Monday, 17th January 2022 | Small business financing Canada

Is your business eligible for a line of credit?

Read our descriptive blog to understand if your business is eligible for a line of credit. Capital is here to boost your business forward with secure and quick financing options.

Small companies that are proactive about accessing resources to manage day-to-day working capital and other short-term financial needs might benefit from a business line of credit. It enables small businesses to apply and qualify for borrowed cash they may require in the future. To fuel expansion and support other revenue-generating projects, many organizations utilize a line of credit as part of a comprehensive capital access strategy that includes both short- and long-term financing.


What is a Business Line of Credit?


A business line of credit (LOC) is a revolving loan that gives you access to a certain amount of money that you may use whenever you need it to satisfy your firm's short-term demands. A line of credit (LOC) is one of the instruments that a company may utilize to finance short-term working capital needs, such as:

 

  • Acquiring inventory
  • Repairing mission-critical machinery
  • Obtaining funding for a marketing campaign
  • Taking care of a periodic cash flow shortfall

 

Types of Business Line of Credit


Secured Business LOC


To get a secured line of credit, the company must pledge certain assets as security. Because a line of credit is a short-term obligation, lenders often want short-term assets like accounts receivable and inventory. Lenders don't always demand substantial assets like real estate or equipment to acquire a line of credit. If the borrower defaults on the loan, the lender will seize possession of any collateral and liquidate it to pay off the debt.


Unsecured Business LOC


This sort of LOC does not require specific assets as security, but it will almost certainly require a general lien and personal guarantee. Because no specific collateral is required for this form of a credit line, the company will most likely need a higher credit score as well as a favorable track record to qualify. Furthermore, interest rates are likely to be slightly higher, and unsecured credit levels are frequently less.


Eligibility of Business Line of Credit

 

  • Good credit score and ability to repay your debts
  • Good creditworthiness and a long history of experience in the industry
  • Business documents and certificates that are valid and legitimate
  • A reliable source of income with a solid financial history
  • Existence of a profitable business


Applying for a Business Line of Credit


Most lenders, just as with a term loan, will want to see financial records and documentation that show a track record of creditworthiness. Traditional lenders, such as banks and credit unions, may want additional proof that online lenders do not, so it's a good idea to find out what will be necessary before your initial meeting with the lender. The following is a list of some fundamental information you'll need to apply:

 

  • Returns on Business License Taxes
  • Bank statements from the last two to three months
  • A bank account for a business
  • P&L, AR, AP, Cash Flow, and other standard financial records

You should be prepared to discuss the specifics of your company's financial situation with the lender. Any documents you are unfamiliar with should be discussed with a trusted advisor, such as your accountant or CPA, to ensure you understand exactly what the documents mean about your company's financial health.

Lenders will seldom give a line of credit to:

 

  • Startups or enterprises in the early stages of development
  • Firms recovering losses from previous activities
  • Pay for urgent costs that aren't likely to result in profits

Establish that your company qualifies for a LOC by demonstrating:

 

  • The company is profitable in terms of producing new income
  • Management is well-versed in the financial elements of running a company
  • The company has a strategy in place to use the LOC to cover certain costs at specific periods, and it can demonstrate its capacity to make the payments on time


Hire iCapital experts for your Business Line of Credit


In today's fast-paced world, keeping your small business finances in order can be difficult.  Depending on your business circumstances, a small business line of credit might be the straightforward answer you need to reach your development goals at your own pace. You can get access to funds in 24 hours with iCapital, along with options to increase your credit limit. Determine a payment schedule that suits you with our flexible payment options.

Get the funding your business needs from iCapital. Contact iCapital at 1.877.251.7171 and make your business decisions quickly with ease.

Read Also

Is a business loan taxable income?

One of the most common questions business owners ask is whether business loans are taxable or not. Business loans in Canada are not taxable income. You will not be taxed on a business loan delivered to your business account. Instead, you pay taxes on the money you make. While some individuals consider company loans as a source of revenue, you are not earning this money. As a result, you will not be taxed on the money deposited into your company bank account when you get your loan.
 
However, just because your company loan isn't considered taxable income doesn't mean it's tax-free. There is one exception to the rule that loans are not taxable income, and that is when you negotiate a debt reduction with a bank or lender. When a debt is forgiven, you must pay taxes on the amount discounted.
 
Many individuals are concerned about the amount of taxes they would have to pay as a business owner, yet starting a business is advantageous in many ways as enterprises are eligible for a tax deduction. 

Are business loan payments tax deductible?

Unfortunately, payments on company loans are not tax-deductible. The loan is not taxable income, so you don't have to pay any taxes when you get it. However, you won't be able to deduct principal loan payments while repaying the loan. You are returning the money you borrowed rather than the money you spent. It might be a huge letdown for many individuals, but there's no need to be concerned.
 
