When it comes to small business loan terms, almost everything is negotiable. With over 700 chartered, commercial and credit union lenders in Canada, you’ll be able to find the lender that’s right for you. Shop around and be prepared to negotiate the terms of your loan. Here are some of the terms and conditions you can negotiate:
￼• Interest rate — Your interest rate will usually be quoted as prime plus, meaning the prime rate that banks charge their most creditworthy customers, plus additional interest. If you are quoted prime plus three, this means you’ll be charged the prime rate of interest plus three percent.
The prime rate is published daily in business newspapers. Your loan’s interest rate can be fixed or variable just like a mortgage — so make sure you feel comfortable with where interest rates are headed before you commit one way or the other.
• Loan maturity date — The term of the loan should depend on the useful life, in years, of the assets that the loan is secured with. Term loans are usually used to finance equipment, where the term of the loan is matched to the useful life of the asset. Short-term needs should have short term loans, and long-term needs should have longer term loans.
• Repayment terms — Typically, the repayment schedule is monthly or annually. Paying monthly will lower the total amount of interest paid on the loan because interest won’t have as much time to grow.
• Loan covenants — Remember that lenders are not in the habit of giving money away. They may impose other restrictions on you or your business activities, particularly if you are a novice entrepreneur.
The bank may ask for regular updates on your financial situation such as cash flow, income statements and balance sheets or input on your salary. This might restrict you from taking too much cash out of the business until your loan has been repaid, or it may require you to keep your day job while you run your business at night.
Industries don’t stay the same for long. So how do you analyze your industry when it’s constantly changing? It helps to have a framework.
According to Harvard University professor Dr. Michael Porter, there are five main forces that determine competitive intensity and overall industry profitability. Here’s Porter’s 5 Forces Model. Apply it to your small business’ industry and you should gain a clearer picture of what’s going on.
1) Intensity of Competitive Rivalry
This refers to direct competition between companies in the same industry, and degree of aggressiveness of rivals.
2) Threat of Entry of New Competitors
New companies often enter the market that compete with existing companies. How do they change or impact the industry?
3) Threat of Substitutes
This is the existence of companies offering products or services that may be substituted for your product or service. This can also include the customer’s ability to switch to alternatives.
4) Bargaining Power of Suppliers
Suppliers of raw materials, components, labour and services can hold significant power if the resources they provide are unique or scarce, or if there are only a few suppliers.
5) Bargaining Power of Customers
This includes the power that customers hold — including the ability to put a business under pressure — and the effect of customer sensitivity to price changes.
If you’re starting a brand-new small business, then you can be a green, eco-friendly business right out of the gate. Any effort, no matter how seemingly small, can make a big difference to the environment and your reputation.
For example, Volvo dealerships boosted their eco-friendly reputation by offering Volvo-branded bicycles on loan to customers during vehicle repairs. The bicycles help to encourage travelling by bicycle more often, and are also cheaper for the dealerships to supply and service.
Not sure where to start? Here are 16 ideas you can use to be a more environmentally-conscious small business:
Purchase energy efficient office products and equipment such as energy-saving light bulbs.
Employing energy-efficient technology such as ENERGY STAR qualified products can help reduce emissions from power plants that produce energy.
Reduce the amount of useless paper—try extra hard to run a paperless office. Forward by email, and proofread on the screen.
Recycle paper products including newspapers, magazines, printer paper and grocery or other bags.
Consider telecommuting, or running a virtual office.
Recycle old computers and gadgets. Many Staples store locations participate in electronics recycling — you can drop your electronics off at some of their locations.
Consider using materials that you can reuse or recycle. Implementing a waste reduction program helps cut down the amount of waste materials put in landfills or incinerated, while reducing greenhouse gas emissions and deforestation.
Try to create a niche in the green market and produce or provide products and services that are environmentally-friendly.
Buy biodegradable office supplies like pens, paper and file folders.
If you can, drive company-owned hybrid vehicles.
If you expand, look for a green building with features like solar energy, wind-turbine energy, or eco-friendly construction materials.
Consider using green power and renewable energy sources like wind, solar, geothermal, hydro and biomass.
Consider energy-efficient design for new construction and/or remodeling to utilize efficient equipment, while encouraging the use of natural energy sources.
Encourage employees to get involved and help make the company more green.
Let your customer know you are an environmentally conscious business—this is important for many customers today.