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Ontario government loans vs bank loans
Funding

Ontario government loans versus small business bank loans

by Tyler Bailey
5 May 2022

As a small business in Ontario, having the right amount of capital can mean the difference between success and failure of your business.

In most cases, small business owners borrow money in order to use it towards the expenses and the various costs of starting up. This is a common practice by many entrepreneurs, using the borrowed money to grow and succeed with business.

As long as you are borrowing smart you have nothing to worry about.

While there are many different ways you can borrow money, today we’re going to be talking about borrowing money from the Ontario government, or the federal government of Canada, in comparison to borrowing money from a traditional bank in the form of a small business bank loan.

Money is money, but what may impact your small business are the conditions that are placed on the borrowed money. Knowing more about these conditions is what’s crucial to understanding and optimizing these funds.

Government loans for small business owners in Ontario

The Ontario government, along with the federal government of Canada provides government loans as well as many other different types of funding programs which small business owners may benefit from.

This money is given to business owners across Ontario in order to help boost the provincial economy through creation of jobs and taxes.

There are different types of government loans that you should be made aware of:

● Guaranteed government loans
● Low interest government loan
● No interest government loans
● Conditionally repayable government loans

Each type of government loan being provided may have its own benefits.

The guaranteed government loans help you by ensuring that you have a co-signer. The co-signer in this case is the Ontario government. So if things don’t go as planned, you’re not on the hook for the full borrowed amount. Instead the funding agency helps cover a percentage of the fund. This way both of you share the risk.

Low interest and no interest loans offered by the Ontario government are very helpful because they often have better terms than any traditional bank loan. Most of the terms through these government funding agencies are negotiable. Allowing you to walk away with better options than you would with a traditional bank loan.

The conditionally repayable loans are also an excellent source of funding for your small. The conditions may vary from business to business and are often negotiable in order to have the best chances of success for you as a business owner. Some may have conditions such as not having to make a payment until you hit success and profit, or not having to pay interest on any amount borrowed for 12 months; or making a
payment based on your profits each month rather than a interest rate based repayment.

The government loans that are provided to small business owners across Ontario are crucial in order
to help cover various costs. These costs can range from the initial start up costs, to the month to month operational cost and expenses.

To be eligible for a government loan, a business plan is one of the first steps that you should spend time on. Your business plan should be very clear and explain your business growth, provide a clear breakdown of your funding needs and how you plan on using the borrowed money, as well show potential in terms of your financials and show if all is to go as well as plan.

This business plan will be the document that you use to apply for government funding and loan programs.

Traditional small business bank loans

A bank loan is simply a bank loan.

Often people think that a bank loan is the safest option because it’s option because it’s being provided to you through the bank that you regularly visit and do it your personal banking with.

It’s easy.

Visit your bank, ask to apply for a loan, fill out a form, sit back and wait for approval.

While it seems easy, it’s often a pitfall, or a mistake that many small business owners make by choosing to go with the bank loan before considering other options.

Why is it a pitfall you ask?

Bank loans often have high interest rates. The terms are often set in stone and not very negotiable. Banks don’t really care much about your business, and only care about the profits they will make off of your borrowing. If you are a startup business, borrowing money from the bank to start up is extremely difficult.

If you don’t have business credit, and you don’t have past history due to simply being a startup, the conditions placed on your account and you’re borrowing me borrowing maybe even worse.

While you may apply for a bank loan on the personal level, your personal credit may be impacted and you may be on the hook for the 100% of the borrowed money. This may also impact your personal credit if things are to go bad with the business.

While you may be able to use personal assets such as the value of your vehicle, or your home as collateral towards the loan, it is not always recommended.

Generally speaking, government loans offer better terms, better conditions and are optimized more for helping a small business owner start up or expand their business than a traditional small business bank loan.

Keep in mind that a traditional bank loan has a purpose. This purpose is to give you the money so you can pay it back with interest. While the same may be true for a government funding program, more resources are put to wards a small business owner to succeed as the government has a lot more to gain than just the interest on your payments.

If you succeed as a small business owner you are paying taxes, this creates a life long cycle of returns for the government.