Even though you will not be able to deduct your loan repayments from your taxes, there are many other elements of your business where you will be able to deduct your taxes. Interest paid on your company loan, for example, is usually tax-deductible. 
 
As a result, you will not be eligible for a reduction in the total cost of your loan repayment. You will, however, be allowed to deduct the interest component of this payment. Interest is a business expenditure, and business expenses are tax-deductible. 

How small business loans in Canada affect taxes

Getting a small company loan might impact your taxes, even if you don't pay income tax on it. Here's how it works:

Interest repayment

Small business loans are structured such that your loan payments are balanced between paying interest and repaying the principal.
 
The portion of your payment that goes toward interest is tax-deductible, lowering your taxable income and allowing you to pay less in taxes than you would otherwise. You must have a real debtor-creditor connection with the lenders to take advantage of this tax deduction (money borrowed from friends and relatives does not count, even if you pay the interest).

Typical business expenses you can deduct

In addition to interest on business, money must be spent on assets and expenses required to run your firm. If you use the money for something else, the interest isn't deductible as a company expenditure.
 
There are other regular expenses essential to running your business that are likely to be deductible. They include the following:
  • Home office
  • Commercial rent
  • Utilities
  • Employee salaries
  • Marketing

Typical business expenses you can't deduct

Certain costs are not deductible, even if they seem typical or essential. Here are some examples:
  • Expensive gifts to clients
  • Commuting expenses
  • Entertaining clients
  • Contributions to political agendas

Why work with iCapital?

The majority of business loans in Canada are not taxed. You can probably deduct any interest you pay from your taxable income if you pay one installment off.
 
When it comes to taxes, there are always exceptions. If you're unclear about the legality of any business deduction you should consult iCapital, which can provide you with multiple stress-free financing options. 
 
iCapital focuses on what's essential for you! You get the money you need and the excellent customer service and attention you deserve when working with iCapital. Contact us today to take advantage of our 98% application approval rate.

Small business financing Canada ,Management

Best strategies to pay off your small business loan

Best Strategies To Pay Off Your Small Business Loans

Knowing that your company's debt is mounting can be a powerful drive to take action, but it can also feel intimidating and overwhelming. Developing a debt reduction strategy can assist business owners in regaining control of the situation and paying off debt as quickly as possible.
The following company debt management techniques can teach you how to pay off debt quickly.

Pay in Installments

You may utilize extra money to pay off your debt faster than paying your small business loan equated to a monthly installment (EMI) once a month. Of course, the lender will charge you a fee for this, but it will undoubtedly speed up your debt repayment.

Please keep in mind that this is typically only an option for secured loans. If you have an unsecured company loan, talk to your lender about the terms for making partial payments.

At Regular Intervals, Increase Your EMI Percentage

If you think you'll be able to manage your debt by reducing your spending or raising your income, talk to your lender about increasing your EMI payment by a particular percentage. The viability of this option will, once again, be determined by your lender's policies and the sort of company loan you have obtained. By increasing your EMI percentage, you’ll be able to repay the company loan faster. 

Create a Positive Working Relationship with the Lender

It is the most underrated aspect of the banking sector: borrowers frequently overlook the importance of developing a positive working relationship with the lender.

To build a positive working relationship with your lender, you must pay all EMIs on time and communicate with them regularly. It increases your trustworthiness and improves your chances of acquiring favorable loan conditions. In addition, the lender can assist you in taking advantage of various discounts that may be available from time to time.

Borrowing with Caution

Don't overborrow since it can affect your repayment schedule. If your loan is not properly handled or you fail on your payments, it can have long-term consequences.

As a result, it's critical to borrow an amount that you can readily return without jeopardizing your company's cash flow. Also, avoid unnecessarily increasing running costs during repayments since this might negatively influence your payback ability. Make the most of your resources and attempt to repay your company loan as soon as possible.

Decrease Company Spending

You can put more money toward your debt repayments by reducing any company expenditures that you can do without. Make a list of your monthly spending to see what costs might be reduced or eliminated.

Reduce inventory to increase cash flow or halt charity giving until the company's debt is paid off. The money you save in unnecessary costs can be put toward debt payments to guarantee that the money owed is paid quickly. It may surprise you how reducing small monthly expenses can add up to significant savings.

Find Ways To Increase Revenue And Income

Maximizing cash flow is a significant aspect of paying down corporate debt. Finding new ways to create money and reduce your debt will help you get out of debt faster. It’s a good idea to identify the accounts with the most significant debt. You'll require cash inflow to pay them down. 

