Private Business Loans

All you need to know about small business funding in Canada.

Whether you have good credit or bad, private business loans can sometimes offer an advantage over their big-bank counterparts. Compared to traditional financial institutions, private lenders will consider much more than just your credit score and your credit history when it comes to qualifying you for their products. In fact, private lenders offer many of the same products that their corporate counterparts do. They also provide a variety of loan terms for small businesses.

When to Choose a Private Business Loan

If you run a small business, private lending options may be the right option for you. Private lenders offer up plenty of solutions to your everyday business needs. A private loan can help you cover a wide range of business needs, including:

  • Purchasing inventory

  • Upgrading equipment

  • Managing your business cash flow

  • Managing debt consolidation

  • Obtaining funds for accounts payable

  • Remodeling your retail location

  • Opening another retail location

  • Paying rent or other real estate payments

Whether you need a short term loan, a small merchant advance, or a large loan, there are private loans out there available for you. Here are a few examples of private loans that may be a good fit for your business.

Merchant Advances

Merchant cash advances are private loans based upon your anticipated credit card sales over the term of the loan. For example, if your business usually does $10,000 per month in credit card sales, the lender will consider the amount of money you want to borrow, why you want to borrow it, your industry, your length of time in business, and much more in order to qualify you. Once you accept the cash advance, your lender will deposit the funds straight into your business bank account. Instead of a monthly payment structure, your repayments will simply be a percentage of your daily credit card sales. This financing option is not dependent on your credit history, but you need to meet minimum requirements for time in business and gross monthly credit card sales.

Working Capital

Working capital differs slightly from merchant advances in that it considers all of your revenue and not just that which comes from credit cards. To qualify, you need to prove a relatively long history of consistent income from a variety of sources. Just like a merchant advance, you will repay the amount you borrow with a percentage of your daily sales. Good credit is not necessarily a requirement for these private loans, but a solid history of generating revenue is. The amount you can borrow varies based upon your business and the money it brings in.

Term Loans

Private lenders also offer up term loans, which are private loans that compete with loans from traditional banks. While a bank will pull your credit and use the information in the credit report to make its decision, a private lender will combine this information with data about your company, its revenue, and its time in business. All in all, private lenders are more concerned with your ability to repay the loan than your past credit history. Because of this, you can expect higher interest rates and fees than loans provided by banks.

Investor Loans

Sometimes, private lenders will agree to provide you with a lump sum of cash in exchange for stake in your company. For example, if you want to develop and manufacture a new product to add to your retail stores and you need money to do so, an investor may provide you with those funds in exchange for a percentage of the revenue that product generates – or a solid percentage of all of the revenue your company generates well into the future. This type of private loan can be quite risky, but it is especially helpful for startups who need funds to get their business ideas off the ground.