No matter the type of government loan or business loan you opt for, always do the necessary research and determining what it is that your business can actually afford to pay each month if necessary to cover the cost of these loans.

Are there government grants and loans in Ontario
Funding

Are there government grants and loans for small businesses in Ontario

by Tyler Bailey
8 April 2022

A very common question the many entrepreneurs across Ontario regularly ask, “are there
government grants or government loans for small businesses in Ontario?”

The quick and simple answer is yes.

The Ontario government has hundreds of government funding programs provided through local, provincial and the federal government.

These funding programs come in the form of government grants, government loans, tax breaks and credits.

These programs are a set in place to help small business owners achieve success and cover the various costs that they may have. The uncertainty around the government funding programs availability availability comes from a basic misconception.

Many business owners who contact the government or the various levels of the Canadian or
Ontario provincial government and ask if there is funding for them and are denied may assume that there is no funding in the 1st place.

This type of information quickly spreads and the misconception of the availability of government grants and loans, begins.

While not every single business owner or entrepreneur is eligible for government grants and
loan, hundreds of grants and potentially helpful programs exist.

What do these government funny programs cover?

When looking for government funding be it a grant or a government loan, the availability of
funding depends on what it is that you need to cover in terms of your expenses. It also considers your location, as well the industry that your businesses in.

Not all government funding programs cover all specific.

For example, if you are a farmer from Milton, Ontario and you’re looking for funding to improve the equipment on your farm, it is often best to look at programs the cover farmlands, equipment purchase, growth – or to focus towards the agriculture industry specifically.

Looking at anything else whether it’s not specific enough or too specific, you may be denied.

A tip: When you are asking for government funding in the form of a government grant or a
government loan, be sure that your funding needs are broken down into individual and specific needs or requirements within your business plan. Doing so will ensure that you and your business can apply to multiple programs from the government of Ontario that may cover those specific needs individually. This will greatly increase the chances of success.

When it comes to government funding programs, typically small business owners ask to have
their startup fees covered, help with the hiring or wage support, to cover the cost of training employees, marketing, as well as the costs of purchasing the tools, equipment, supplies and inventory, or renovations to the business promises.

The more you can break down your specific funding needs the more options you potentially
may unlock.

The Ontario government has programs to cover nearly all start up expenses.

Take the time and review all options available in the funding database here at Ontario Startups to ensure that you don’t miss any of these helpful options.

Who can apply for Ontario government grants alone?

While not every single business owner is eligible for a government grant or a government loan, if you are a Ontario resident or considering moving to the province of Ontario, are starting a small business or already have one, you may be potentially eligible for a grant or a loan program.

Every government funding program will have a different set of rules and application criteria that the applicant must follow and must meet in order to be eligible.

Be sure to review these before you submit your applications.

If you are denied funding for any reason, be sure to check our reason and understand why you were declined in the first place.

Some of the more common reasons for application denial include:


● Applying to the wrong funding program
● Not being eligible to the criteria asked for
● Not applying with the proper business plan
● Submitting your applications incorrectly
● Asking for way too much in terms of funding
● Applying past the deadline
● Your personal financial situation may impact your application and success rate

If you are denied funding, be sure to speak to an Ontario Startups expert in order to get a better understanding of why you were denied and what options you have in terms of applying for other programs in the future.

Tip #2. Nearly 80% of funding applications are denied due to simple mistakes on the applications themselves. To avoid application mistakes always have an expert review your applications. As it can take weeks at a time to hear back from a funding agency, you cannot afford the time delay if you are denied, so always, always ask for help.

The Ontario government currently has over 500 different government grant and government
loan programs for entrepreneurs to apply to. These programs are available and ready for the
taking. If you are unsure if you are eligible for any of these funding programs rams start by creating a business plan.

Your business plan will be the 1st step you take towards figuring out what you require in terms of funding. Once your business plan is ready, your funding needs are clearly laid out, use the funding database provided here at Ontario Startups to see all matching options based on your
funding requirements.

Government Loans in Ontario
Funding

Government Loans in Ontario

by Tyler Bailey
28 February 2022

If you are deciding to start a small business in Ontario you may be considering certain government loans.

