The Definitive Guide to Business Loans

Learn about small business loans in Canada, where to access capital, how to qualify,
and what type of loan is right for your business.

Getting Started - What are small business loans?

Starting or growing a business takes a lot of planning, hard work and most importantly capital, to make it all happen. That’s where business loans come into play. Keep in mind that acquiring a business loan in Canada or raising capital may not be suitable for your business’ current needs. You have the option of growing your business slowly and risk-free by bootstrapping. Dealing with investors and paying back lenders is a great responsibility that can bring down your business if done carelessly. But when it’s done right, you can raise a good sum of capital to achieve your vision for growth.

Financing may seem overwhelming due to the number of options out there. But it doesn’t have to be. Before you begin on your journey to securing a business loan, make sure you are aware of all the available options out there, including low-rate loans such as those offered by Lending Loop.

Throughout this guide we’ll help you discover whether business financing is a good idea for your company, the difference between financing options, how to decipher rates and fees, and how to go about securing the business loan you need.

Let’s begin with the benefits of small business loans.

Benefits of a business loan

There are plenty of reasons to apply for a loan. As a business owner, you may want to secure financing to maintain business operations, invest in new equipment, expand locations, or hire more employees. One main advantage of a unsecured business loan is that you it allows you to manage your cash flow via standard monthly payments vs. fixed daily payments such as those required by merchant cash advances. Some of the other key benefits are:
  • Cost-effective interest rates
  • Convenient and accessible
  • Various payment options
  • No collateral required
  • Flexible
Consider this...
Before you dive into the loan application process, consider all of your options and make sure you fully understand them. Ask yourself this: Do I really need financing? If so, is a business term loan the right choice for my company at its current stage growth? What are my other options? The good news is that small business financing is available in many forms. Having a deep understanding of the pros and cons of each will enable you to know where to find the best financing for your needs.

When to get a small business loan in Canada

You may want to take your small business to the next level. Other times, you may be facing financial problems that are restricting your business from moving forward. Either way, here are some main indicators for both.
Indicators:
  • You are looking to renovate your existing business
  • You are looking to open up a new location
  • You are looking to want to invest in training your staff
  • You are looking to hire new staff
  • You want to launch a marketing campaign
  • You want to purchase or restock inventory
  • You want to purchase new equipment
Access to working capital
Working capital is the cash that is used to manage your daily operations. If your small business is not cash flow positive, you can take out a loan to cover your daily expenses until then. For instance, if you are running a seasonal business and need a loan to stock up on inventory for busier seasons.
Building your business credit
As a small business owner you should always be aiming to build a strong credit score. Without it, you will have a hard time getting approved for loans. You can build up your credit score by taking out a smaller loan and by making timely payments.
Refinancing high-cost debt
Some financing options can be more costly than others. For instance, merchant cash advances are known to be significantly more expensive than unsecured term loans. You can work with a lender to refinance one or more of these financial products. If you decide to go this route, make sure you consolidate your debt at a lower rate, this will help save you both time and money.

Top 7 Financing Options in Canada

1. Friends, Family & Fools - First capital for a business
Reaching out to your personal network of family and friends is the most common way to raise capital when starting your business. Banks or other lenders may not trust you enough to risk their capital on you. But those close to you believe in you and are often willing to provide you with small sums of capital to help you get started.
Pros
  • As investors they can turn into trust advisors, and are typically more forgiving than outside advisors when it comes to the ups and downs of your business
  • Due to your existing relationships this capital is typically easy to access and comes with very little rules.
Cons
  • If your business flops and you still haven’t paid them back, tensions can arise
  • It’s best to be upfront about the risks of your business from the very beginning. Show them your business plan, outline what the money will be used for, and put everything down in writing
2. Angel Investor - An individual providing early-stage capital
An angel investor is an individual who has spare cash available and is looking for higher rate of return than traditional investments. They have often been entrepreneurs themselves and understand the ups and downs of business.

