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Behind the business of small business loans

Starting a small business takes money. Getting money takes knowing about the small business you want to start. Banks can help.

Starting a small business takes money. Getting money takes knowing about the small business you want to start. Banks can help.


First and foremost, “if you have questions come on in,” says Mike Michell, national director, small business, RBC. He recommends walking into your local branch and asking questions or picking up one of their guidebooks designed to set you on the right path.


“But where it becomes a really rich conversation is when someone comes in having part of the work done. Then we can start to have a dialogue.” He’s talking about a business plan. “How do you see the company starting out? What do you think your cash needs will be? How do you think the company will evolve over time?”


And that’s where small business loans enter the conversation. What type of financing you need depends on what it is you need to finance. In it’s simplest form it comes down to operational loans and term loans.


“For example if your only going to get paid every 30 days but you have to pay your suppliers right away you’d need an operating line, whereby it’s in and out very quick. If you need to buy a piece of equipment and let’s say the equipment might last ten years, that’s usually better served by having what we call a term debt to match it to the life of the asset.”


It’s not far off from personal banking. “If you’re going to buy a house or a car you would use term facilities. If you’re going to do renovations you would want to have an operating line and you would want to have a credit card or an over-draft protection for your day to day expenses. Good financial planning for the small business would mirror what you see on the personal side.”


Similarly, good personal financial planning will open doors on the small business side. “Make sure your personal credit is in good standing,” says Michell. “It’s very important for us to understand how the small business owner behaves and conducts his or her credit on the personal side.”


Ultimately it comes down to working with a financial institution to find out what can work for you.