In most cases, capital will be required to start your business successfully. As a small business, you have dozens of startup expenses as well as operational expenses to keep your business running smoothly.

To cover these,  some sort of funding is required unless you have your own funds to start with.

Why do government loans exist

The Ontario government along with the federal government of Canada provides government loan programs to small business owners in order to boost the economy and give back. Ultimately the government benefits from providing you a loan, for a number of reasons.

  1.  The government gets their money paid back through interest.
  2.  The government gets paid back through taxes
  3.  By boosting the economy, you are creating jobs, and in other words your creating jobs for people who pay taxes.

No matter the type of funding that the government provides, they will not be losing money in most cases.

These government loans are provided to small business owners across Ontario and Canada and are there the help you succeed.

The funds can be used for a number of purposes including paying marketing costs, covering your initial startup expenses, the needed tools and equipment, hiring staff, and more.

Are you eligible for a government loan and Ontario

To determine whether you are qualified for a government loan in Ontario you have to consider a number of factors.

These factors vary from program to program as they do from business to business.

Your location, the industry that you are in, as well as the various funding needs that you have, are all factors in helping the government determine whether you are eligible for a government loan or not.

To see which government loan programs you might be eligible for your small business, use the funding database provided by Ontario Startups, and see all options available.

Before you consider applying to any government loan program you should have a business plan ready to go.

Your business plan should have an explanation of your business model, your marketing and growth strategy, your projected financials as well as a detailed breakdown of your funding requirements.

If you need assistance creating your business plan consider using the business plan builder tool provided by Ontario Startups.  It is a very easy tool to use plus you get expert assistance each step of the way

Different types of government loans in Ontario

While government loans are pretty much the same as a traditional bank loan they often come with better terms and have an extra layer of protection for you personally.

Government loans are some of the easier programs to get into, in comparison to government grants.

The different government loan types that are the most common include

  • No interest or low interest government loans
  • Conditionally repayable government loans
  • Government guaranteed loans

Each of these common government loan types has its pros and cons.

Depending on your small business and the very specific funding needs you have each of these government loan programs may be perfect for you.

No interest or low interest government loans

The government loans that have interest attached to them are much like bank loans. You borrow the needed money, a set term is in place, you pay back that money with interest.

These government loans are far better than any traditional bank loans simply due to the fact that they may have lower interest rates or better terms. This is all crucial information especially when you are starting a small business and every penny counts.

The no-interest loans provided by the Ontario or federal government of Canada are the exact same art same as the interest loans except they carry no interest. You borrow the money, use the money as needed, pay back.

Conditionally repayable government loans

These are some of the preferred government loans to apply for. Being conditionally repairable means that there is a condition placed on the loan.

These conditions can vary from program to program and business to business. Most, conditions are negotiable but can include conditions such as:

  • No repayment for a period of 5 years on the loan
  • No interest for the 1st 12 months
  • Only repay once you start profiting

These are a few of the terms that may be possible. Additional terms and conditions may be set and negotiated.

A conditional loan is favorable as it helps you keep more money in your pocket when you needed them most, especially during the initial startup phase.

Guaranteed government loans

No, it does not mean that the government guarantees you money. And no, not everybody can get a guaranteed government loan.

Guaranteed government loans simply mean that the government will be the co-signer on your loan.

Why does that matter?

If things don’t go as planned for you, with a traditional loan you are on the hook for 100% of the funds borrowed. This means any money that you borrowed no matter if your business is successful or not, you have to pay back.

With the government-guaranteed loan,  any money that is borrowed, the government is the cosigner. This means they are on the hook for part of the money.

You, you’re a small business and the government program agency, share the risk.

In some cases, the government can be on the hook for as much as 85% of the government loan.

This keeps some of the risks for you down.

These are the top government loans to consider when borrowing from the Ontario government or the federal government of Canada.

If your small business needs the initial capital to get started, a government loan may be your best option.

To see all government loans, and other types of government funding, try using the funding database and see all available options. The Ontario Startup experts are there to help support you, and guide you through the funding search step-by-step.

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