They typically provide capital in the form of equity financing. This means the investor provides you with a fixed amount of capital in exchange for an ownership stake in your business. They basically fill in the gap between friends and family financing and venture capital.
Pros
  • Less risky than debt financing (in case your business fails, invested capital doesn’t have to be paid back).
  • No need for collateral/ personal assets
  • They bring years of experience so you can gain valuable knowledge and experience
Cons
  • More difficult to find and connect with
  • May make excessive demands on company control
  • You’re giving away a part of your company ownership
Venture Capital Firms
3. Venture capital - A pool of investors providing capital to early-stage startups
Venture capitalists are similar to angel investors. The only difference is that they’re a group of people that usually work for a venture capital firm, and specialize in building high risk financial portfolios. Similarly, they provide funding to startups and growing businesses in exchange for equity.
Pros
  • Business expertise - They can be a valuable source of guidance and consultation
  • Provide additional resources in legal, tax & personnel matters
  • Provide useful industry connections
Cons
  • Expensive - the process includes negotiations and due diligence.
  • Loss of control - they will typically ask for a board set as a pre-requisite to receiving their investment
  • Similar to angel investors, you diminish your business ownership.
Canadian Private Equity Firms
4. Private Equity - Providing capital to late stages of company
Private equity works in the same way as Venture Capital — a private equity fund invests in companies and looks to sell its stakes for substantial profit. Similar to Angel Investors & Venture Capitalists, their focus is on businesses with high growth potential. They invest in much wider range of companies and generally in larger sums (think millions..). The deal structure is also different. Private equity firms expect a large stake in the business and generally want to take some control of the company so they can continue to accelerate growth and sequentially, the value derived from their investment.
Pros
  • Large sum of funding - Typically from $1m - $1b+
  • More involved - They’re much more hands on and will help you re-evaluate all aspects of your business and how to maximize its value.
  • Incentives - Individual partners within private equity firms often invest in your business with their own capital. That’s why they have a strong personal incentive to increase your business’ value.
Cons
  • Loss of control - They want to be actively involved - which can be a good thing - but can also lead to you losing some control of your business, such as strategy, hiring or firing employees, etc.
  • Different take on value - They are focused on the financial value of the business, specifically after 5 years. Business owners have a longer-term outlook and value building relationships with employees and customers more.
  • Qualification -  They’re picky and are generally looking for large enough businesses to support, and receive large profits in a relatively short time frame.
Traditional Lenders Canadian Banks
5. Traditional Lenders - Aka the banks
There are 5 large banks in Canada that dominate the banking industry. But there are other traditional lenders such as credit unions and smaller banks that offer financial products as well. They offer all kinds of loans and debt products except for merchant cash advances. The most common loans offered are lines of credit and term loans. Even though banks have products to help new businesses, they tend to focus more on well-established businesses that can provide collateral. There are many reasons for this but it’s mainly because they make less money from lending to small businesses, and want to avoid the risk of receiving a poor reputation for charging higher rates. That’s why they decline most small business applicants.
Pros
  • Temporary - Once you receive a loan from a bank and pay it off in full, there are no more obligations or involvement with the bank lender unless you decide to apply for another loan.
  • Full ownership & control - Unlike equity financing where they take over shares of the company and are very much involved in decision making, banks are not involved in any aspect of running a business. This means you get to have full control of your business.
Cons
  • Tough to qualify for - They’re very difficult to obtain. The application process takes a long time (weeks or even months!), and business owners are required to provide personal assets along with their business documentation.
6. Alternative Lenders (Online Lenders & Credit Unions)
These lenders are often referred to as online lenders or fintech companies because they offer financial products and experiences through the latest technology and online platforms.

This is a form of financing that is not provided by traditional banks. Many of them are online and offer smaller loans (usually around $250,000) with shorter terms and fair interest rates. Their requirement includes lower credit, cash flow and fewer documents. You can obtain business funding from an alternative lender when a bank loan isn’t available.
Pros
  • Fast approval rate - They approve more than 50% of small business owners looking for funding
  • Flexible lending options - They offer smaller loan amounts that banks don't even consider
  • Fast funding process - The technology that they use enables them to process applications and provide funding faster
Cons
  • Higher interest rates - They charge higher interest rates because they finance riskier and smaller businesses
  • Frequent payment schedule - They provide shorter repayment period. The amount offered and term length varies
  • Credibility - Not all are equally credible
7. Peer-to-Peer Marketplaces
Also known as peer-to-peer lending, it involves connecting small businesses owners with individuals investors online who are willing to lend money. The marketplace then assess the risk of each small business and posts their information and funding goal on their platform. Individual investors can then choose the businesses they are interested in and pledge an amount towards it. When the small business’ goal is met, the loan is provided and the marketplace in this case serves as an intermediary going forward.

