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Are you a small business owner in Ontario trying to secure financing for your business?

Many entrepreneurs find it challenging to get the funding they need to not only start, but to grow their businesses successfully. While obtaining sufficient funding may seem like a daunting or virtually impossible task, you should know you are certainly not alone in your struggles and that support is available to you.

Why is obtaining finance a significant issue for new business owners?

Starting a business often requires a significant amount of capital. This capital is required to cover a wide range of expenses, including purchasing costly equipment and inventory, hiring employees, and general marketing of the new business.

In this article, we’ll explore several of the most common reasons you might have difficulty obtaining financing for your Ontario business. We’ll also offer advice on overcoming these obstacles, so that you can get the capital you need to make your business venture a success.

Below are seven of the most common reasons you might be having problems obtaining financing for your Ontario business:

1. Insufficient initial savings

It can be very difficult to finance a business with limited personal savings, which is, unfortunately, something that many entrepreneurs struggle with. Without sufficient personal funds, a business may not be able to fully operate and could struggle to get off the ground.

This can be a major obstacle to obtaining financing from external sources, as this may cause lenders to view the business as a high-risk investment. Therefore, entrepreneurs must always carefully assess their financial situation and effectively plan for the start-up costs of their business.

2. Lack of steady cash flow

Often, small businesses that fail to demonstrate consistent cash flow are denied funding, as they are considered high-risk investments. Banks are far more likely to favour small businesses that have already secured a stream of steady revenue on a monthly basis.

3. Insufficient collateral

When applying for a loan, new entrepreneurs often are required to use their own assets as collateral (e.g., their house or car). Banks are careful to minimize risk, so if a borrower does not have solid collateral to offer (also known as being “asset poor”), it is unlikely that the bank will approve the loan. In fact, an insufficient lack of collateral is one of the most common reasons why businesses fail.

4. Poor credit history

Most small businesses still have credit scores negatively impacted by the recent financial crisis. Generally, a business will require a credit score of at least 720 to be considered for a loan from a bank. This can be a high bar for many small businesses, particularly those that are just starting out and may not have had enough time to establish a strong credit history.

5. Excessive debt with other lenders

Needless to say, banks are often hesitant to lend to businesses that already have current debt with alternative lenders. Usually, they will not even consider lending to a business that has already obtained funding from another source. The reason being many entrepreneurs will seek credit from a variety of lenders, particularly at the beginning stages of their venture; this can be a significant obstacle when applying for financing from the bank.

6. Weak business plan or credibility

A poorly orchestrated business plan or weak credibility will often fail to give banks or investors the assurance they need regarding the likelihood of business success. Many new entrepreneurs and owners of small businesses do not possess the proper credentials, reputation, or track records required to secure these loans, which can be rather discouraging.

7. Unfavourable economic climate and market conditions

Banks may be hesitant to lend money to a business if they feel that the current economic and market conditions will prevent them from receiving their loaned funds in the appropriate time frame.

While this certainly isn’t fair to owners of new and small businesses, as external factors are out of their hands, it’s important for these entrepreneurs to carefully assess the economic climate and market conditions before applying for a loan.

Consider Alternative Financing

If a traditional bank loan isn’t an option for your small business, then alternative financing may be a good way to obtain the funds you need to grow your company.

Alternative financing for your start-up business includes private lenders, which typically offer a range of loan products such as term loans, investor loans, lines of credit, and equipment financing to meet the unique needs of small businesses.

Additionally, private lenders may offer more flexible repayment terms and lower interest rates than other types of lenders. Overall, private lenders can be a good option for small businesses looking to secure financing to grow and expand their operations.

Let Our Experts at Canadalend Help You Achieve Your Business Goals

Obtaining proper financing is critical for the success of any new business. Whether you’re seeking commercial financing services to kick-start your business in Ontario, or are looking to give your existing business a boost, our private lenders and mortgage broker experts at Canadalend.com can assist you in securing the best commercial mortgage rates in the province.

