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.
- The government gets their money paid back through interest.
- The government gets paid back through taxes
- 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.