Consider the various ways you and your firm could improve cash flow. For example, can you diversify your company's services or goods to capitalize on a market gap? Raising or reducing pricing, holding a flash sale, upselling to customers, focusing on your store's most popular goods, or renewing your marketing approach are all actions that could potentially increase company sales.

‍Get Small Business Loans with iCapital!

iCapital is one of Canada’s leading loan providers to small businesses in various industries. We offer flexible payment options and hassle-free procedures to ensure you get your money as soon as possible. Get more information about iCapital's small business loans. Contact us today and apply for a small business loan for your company with a 98% approval rate and 24/7 access to your accounts.

Small business financing Canada ,Accounting

Do short-term loans affect your credit rating?

What is a Credit Rating?

A credit rating determines how creditworthy individuals, groups, enterprises, non-profit organizations, governments, and even nations are. Special credit rating agencies assess borrowers' financial risk to decide whether or not they will be able to repay short-term loans on time.

A strong credit rating boosts trustworthiness and demonstrates a record of repaying debts on time. In addition, it assists banks and investors in determining whether or not to approve loan applications at a given interest rate.


Why does a Credit Score matter?

Before discussing business financing, let’s talk about credit ratings and why they matter. Most lenders are partial to issuing a company loan based on your credit score. Why? Your credit score and personal financial history will provide information and an accurate picture of your financial responsibility.

Lenders will use your credit score to determine how trustworthy you will be as a borrower.
This is especially true if you are a young entrepreneur. If you have no company credit, a lender can look at your previous ability to pay off past loans to determine your creditworthiness.


How does a credit check affect a Credit Score?

While you may have been aware that personal credit ratings influence your ability to obtain company funding, did you realize that qualifying for a business loan might negatively impact your credit score? This "blow" will affect your ability to obtain the best rates.

The type of credit score performed by the lender determines the influence on your credit score:

 

  • Some credit inquiries from lenders consider variables other than your credit score with a no credit check. This implies that your credit score will not suffer.
  • During the pre-approval procedure, a soft credit inquiry will be performed, which will not affect your credit score.
  • A hard credit inquiry is the ultimate sort of credit inquiry and occurs just before a company loan is approved. Each inquiry will lower your credit score by 1 to 5 points.

Situations when business loans affect Credit

There are various types of business loans, each with its own impact on personal credit. For example, most business loans will harm your credit if you guarantee a company account.
It is a frequent circumstance for solo owners and couples. The lender has the authority to recover payments from you if the firm defaults. In addition, the lender will record defaulted business debts on your credit reports.

Another situation where business loans may impact your credit score is when you utilize personal borrowing to support your company. For example, if you utilize personal loans to finance your business, such as home equity loans, the payments will appear on your credit reports.

A company line of credit is no different. If you guarantee the line of credit, it may impact your credit. Your credit ratings may be affected in either a good or bad way. If your company has difficulty repaying debt, it will have a negative impact on your credit score.


How Can You Improve Credit Score?

Being authorized for a fair business loan with little to no credit is certainly not impossible. However, if you want a loan with a longer payback period, and cheaper fees and interest rates, raising your credit score can help you get approved.

  • Find out what's causing your credit score to suffer
  • Create a credit history
  • Raise your credit score

How Does iCapital Work?

iCapital offers hassle-free loans to small businesses in as quickly as 24 hours. With minimal paperwork and hold-ups, you can have the money transferred to your account within 48 hours.
iCapital is a one-of-a-kind firm in Canada. Are you prepared to begin the process of obtaining short-term loans in Canada? To get started, give the iCapital team a call today at 1 877-251-7171!

Small business financing Canada

April is World Autism Month

April is World Autism Month. It is an annual opportunity to bring awareness to and dedicated conversation about Autism Spectrum Disorder (ASD). ASD is a neurodevelopmental disorder that affects the way people interact and communicate. ASD is a spectrum disorder, which means the degree to which each person on the spectrum experiences certain challenges will be different from one another. In Canada, approximately 1 in 66 children and youth ages 5-17 have been diagnosed with autism.

At iCapital, we believe strongly in being a good corporate citizen and giving back to Canadians. We have a long history of charitable giving including sponsoring sports teams and children’s organizations. Prior to the Covid-19 pandemic, we ran an annual fundraising event in support of autism that raised over $100,000 for Integrated Services for Autism and Neurodevelopmental Disorders (ISAND)

ISAND is a registered non-profit organization that serves children and young adults with autism and other neurodevelopmental disorders. ISAND’s integrated team of developmental pediatricians, psychologists, clinicians, and therapists work together with families to achieve the best possible outcomes for young people with autism and neurodevelopmental disorders. iCapital is a proud, long-time supporter of this amazing organization. This year, we donated $10,000 to support ISAND’s various programs.

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