Once your business plan is ready, you are prepared to go to the bank and apply for a loan to start your small business.
The bank will assess your business plan on two primary fronts:
- The viability of your business and the projected cashflow as the primary source of repayment of the loan; In fact, your business plan should prove that your business would be able to support itself. You will be required to provide relevant information such as financial statements, cashflow projections, etc. to substantiate that. Our officers are happy to assist in ensuring that your application Loan Guarantee package contains the information needed. Also, we have a list of local accountants and financial services providers. These professionals assist clients who need more help to compile the information required in a business plan.
- Your collateral/security as a secondary source of repayment. Examples of collateral could be your own personal funds, equity in real estate, houses, property or such assets as vehicles, savings, investments, equipment, an investor or a guarantor. In certain cases, a portion of the loan could also go unsecured. The aggregate value of your collateral and any unsecured portions should total the amount that you need to borrow from the bank. Your collateral demonstrates your ability to repay the bank loan in case the business cashflow is not enough.
While not a bank, the BEDC will consider acting as a guarantor for a portion of a bank loan for small businesses that appear viable, and where the credit-worthiness of the borrower is sound. As guarantor of last resort, the BEDC can guarantee up to 50% of the agreed loan amount to a maximum of $200,000.
Our Loan Guarantee can help if your business does not have enough security/ collateral.
Clients who receive a BEDC Guarantee to secure their bank loans are required to pay a fee to the BEDC of 1% of the amount guaranteed. Once a guarantee is issued, you are required to furnish regular progress reports in the form of regular financial information to the BEDC.
In the event that a Borrower is unable to repay the BEDC-guaranteed loan, the BEDC must make a payment to the bank. The Borrower is then liable to the BEDC for the amount paid to the bank plus administration fees and any legal expenses that may be incurred by the BEDC in recovering the outstanding debt.