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Eric Inspektor, Toronto executive, on small business loans: how they can save, sustain or grow your company

Image par Ronald Carreño [1] de Pixabay [2]

When people think of business loans, their thoughts may turn first to banks and traditional financing institutions. Afterall, they know that loans can be key to launching a startup or growing an existing business, with funds often used to purchase equipment, build-out premises or cover other working capital expenses.

However, business loans can be difficult for a new business or small company to obtain, and there are many roadblocks that can keep a business owner from getting approved for a loan.  Moreover, if you’re an aspiring business owner who may have limited cash flow, an incomplete business plan will make securing a loan next to impossible.

The COVID-19 health pandemic has also thrown a wrench into the already complicated process of securing a loan [3].   Undeniably, lenders are approaching credit risk assessments with more scrutiny because of increased volatility.  In other words, at a time when so many businesses desperately need funding, lenders are being more careful with their money.

That’s why, with all of the reasons listed above, it’s important to get your facts together before you present your case to a lender.  Whether you are borrowing money to save, sustain, or grow your business, simply put, you need to know the rules.

As co-founder and senior underwriter at CORFinancial Corp. [4], a boutique investment bank based in Toronto, Eric Inspektor [5] has successfully helped many business owners overcome the roadblocks of securing a loan. 

Eric Inspektor [6] says the first step in asking for a business loan is to be prepared and to ask the right questions.

He explains, “One has to be practical. First of all if you need and you’re looking for financing, make sure that your financing application, the package that you present to a lender, is detailed, comprehensive and makes sense, most important of all.”

Inspektor says that everything needs to make sense and it needs to answer all of the lender’s questions.  He also says that,while the Canadian government has been proactive in coming up with programs and solutions for businesses who are suffering due to the global pandemic; government aid may not be enough to secure a loan.

“Remember, the government is not a bank, so any lending or any borrowing has got to

be done through the banking community and is still subject to credit criteria being met,” adds Eric Inspektor.

The government programs that have been successful are the $40,000 [7] interest free for two years and the rent and wage subsidy. These program continue to work but when you get to actual borrowing, the issue is you still have to apply to the bank and they are still going to apply their standard credit criteria when reviewing loan applications; unfortunately, this results in the banks not being as proactive as we want them to be.

Eric Inspektor notes, “The banks are taking applications and they’re treating those applications without regard for the government guarantee.  In other words, if they don’t see it as viable in relation to their credit criteria, they are not taking into consideration the government guarantee. That’s the feedback that’s coming to us.”

If there’s a silver lining, it is that the banks are not the only lenders out there.  There are other funding sources such as  asset-based lenders who may be a better alternative.

“Asset-based lending is best suited to certain situations; however, many businesses are turning to this type of funding even when they would qualify for traditional bank funding because asset-based lenders are more proactive and, in some cases, better qualified to underwrite business loans,” Inspektor says.

Where traditional banks are cash flow lenders, asset-based lenders lend against the company’s assets and rely on the present asset value and future performance based on deployment of their capital.

When entrepreneurs or small business owners are determining what lending route to go, Eric Inspektor says there are good lenders around who understand business, use different criteria, will leverage the assets, and who will leverage the enterprise value of the business.

“There are a number of good business lenders out there; the challenge is in doing your research tomake sure that you’re dealing with the right one.”

From cash flow to expansion, small business loans can benefit your business in various ways. Despite the current roadblocks, Inspektor advises business owners to keep on persevering.

“Remember there will be a solution to COVID but in the meantime your business must go on. At CORFinancial we’re here to assist, even if it’s only as a sounding board.”

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