Debt Capital for Business in Canada

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Obtaining Debt Capital for Your Business (Page 3)

DISCLAIMER - The information provided here is of a general nature and may not apply to any specific or particular situation. It is not to be considered as a legal advice nor presumed to be indefinitely up to date.

4. The application

When applying for a loan, the startup should first obtain a credit report on itself and be able to explain any discrepancies on the report. Further, it should be prepared to answer the following questions:

(1) How much money is needed?

(2) For what purpose?

(3) For how long?

(4) To be repaid how?

(5) To be repaid when?

(6) To be repaid by whom?

These are the basic terms of the loan. It will be the starting point of negotiations. The entrepreneur should also be prepared to provide the following information:

Business plan (including start up costs, if applicable);

Current balance sheet;

Current income statement;

Current cash flow statement;

Balance sheets for the last three years;

Income statements for the last three years;

Cash flow statements for the last three years;

Tax returns for the last three years;

Projected balance sheet;

Projected income statement sheet;

Projected cash flow statement;

Three business references;

List of assets and their values that can be provided for collateral; and

All legal documents related to the business (registration papers, deeds, insurance papers)

The projected balance sheets, income statements, and cash flow statements should be projected out over the loan term, and should show the loan being gradually paid off. The assumptions underlying all figures on the projected financial data and the list of collateral assets should be current, believable, and, if possible, conservative. For added credibility, an accountant should prepare the financial data. Sales figures should be supported by believable marketing data. All information should be legible, neat and organized.

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