Six reasons why your small business should consider a term loan

According to Software Path, only about 18% of small businesses use an inventory tool, and nearly half–43%--either don’t track inventory at all or they do so manually. This means that these businesses are making stocking decisions without the pertinent data. This can lead to having too much or too little stock, cash flow problems, and a disorganized budget. By regularly surveying your inventory, you can make informed business decisions to ensure you’ll continue to profit. 

Additionally (and importantly), a well-managed inventory will help ensure that you have the stock your customers want, when they want it. This directly affects sales, but it also demonstrates good business practices to your customers.

Top 4 inventory management tips for your business

Stay informed and be strategic

Prioritize taking stock of your…stock. Regularly assessing your inventory will enable you to make informed decisions about how much product you need–and how much you might need in the future. Include inventory management in your everyday operations to take the guesswork out of ordering.

Listen to your customers

If you and your staff aren’t paying attention to your customers’ requests, you’re leaving money on the table. Train your staff to note what your customers are asking for and to take these requests to management. Analyze your competition and see what they’re carrying. Be proactive in researching and analyzing the best products on the market.

Observe and anticipate seasonal trends 

Every business experiences ebbs and flows and your ordering behaviour should reflect that. Document sales data over time so you can predict peaks and valleys, and secure inventory accordingly. 

Use promotions strategically 

Even the most well-managed businesses end up with overstock from time to time. If you’ve got product you need to move, you can set up a promotion to entice buyers. Be strategic about the deals you're offering. Too deep a discount can lose you money so aim for the highest sale price that will move your product. 

If you want to compete in your marketplace, inventory management is key. By prioritizing regular assessments you can track your expenditures, purchase strategically, and keep your customers happy.

Inflation describes an increase in the cost of consumer goods and services. It’s a simple concept with complex causes but it’s certain that the COVID-19 pandemic has played a significant role in the spiking costs faced by Canadians. In January 2022, the inflation rate was a little over 5% compared to the previous year for consumers, with many businesses experiencing even higher increases. For Canada’s SMBs, this means rising prices and tighter profit margins.

If your business has yet to suffer the effects of inflation, it’s likely only a matter of time. Although costs don’t always rise at the notable levels we’ve seen this past year, inflation is an ongoing process so your best bet is to be proactive.

Inflation management strategies for your small business

Focus on growth 

In dealing with rising prices and shrinking profit margins, small businesses will have to choose between severe austerity or a growth mindset. In the former strategy, you cut all but the absolutely essential expenses and try to hang on until things improve. (Spoiler: inflation is continuous.) The problem with this strategy is that you won’t be in a position to invest in your business so the likelihood of it surviving is painfully low. 

Rather than trying to wait things out, focus instead on growth. Review your profit margins regularly and no less frequently than quarterly to make sure you can adjust to maintain your cash flow. This will help you maintain some certainty even while the markets fluctuate. By moving forward with a plan, you may well be giving yourself a better chance at success in both the short- and longer-term. 

Review your gross profit margins

Setting your prices to match inflation rates is inefficient and can alienate your customers. Instead of posting fluctuating prices, build some room for adjustment into your everyday rates so you can be nimble in the face of instability without blowing your margins. 

Look for savings

A growth mindset doesn’t preempt smart financial decision-making. Look at your indirect costs to see if there are places you can cut unnecessary expenses. Review your overhead expenses, software and media subscriptions, administration costs, and other operational items. Consider automation where you can. It streamlines processes, reduces errors, and can save you time and money. 

Be smart about borrowing

Borrowing can be a sound choice, provided it's done at the right time and the right terms. If you foresee running up against cash flow issues, don’t hesitate. Borrow the money you need to keep operating. There are online tools to help you predict trends so aim to borrow at favourable rates. You can select a fixed rate loan to protect your repayment terms. Similarly, consider moving high-interest credit card debt to loans with lower rates.

Current inflation rates are a concern for Canadian small business owners but there are strategies to maintain operations. The tips above will not only help you weather this storm, but will also help you prepare for the next. 

Banks are typically hesitant to provide money for business purchases. However, you may want to consider this option which allows you to get a small business loan in Canada for various purposes, including acquiring an existing firm. You might also want to look into the Business Development Bank of Canada, which has several long-term funding alternatives based on your circumstances. Financing options specifically designed for the purchase of a business include vendor take-back financing; unsecured loans for intangible assets such as intellectual property, goodwill, and client lists; long-term loans based on the value of fixed assets such as land, buildings, equipment, or shares in an existing business.

Buyout with leverage

The firm's assets you're buying (equipment, property, or inventory) are used to fund the acquisition in this financing arrangement. A mix of seller finance and a bank loan is used in most leveraged buyouts. It is highly typical, as business purchases frequently include various financial sources.

Online Lenders

iCapital is one of the most trusted online lenders in Canada offering loans to businesses. You can qualify for up to $250,000 with iCapital in as little as 48 hours. Our application process is fairly straightforward and loan approval is as high as 98%. Connect with us to discuss your financial plans and needs and we will work out the best strategy for you.

Things to consider when buying a business

• Debt assumption: When purchasing a firm, you must decide whether you want to acquire the assets or the entire company, including assets and liabilities (debt).
• Purchase financing: When buying a firm, keep in mind the finances you'll need to manage once you've bought it. After making your purchase, you'll have several financing choices for getting a business loan.
• Self-funding and cash reserve: In an ideal world, a company's activities would be financed by its cash reserves once it is purchased. However, you may need to bring in more money if they aren't adequate.
• Line of credit: When your company has a business line of credit, you may borrow up to a particular amount and pay interest on the amount you borrowed. A line of credit is helpful since it provides your firm with rapid access to cash, up to a pre-determined credit limit, similar to business credit cards.
• Financing for invoices: Invoice financing refers to financial agreements that enable you to finance your company's invoice receivables. Small firms utilize it to boost their working capital and cash flow by fulfilling short-term liquidity demands. Invoice discounting and factoring are the two most popular options.

Why iCapital?

A loan can be used to purchase a firm from an existing owner in Canada. You can use various financing options to finance the purchase. You should evaluate which funding option will work best for you and then decide whether you should invest in the purchase.

Are you interested in learning more about this? Contact iCapital at 1.877.251.7171 to get a loan to buy a business using our straightforward procedures.

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.