Peer-to-Peer lending is not to be confused with the more widely known crowdfunding model. Crowdfunding involves raising money in exchange for rewards or equity.
Pros
  • Low interest rates - typically less expensive than other alternative financing options
  • Faster approval rate - loans are approved and money is transferred much quicker
  • No collateral - That’s right! Some peer-to-peer lending platforms like Lending Loop do not require you to put up collateral
Cons
  • It is not guaranteed that your small business will be 100% funded
Read our full article on how peer-to-peer lending works.
Read more

7 Types of Debt - From Banks to Peer-to-Peer Lending

Term Loans
Sometimes called instalment loans, they are issued in one lump sum. The original loan amount, plus interest charges is repaid via fixed instalments on a monthly basis. But some lenders require weekly or bi-monthly payments. A medium-term loan is a term loan that is between two and five years in length. A term loan longer than that is called long-term loan. Traditionally, term loans are repaid on a monthly basis, but some lenders require weekly or bi-monthly payments. Term loans are very flexible. Business owners can use these loans for a variety of business purposes, such as business expansion, equipment purchasing, working capital, bridge loans, or most other needs. While many term loans are for general-purpose, some loans have special uses:
Micro Loans
  • They come in very small borrowing amounts ($50,000 or less) and short term lengths. They are generally easier to obtain, are considered low risk and are used by small businesses and startups.
Equipment Loans
  • These are used to purchase equipment, which then functions as collateral for the loan. These loans are secured and easy to obtain. They usually cover 80 to 90% of the cost of the equipment and you, as the borrower, are responsible for paying the rest.
Business Lines of Credit
A business line of credit is a flexible debt product that allows you to access a fixed amount of capital, and is used to meet short-term business needs. It’s kind of like how a credit card works, but with a small twist. When you get approved for a line of credit, you are given a certain amount of money that you can draw from your line at any time, as long as you don’t exceed your credit limit. And once you have fully repaid the borrowed money (in fixed, periodic payments) you can borrow the same amount again. You can use a business line of credit to finance working capital requirements, such as marketing campaigns, inventory purchases, or even to manage your business’ cash flow.
Short Term Loans
They’re sometimes called cash flow loans because the eligibility and rates are based on the strength of the business’ cash flow. They’re also repaid in fixed, period instalments, but do not carry interest rates. They must be repaid within one year but majority of the loans are repaid much quicker, often within 90-120 days. So if your business has a strong cash flow, consider applying for a short-term loan.
Merchant Cash Advances
A merchant cash advance is not necessarily a loan but more of a business-to-business transaction. You essentially sell your business’ future credit card sales and/or a portion of bank deposits to a lender in exchange for funding. Loan sizes are between $5,000 up to $2,000,000, and terms range from 3 months to 2 years. The repayment is not fixed and is collected by deducting a percentage of each sale on a daily or weekly basis via the business’ credit card sales or bank deposits.
Specialzed Debt Products
Equipment Leasing
  • Equipment leasing - If you require an equipment for your business but cannot afford it, you can lease it
Government Grants
  • Government grants - Funds granted to small businesses for specific projects that do not need to be repaid

Small Business Loan Requirements

There are many small business loan options out there, and there is a chance for every business to qualify for at least one or more. But it’s best to evaluate your options and choose the one that best suits your business’ goals.

Once you have made the decision and are going through the application process, be prepared to answer questions such as what you need the funds for and how you plan on making repayment. Lenders want to get a better picture of your credit history and future business plans. That’s why it’s important to have all your data and documents prepared.