To learn more about our private loan solutions in Ontario and other private financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.

Becoming a first-time homebuyer in Canada can be an exciting yet confusing process.  

When it comes to financing your mortgage, in particular, it's essential to be fully aware of your options to make a decision best suited to your financial needs and goals, as well as your home-buying experience in general. 

That said, the two types of mortgage lenders you'll have the option of borrowing from are private and traditional lenders (also known as banks). In this article, we'll compare these two types of lenders to help you better understand which kind of loan will be right for you. 

What is a Private Lender? 

A popular alternative to traditional bank lenders, private lenders are typically funded by banks, private investors, or a combination of both. These mortgage lenders usually offer short-term, interest-only loans to borrowers who don't necessarily qualify for a bank loan to obtain their mortgage. 

Due to the higher interest rates on money borrowed from banks and/or the expectations from private investors to make a healthy return on their investment naturally plays a role in raising the overall expenses for the private lender, which is ultimately applied to the borrower. 

When Should You Choose a Private Lender? 

Fortunately for many borrowers, private mortgage lenders aren't closely looking at your credit score when determining your eligibility for a loan. They are more so interested in the value of your property. They also aren't going to turn you down if you have a non-traditional income, such as being self-employed. 

Private lenders in Ontario are also considerably more flexible with the kinds of loans they provide, generally allowing for some customization. They are also more flexible with the types of customers they loan to due to not being as regulated. 

They will also be able to provide you with your loan in a much shorter time frame, as less documentation is required, and approvals are generally speedy. 

Besides being generally more flexible in many ways, private lenders boast greater expertise than traditional lenders. They will be determined to work with you to find the best loan possible. 

Simply put, a private lender will offer a more customized and personal approach with more room for understanding and will do whatever is necessary to help you meet your financial expectations. Anyone setting out to purchase a home in Canada deserves nothing less. 

What is a Traditional Lender? 

A traditional lender (banks) collects funds from depositors, paying little to no interest, then lends this money to borrowers at mildly higher rates to make a profit. Before the introduction of private mortgage lenders, these traditional loans were the only way for borrowers to obtain a mortgage in the past.

Mortgage loans from the bank require borrowers to pay the principal and interest. They are generally longer-term loans with a much more strict approval process, unfortunately making them a non-suitable option for many people. 

When Should You Choose a Traditional Lender? 

Borrowers who are in no rush to close on their home, are confident in their financial history and income with a strong credit score and have all of the required important documents ready for presentation are likely to be good candidates for a traditional bank loan (although they will still have the option of going with a private lender). 

Moreover, banks may offer loan terms longer than that of a private lender (for example, they may offer a 30-year mortgage vs. a private lender only willing to provide a 10-year mortgage), which may be a more attractive feature for a homebuyer.

It is worth noting, however, that borrowers choosing a traditional lender for their mortgage should ideally not be self-employed or have a non-traditional income. Going with a conventional lender makes qualifying for this loan type substantially more challenging. 

It is also vital for borrowers to understand that there will not be as much flexibility in obtaining a loan from a bank compared to a private lender, including being required to choose from more limited, fixed loan options in-house. Furthermore, while the interest rates are generally lower with traditional bank loans, more fees may be involved - and these can add up to quite a hefty total. 

Choosing the Right Mortgage Lender Doesn't Need to Be Daunting 

Our mortgage experts agree that obtaining a loan from a private lender can be much more convenient for a borrower. Getting private lender loans can be a perfect option for homebuyers who are not eligible for a traditional bank loan due to their financial history, current income, or other factors - and in many cases, it just makes more sense. 

Let Our Private Lenders at Canadalend Help You Obtain the Right Mortgage. It's easy to find the perfect mortgage for your new Ontario home when you choose from our team of seasoned private lenders in Ontario. At Canadalend.com, we can provide an optimized mortgage solution that is financially beneficial and custom-tailored to your needs.

To learn more about our private mortgage solutions and financing options, call Canadalend.com at 1-866-I CAN LEND or contact us here.