methods to qualify for a higher loan—from preparing for government-backed financing to make a significant down payment:
- Collateralize the situation: If you put up collateral to ensure your payments, you'll be able to acquire a bigger loan. Your home, automobile, or company equipment are all examples of assets.
- Don't forget to make a down payment: If your lender sees that you have the capacity to save money and commit to your business, you may be able to borrow more with a higher down payment.
- Pay debts first: If you enter your loan arrangement with a lesser amount of previous personal and commercial debt, you may be able to borrow more money.
- Boost your credit rating. The higher your credit score, the less of a perceived risk you are to the lender, and the more money they may be willing to lend you.
- Wait till your company is more established before making a decision: Once your firm has been active for a time, and your income has increased, you may be eligible for extra money.
Apply for a business loan with iCapital
The amount offered by business lenders and the amount you can borrow is two separate figures. However, to prevent taking on more debt than required, you should concentrate on how much you truly need to borrow for your business.
With iCapital's complete guide to business loans, you can borrow the right amount of money and gain access to it fairly quickly through an easy application process. Contact iCapital at 1.877.251.7171 to apply for a business loan and get the funds you need in 48 hours.
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Marketing ideas for your business in the new year
As the end of the year approaches, it’s time to revisit your marketing strategy to meet current consumer expectations. Forecasting trends is tricky, but what’s clear is that in 2023, customers value privacy, inclusivity, transparency, and overall authenticity, and it’s your job to show them how your business practices meet these ideals. Read on for six steps you take right now to market your business in 2023.
Understand your changing audience
The first thing you need to do is revisit your market. Review your sales and marketing data to make sure you have a realistic grasp on the size, demographics, and character of your target market. Pay close attention to any changes in your ideal customer and use this updated intel to seek out new opportunities. For example, if your business has grown or taken a new direction in recent years, it might be attracting a new audience. Make sure you’re communicating with the most appropriate market segment.
Update your website
Your website is one of your most valuable marketing assets so it’s crucial that it be in good shape. Review your site to make sure all the content is correct and up-to-date. Check to make sure that it loads quickly and displays correctly across desktop, tablet, and mobile platforms. You probably look at your site regularly so consider getting someone with “fresh eyes” to take a look. Ensure that your site works intuitively and offers a seamless customer experience. A site that’s pleasant to use will help you convert new visitors and retain returning ones.
Maximize the potential of social media
With more than 4.7 billion people using social media, your business cannot afford to ignore it. If you’re just starting out on social platforms, now is the time to claim your presence. Set up accounts for your business on top platforms like Instagram, Facebook, and TikTok. Investigate which sites your ideal customers might be using and ensure you’re on them too. Post relevant content, regularly, and make sure that you keep your profiles fresh and current. Try running contests or promotions to boost engagement, and take advantage of the built-in shopping capabilities available on many platforms. You can communicate a lot about your brand values by aligning yourself with other local small businesses through collaborations or sponsorships.
Leverage video content and live streaming
Video content has been a rising trend for the past several years, and is well-suited to businesses who want to increase awareness, improve lead generation and sales, and reduce support calls. Consider how video content might work for your business, keeping in mind that consumers appreciate being entertained. Live streaming is popular and an effective way to connect with your audience in real time. Engage your audience with quality storytelling. Inform them with a clear and concise script. Be creative.
Get interactive with your audience
When was the last time you did an online quiz or game? How about worked with an online calculator or map? Interactive content is engaging, which is why audiences–and marketers–love it. It’s low-cost and can help you increase brand loyalty, generate leads, and drive sales. Think about ways your business can use interactive content to grab your customers’ attention.
Respect consumer privacy
More than ever, consumers are concerned about privacy. Demonstrate respect for your customers’ privacy by compliance with standards like GDPR, by properly acquiring and using user data, and by continually informing your customers of exactly how you’re handling their information.
If you want to stay ahead of your competitors in 2023, now is the time to fine-tune your marketing efforts to communicate your business’ authentic brand and values. Take an inclusive, transparent, privacy-first approach, to reach your target audience.
Marketing