Keep in mind that every lender has different paperwork requirements but here are some of the information that the majority look for:
A Comprehensive Business Plan
  • It should outline your business’ objectives, how the borrowed funds will be used, and how your business stays sustainable
Business Assets
  • Most traditional lenders look for specific collateral, but online lenders don’t require it to approve a business loan. Because of that, most healthy businesses that don’t have adequate collateral can have access to funding through online lenders
Financial Statements and Cash Flow Forecast
  • This will provide lenders a better understanding of the condition of your business and whether or not you are a good candidate to receive a small business loan. They will also determine the amount of cash flow you have available, how well is your business operating in the marketplace and if you have any other type of outstanding debt
Commercial Credit Score
Income, tax returns, insurance policies
  • These tax, income and policy documents will help to provide lenders with a deep insight into your business’ financial health.
Business Credit Scores

How to Qualify for A Small Business Loan

Each lender has their own specific criteria that you must first review and understand. This way, when it comes to filling out the application form, you will save lots of time and frustration.

> Separate personal & business finances

Besides keeping your sanity and protection during tax season, there are many other good reasons why you should keep your business and personal finances separate. It makes bookkeeping super easy, keeps your financial health intact and protects your personal assets.

Don’t know where to start? Let’s begin!
  1. Open up a separate checking account - when your checking accounts are separate and you only draw from the business account, tax time rolls around, all you would have to do is review your bank statements for that specific account. You can do your taxes and other financial reporting straight from that account’s bank statements.
  2. Get a business credit card - It will help you buildup your business credit history and keep it separate from your personal credit history. And when there is something out of your business’s budget, you won’t be tempted to use your own business card.
  3. Set a budget for your small business - Don’t pull more money out of your personal account if you can’t afford something for your business. Set a budget for yourself based on your business’ current earnings so you can avoid that temptation. Use this pre-made annual budget template to keep track of your small business finances.
  4. Keep track of business receipts - If you use your personal items, like your vehicle or cell phone for business purposes, you should keep track of the cost. Use a logging tool to track of their usage.
  5. Divide business expenses - Any sort of personal entertainment, food and travel expenses that you have must be kept under personal finances. It can be quite tempting to write it off as a tax deduction but going out for dinner with family and friends doesn't qualify as business expenses.
How to open a business bank account
  1. Choose a bank - You need to find a bank that meets your business’ current needs and what you may need down the road. Ask yourself this: are you looking for a bank that has features like mobile check deposit and cash management? Also, some banks offer cash bonuses. So you might want to consider earning interest on the funds in your business account.
  2. Prepare all of your business documents - Here’s a list of what you need to open up a business bank account:
    - Business Number
    - Business license and/ or business name filing
    - Partnership agreement (if applicable)
    - Articles of incorporation (if applicable)
    - Articles of organization
    - Cash flow projections
  3. Set a budget for your small business - Don’t pull more money out of your personal account if you can’t afford something for your business. Set a budget for yourself based on your business’ current earnings so you can avoid that temptation. Use this pre-made annual budget template to keep track of your small business finances.
  4. Open the bank account in-person or online - now that you have chosen your bank and have collected all the necessary documents, you can either open up your business account in-person or online. It depends on your preference: do you feel comfortable opening up a business bank account on your own? Or would you like to have someone walk you through the process? If you want to verify certain information and ask questions, the latter is a better option for you.
How to build you business credit
Building business credit takes time but you can take some steps towards it. If you already haven’t, you can incorporate and establish your business. You can keep track of all your income and credit payments in order to pay your bills on time, or even better, pay early. It’s true that paying your bills on time is vital to building your business credit score but even so, credit report errors do happen and can damage your score. In such cases, you can check your credit score for free on getloop.ca, and report any inaccuracies on your credit report through a Canadian credit bureau.

