Wednesday, 17th July 2019 | Small business financing Canada,Business loans for bad credit,Management
Six reasons why your small business should consider a term loan
Small businesses need cash flow to operate and grow, but many fundraising strategies come at a hefty price. Learn all about term loans, and to decide whether this product is right for you and your small business.
Small businesses need cash flow to operate and grow, but many fundraising strategies come at a hefty price. Even if owners can manage the rigorous application process of a big bank, the banks are famously reluctant to lend and their terms can be unfavourable. Investors may offer much-needed capital but their involvement will shift your control as an owner. How, then, can Canadian small businesses access the money they need now for equipment, renovations, or expansion? Some have found the answer in term loans, a lending option with repayment typically happening in small increments over several months. Read on to learn all about term loans, and to decide whether this product is right for you and your small business.
What is a term loan?
When a small business takes out a term loan, they borrow a certain amount of money (the loan) and agree to repay it in regular payments over a period of months (the term). Term loans work well for small business because they deliver a lump sum of money with the ability to repay over time. Terms loans will carry interest at a fixed or variable rate, have a regular repayment schedule and a set maturity date.
Advantages of term loans
Term loans are very popular among Canadian small businesses and it’s easy to see why. Take a look at these six reasons to consider a term loan.
- Hassle-free financing
In Canada, you can get a term loan within a couple of days. The application is short and simple. When you submit, it goes to an underwriter to review and approve, and then you receive your funds. - Better interest rates
Term loans tend to have lower interest rates than shorter-term loans. Your interest rate will depend on length of the loan, the collateral you supply to secure the loan, and your credit history. - Flexible cash flow
Small businesses need cash flow for all sorts of expenses, from one-time spends on equipment or renovations to recurring costs like training new employees. Borrowers can use term loan money as they wish to meet their business goals. - A tax write-off
The interest paid on the term loan is a deductible expense on your business tax returns. - Maintain independence
Small businesses in need of capital may seek investors and issue shares to raise funds, but this strategy results in a change in ownership and control. A term loan gets you the money you need without having to forfeit your independence. - Helps you build credit
Responsible repayment of your term loan will improve your credit score, unlocking better financial products and making it easier for you to do business.
Are there any drawbacks?
Term loans are highly regarded for their flexibility and ease but there is one major caveat to consider. Since you’ll have to supply collateral—usually, the business itself—to get your loan, you’re putting your business on the line. The best way to protect yourself is to borrow only as much as you can afford.
In the world of Canadian small business, finding capital is a major challenge. Many owners opt for a term loan for its easy application process, flexible terms, and attractive rates.
Read Also
5 ideas for stimulating sales through this pandemic winter
For Canadian small business owners, the approach of winter without a COVID vaccine holds some uncertainty. Businesses that have managed to adapt and pivot during the first stages of the pandemic face another slow season—this is especially true for those in areas retreating back into stage 2 restrictions. With more time at home, people appear to be spending more time on social media, particularly on YouTube, Instagram, and LinkedIn. (Facebook has always had strong usage rates.) Whether it’s to connect with friends and family virtually, to search for jobs, or to enjoy online diversions, it’s clear Canadians are taking to social media. This is an opportunity for Canadian small business owners. Here are 5 fresh ideas to connect with buyers, increase awareness of the business and products/services, and deepen loyalty using social media.
#1. Make ‘em laugh
Canadians are under a tremendous amount of pressure. If you can engage your followers in a fun or funny way, you’ll have a good chance of not only keeping their attention but also leaving them with a positive feeling about your company. Skip cold corporate speak if favour of messaging with a light and relatable tone. Puns and in-jokes are great but make sure your humour is relatable and uncontroversial.
#2. Run a contest
Who doesn’t like the chance to win something? Engage your audience with a contest like this one by SAOR Studio that’s helping its members to stick to their exercise regime with a workout bingo. The game is proving to be almost as much fun as a night out at the bingo hall—members are even posting their progress on social media. The big prize? Complete a line and receive 15% off on gym merchandise—a win-win.
3. Use livestreams
Nothing stops the runway for Canadian fashion brand Miik. Using Instagram and Facebook Live, the Toronto-based clothier has taken the catwalk digital and now customers can tune in for virtual viewings and Q&As with the owners. Borrow this strategy to host industry “shows'' or to launch new products.
4. Post often
Even if you’re open for foot traffic, people are increasingly hesitant to be out and about, so posting regularly is more important than ever. Get creative with your content so you don’t give your customers social media fatigue. Consider the Halifax Thunderbirds. While this Canadian lacrosse team is side-lined, they’re keeping their audience entertained and engaged with squad news, fan pictures, and anecdotes from past matches.
The National Ballet of Canada is taking a similar tack by sharing behind-the-scenes posts of dancers in their homes and offering free, live virtual ballet classes and performances. The same strategy that works for athletes and performers can build relationships with retailers. Edmonton-based New Classics uses their Instagram to showcase their ethically crafted and environmentally conscious slow fashion items so customers can window shop from their couch before ordering online.
5. Be inspiring
Tone is everything and these days Canadians are looking for brands that make them feel good. Search out and post thoughtful and inspirational (but not saccharine) statements and ideas that show off your brand voice. Take for example, Mail Chimp, the marketing platform. They’ve peppered their feed with lovely, simple animations with positive, encouraging phrases like "It feels good to put something back into the world" and "Making the most of it sometimes requires a little something extra." Choose statements that are in line with your brand voice and couch them in your own design.
Canadian small businesses needn’t fear the coming cold months. With the right social media strategy and outreach, they can meet their customers where they are—in their comfy clothes, at home.
Marketing