Personal Capital and Bank Loans: Two Ways to Finance a Canadian Corporation
In your business plan, you must define the way you are going to provide finances for your business. There are various methods, and the first two are the most traditional.
The first method is to use personal capital. This refers to the money in your long- or short-term savings accounts, or to the sale of a capital asset, such as a property that you sell and spend on investment.
The second method is financing through angel investors or banks. Banks give you a loan based on your account balance. For example, instead of selling your property, you can mortgage it and receive a loan. This type of loan is paid based on your assets and mortgages, such as estate or shares (equity finance). For these loans, the interest rate is less than 10%. If you want to buy a franchise or a famous business, you may receive a loan of up to 70% of your investment.
Many banks provide really suitable loans for purchasing equipment. For example, if you want to establish a printing office, you can purchase one-million-dollar equipment by paying 5 thousand dollars in advance and 20 thousand dollars in monthly payments.
Banks pay equipment expenses to businesses. Machinery is one of the main expenses of companies, and banks pay up to 100 percent of machinery expenses. The rate of payment is different for each bank and each business. Sometimes it is between 50 and 60 percent. Different businesses have different rates. For example, 100 percent of expenses is paid for printing machines because the payoff is more guaranteed for this business.
Canada is also one of the best countries for production in agriculture, livestock and poultry, and it provides governmental supports.
When the corporation builds records, you can ask banks for credits and loans. For example, you can have a credit import account. This credit must be created during a specific time, and it will not be given simply by transacting money in a short time. The element of time is of great importance here. You should be careful that no complaint is lodged against you and no fraud happens in the corporation.
Whichever method you choose, write it into your business plan: how much you will secure by yourself, how much by loan, and from which sources.