> Create a business budget

The process of creating a small business budget is actually not as difficult as you might think. It usually begins by looking back at your past income and expenses. If you’ve been in business for a long time, this process is much easier because you’ll have more data to look back on as you start creating your forward-looking budget. If your business is new, you will have to do more research into typical costs within your industry and gather working estimates for your finances.
  1. Examine your revenue - look back on your business and find all of your income sources. Add them up to see how much your business is earning on a monthly basis. This would be your revenue, NOT profit. Once you have all of your income streams, then you have to calculate your monthly income — preferable for the past 12 months.
  2. Subtract fixed costs from income - fixed costs are any cost that is essential on a recurring basis for your business operation, such as rent, supplies, payroll, taxes, insurances, etc. They might occur daily, weekly, monthly, or yearly so make sure you get as much data as possible.
  3. Variable expenses - These are costs that change depending on how much you use them. Majority are necessary for your business to stay in operation, such as utilities, marketing costs, replacing old equipment, etc.
  4. One-time costs - unexpected expenses happen when you least expect them and when you’re tight on budget. Don’t stress. Instead, prevent this from happening by making sure that you have some extra cash on hand when planning for contingencies within your budget. Also put an amount aside for emergency fund. This way you’ll be ready when something goes wrong, like an equipment breaks down or need replacing, or when you need to replace inventory. Of course you have the option to apply for a small business loan as well.
Accounting & Bookkeeping
This is the most crucial part of your small business. Keeping your finances in order will help you keep track of required records, especially when tax season rolls around. If you feel comfortable doing it yourself, go for it, but it is highly recommended that you hire a good accountant as they will be able to answer your questions and provide you with essential tips and advice.

There are many benefits to keeping your business records organized. Some of the major benefits include planning and forecasting future financial positions, comparing past and present finances, and saving lots of time and energy if your business gets audited.

The most important thing is to keep records of your transactions. Some of these include:
  1. All receipts for your business (paper or electronic)
  2. Sales & expenses
  3. Payroll
  4. All taxes (collected and paid)

> Financial Statements

Keeping track of your business’ day-to-day operations through financial statements is not only beneficial in running your business but also useful when seeking funding from lenders. Additionally, keeping tabs on your finances allows you to ensure your products and services are priced accurately, and to determine your cash flow and file taxes easier.

Take time to understand your financial statement. The best way is to meet with your accountant for a yearly financial check up. They can go over your numbers and explain how they affect your business.

There are three key features in all business financial statements: income, balance sheet and cash flow.
  1. Income statement - As a small business owner, it’s important to have a good handle on the money coming in and going out of your business. An income statement is a report that provides revenues and expenses of your business. By creating this report, you group expenses based on their cost type. For instance, product expenses count as the cost to produce the good, and administrative costs could be general company expenses.

    You then have to deduct expenses from revenues and report the net income at the bottom of the financial statement. This figure becomes an overall summary of the profitability of your business.
  2. Balance sheet - The balance sheet provides a report of your business assets, liabilities and stockholder’s equity. Generally, businesses either own assets or finance them. Here is the accounting equation for it:
    - Assets = Liabilities + Stockholders’ Equity
    The balance sheet is usually more detailed than the income statement and requires full inventory of every asset.
  3. Cash flow - It is the cash that comes in and goes out of your business. The cash that comes in is from customers or clients who are purchasing your products or services. If your customers or clients don’t pay upfront, a portion of your cash flow will come from your account receivables. The cash that goes out of your small business is payments and expenses such as rent, mortgage, loan payments, taxes and other account payables.

    Cash flow also indicates if a business is able to pay its current liabilities, which is an important factor in determining the business’ financial health.

> Develop a Business Plan

A business plan is a written document that describes the purpose of your business, its sales and marketing strategy, its financial background and a projected profit and loss statement. Every business needs to have a business plan, as it provides direction and attracts investors. It’s basically vital to the success of your small business.

Here’s what to include in your small business plan:
  1. Cover page: Include your business name, logo and contact information so investors can easily reach you
  2. Executive summary: Provide a description of your business concept, the industry, your business structure, and your products and services. Then provide 4-8 reasons why your business will be successful
  3. Company overview: This is your company profile; where you are located, when and how you were formed, and your legal entity.
  4. Management team: Describe the key employees in your business and why they’re qualified for their respective positions. You can also mention gaps in your team and who you plan to hire.
  5. Market Analysis: Describe the market in which you are competing, how big it is and how and what trends are affecting it.
  6. Marketing strategy: Describe what marketing tactics you will use to promote and sell your product or service. Provide information about your ideal customers and your budget.
  7. E-business strategy: identify how you plan to use the internet and new technologies to reach customers and manage your business. This is the best part to explain how these strategies can save you money.
  8. Competitive Analysis: identify your competitors and their key strengths and weaknesses. Discuss how you plan on making your business more successful than others.
  9. Operational Plan: Outline operational processes that your company needs to accomplish to become successful. These include milestones that you want to accomplish within the next 3-5 years.
  10. Financial Plan & forecasts: Provides ways in which your company generates revenue. If you are seeking funding, identify how much you require to start or to operate your business. At the end, include a summary of your financial projections.
  11. Appendix: Use this part to include full financial projections, projected income statements, balance sheets and cash flow statements.
Read our full article on small business insurance here.
Read More

Understanding Rates, Costs, & Fees

Use this small business loan calculator to better understand the effects of various financing terms.
Interest Rates
The most commonly asked question by small business owners is this -“What’s the interest rate?”

Interest rates are the amount charged as a percentage of principal by a lender to a borrower for the use of assets. In other words, it represents the cost to you as a borrower in exchange for the lenders assumed risk providing you the funds.

The interest rate is different based on the financial institution. They are either variable or fixed:
  • Variable rate: The lender's prime lending rate plus 3%
  • Fixed rate: The lender's single family residential mortgage rate for the term of the loan plus 3%.
Administrative Fees
Some lenders charge a monthly fee to cover some costs such as monitoring your loan. Even if you don’t have any outstanding loan amount that month, they still charge you this fee. This fee is usually between $50 to $100/ month on a loan that is less than $250,000. It can, however, quickly increase to hundreds of dollars on larger loans.

Lending Loop has an origination fee. It is charged on every loan that is successfully funded on the platform. The origination fee covers the cost of underwriting and processing the loan.

Rates and fees for borrowers

Lending Loop Credit Rating
A+
A
B+
B
C+
C
D+
D
E+
E
Interest Rate:
5.90 -
7.50%
7.51 -
9.30%
9.31 -
11.10%
11.11 -
13.00%
13.01 -
14.90%
14.91 - 17.10%
17.11 - 19.30%
19.31 - 21.60%
21.61 - 24.00%
24.01 - 26.50%

Origination Fees

An origination fee is charged on every loan that is successfully funded on Lending Loop. The origination fee covers the cost of underwriting and processing the loan.

Lending Loop Credit Rating
A+
A
B+
B
C+
C
D+
D
E+
E
Origination Fee:
3.0%
4.0%
5.0%
5.5%
6.0%
6.0%
6.0%
6.5%
6.5%
6.5%

Fees for late or delinquent borrowers can be found in the Support Center.

Transaction Fees
Some lenders charge a transaction fee every time they wire you funds. The cost varies based on the method used. The outbound wire can cost from $25 to $60. For the inbound wire, you may have to pay an extra $10, no matter how much has been wired.
Repayment Types
Monthly Repayments
  • This is the most common type of repayment. You make a single payment once a month instead of many small payments. It’s kind of like your rent or internet bill payments that are on a monthly basis.
Fixed Daily Repayments
  • This involves making payment on a daily basis (from Monday to Friday) and is typically required when you utilize high cost options such as a merchant cash advance.

Questions to ask before securing finance

Before you submerge yourself in the small business loan application process, make sure you understand your options. Ask yourself the following questions to see if you are truly in need of funding and for what purpose:
  • What do I need the capital for?
  • How much capital am I looking to receive?
  • How does my business credit score look like?
  • How quickly do I need the funds?
  • Am I going to be in this business for the next 5 years?
  • Is my current cash flow sufficient enough?
  • Is the payment option flexible?
Then ask your lender the following questions:
  • What are the interest rates and total costs?
  • What will my payment schedule be?
  • What is the term of this loan?
  • How long will the loan process take?
  • Can the amount I owe increase overtime?
  • Is my current cash flow sufficient enough?
  • Is the payment option flexible?

The Bottom Line

As a small business owner in need of funding, your options are almost endless! But don’t be overwhelmed. You can always use this guide to figure out your business goals, needs and options and find the best funding option for your small business. Keep in mind that each financing option will provide you with the capital you need to expand or start your business but they all come with their respective pros and cons.

You are now armed with tremendous knowledge of small business loan options available to you to make wise funding decisions and reach your business dreams!  Now go out there and get the capital your business deserves.
Start your no-obligation business loan application today.
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Glossary of Financing Terms

Accounts Payable

The amount of money that a business owes its creditors.

Accounts Receivable

The amount of money that is owed to a business for the products and services the business has sold on credit.

Amortization

Repayment of debt in instalments over an agreed-on period of time, where both interest and principal are fully paid.

Alternative Lender

Another term for an online lender or a lender than is not a bank.

Asset

We do not offer any discounts for students or nonprofits at this time. However, We do offer a 10% recurring discount to any websites that include our logo and link on sign up and login pages. You're also welcome to apply to our Startup program if you're unable to afford the $25/mo plan.

Application fee

A fee charged to cover the cost of evaluation a loan application.

Authorized user

Any person that receives permission from you to use a credit card account.

Balance transfer

The process of moving an unpaid credit card debt from one issuer to another.

Bank rate

The rate of interest charge by Canadian banks to chartered banks.

Cash Advance

Term used when no products or services are purchased and cash is provided. Credit charges are then applied the day the advance is made.

Collateral

When assets are pledged as security for a loan. If the borrower defaults on payment, the lender can take over the property pledged as security to repay for the loan.

Cash flow loan

Also known as short term loans, it is a loan where rates and fees are determined by the business’ expected cash flow.

Credit ratings

The rating assigned to every piece of credit history information in your credit file by the creditor.

Credit score

This is a value assigned by creditors to indicate how likely someone is to repay a loan or credit card based on the agreed repayment terms. Check our free credit score platform at www.getloop.ca

Creditor

A person or institution from whom you borrow or owe money.

Credit loss

A loan receivable that has become uncollectible and is written off.

Creditworthiness

The ability to repay all debts on time.

Debt

An obligation to repay a sum of money, plus interest.

Default

Failure to repay loan according to agreement.

Direct debt

Authorization of recurring payments to be drawn on an account on a specific date.

Direct deposit

Authorization of payments made by governments or businesses to be deposited directly into a recipient's account. Mainly used for the deposit of salary and pension.

Due Diligence

Refers to a process used to identify risks and issues relating to a proposed transaction. It is the process of evaluating all information to verify its set purpose.

Equipment loan

A loan used to purchase equipment.

Finance charge

The total interest charge of an account, plus additional transaction fees.

FinTech

short for financial technology, it is a term used to describe the technology used in finance.

Fixed fee

This is the fee for borrowing short term loan, merchant cash advance or other financial product that uses a factor rate.

Gross income

The income amount before taxes. It includes wages, investments, monetary gifts, and liquid assets.

Guarantor

A third party agrees to repay the balance on a loan if you fail to repay it. The guarantor takes over the debt if the debtor defaults on a loan.

Interest

The fee charged for the supply of money charged to the lender.

Interest rate

A fixed, specified compensation paid to a lender by a borrower on the amount loaned.

Late fee

A fee charged for late payments.

Line of credit

A sum of money where the borrower can draw from at any time.

Merchant Cash Advance

It’s a transaction where a financial institution purchases a business’ future profits at a discount. The fees for MCA are determined by a factor rate and by deducting a percentage of daily revenue, the repayments are made.

Origination fee

A fee charged when processing or distributing a loan.

Overhead

General term used for indirect costs (ex: rent, salaries, benefits)

Personal net worth

Total assets minus total liabilities of an individual.

Principal

The sum of money received upon borrowing a loan.

Receivable

Amounts paid to a person or corporation for goods/services sold for which a bill has been sent.

Revolving line of credit

A line of credit that replenishes as the borrower fully pays their debt.

Secured loan

The lender has a legal claim against the borrower’s assets. If the borrower defaults, the lender can convert the assets to cash as repayment.

Shareholder

A person or institution that has invested money in a business in exchange for a share of ownership.

Sole proprietorship

A business with a single owner who is responsible for all liabilities.

Total financing cost

The total amount of fees paid on a loan.

Total repayment amount

The total amount of money a borrower repays on a loan

Variable cost

A business expense that increases or decreases based on production value

Working capital

The capital used to cover the business’ everyday expenses like overhead costs, payroll, etc

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