As the old saying goes, ‘you need to spend money to make money’. Similarly, if you want your business to grow, you need to invest in the expenses that come with it. But paying upfront isn’t always possible – this is where business loans come in. According to a Stats Can report, since the start of the pandemic, small to medium sized businesses have been put under major strain, and business owners may need additional help this year (beyond government programs) to keep the lights on.
According to a recent survey of 1,176 Canadian adults by Finder, more than one in ten (13%) of Canadians plan to take out a business loan in 2021. For information on who is planning to take out a personal loan in 2021 see our report here.
Non-business owners almost just as likely to take out business loans
You may expect that out of those taking out business loans, the majority, if not all, are business owners. But that isn’t the case. Of those that are not self-professed business owners, they may have plans to become ones in the near future.
Out of the adults surveyed, only about one in five (19%) are business owners, and not all of them are taking out loans. In fact, of those taking out business loans, 61% are business owners and 39% are not.
More specifically, about two in five (42%) business owners say that they will take out a business loan this 2021. However, over half (55%) expressed the likelihood they will take out a business loan, with 27% saying it is very likely and 28% saying just likely.
More men are taking out business loans than women
Regardless of whether they’re business owners or not, more men (16%) are taking out business loans compared to women (10%) this year.
And though a little under a fifth (16%) of women say it’s either very likely (5%) or likely (11%) that they’d take out a business loan, nearly a quarter (24%) of men say the same: 15% say it’s likely they’ll take out a business loan and 9% say it’s very likely.
Millennials most likely to take out a business loan
A little over a fifth (22%) of millennials are business owners, with generation X just a touch behind at 20%. Generation Z comes up at third with 17%, and boomers wrap up the list with 12% owning a business.
It may come as no surprise then, that millennials also top the list in terms of who’s taking out business loans, with nearly a fifth (19%) of this generation doing so regardless if they own a business or not. It looks like more of generation Z are making bold business moves, with 17% taking a business loan. They are then followed by generation X (9%) and boomers (4%).
16% of Saskatchewanians and Albertans will take out a business loan
Saskatchewan and Alberta top the list with 16% of Canadians from these provinces saying they’ll take out a business loan in 2021. This is then followed by Quebec with 15% and Ontario with 13%.
Meanwhile, Quebec takes first place in terms of the highest percentage of people saying they’re likely to take out a business loan in 2021, with 30% of Quebecers saying they’d do so. Specifically, 22% say this is likely while 8% say it is very likely. Quebecers are then followed by Saskatchewanians (24%) and Ontarians (18%).
Does income affect your plans of taking out a loan?
It looks like level of income does have some influence on whether Canadians plan to take out a business loan in 2021. The second highest income bracket ($100,000-$119,000) come out on top with 18% taking out a business loan, followed by those earning $80,000-$99,999 at 17% and $60,000-$79,999 at 15%.
In terms of likelihood, a little over a quarter (26%) of those earning $100,000-$199,999 are either likely (9%) or very likely (17%) to take out a business loan. They are then followed by those earning $60,000-$79,999 and $120,000 or over at 23% each. It may be worth noting that for both these brackets, there are more people who are just likely to take out a business loan (14% and 15% respectively) than very likely (9% and 7% respectively).
Decided your business needs a loan? Here are some tips on getting approved.
- Check and make sure your business meets the eligibility criteria before applying for any loan. Generally, business loan applications look at your business age, minimum credit score and monthly or annual revenue.
- Keep your documents in order. Required documents vary by lender, but some common requirements include business bank statements, tax returns and a profit and loss statement among others. Making sure these documents are always updated and accurate will make for a smoother application.
- Know which type of business loan you need. There are several loans available for business owners all offering different terms and benefits. Understand which type of loan works best for your situation so as to avoid delays. Check out our guide to getting a business loan to compare providers and learn more.
- Create a strict budget and stick to it. When working on your business plan, you need to consider the states of both your debt and your budgets. Study your current cash-flow situation so you can assess how much you can afford to set aside for debt repayment.
- Make extra payments. Paying more than the minimum amount on your loan repayment may sound like a pain in the budget, but in the long run, it’ll be beneficial to reduce the time it takes to repay your loan. This is especially the case if you get a larger monthly revenue than anticipated: Consider putting some of that extra cash toward repaying your loan.
- Reduce your expenses. Even if you feel you can set aside a decent amount to repay your loans monthly, reducing your expenses may still be beneficial. This can be as simple as selling any equipment or software your business rarely uses to re-evaluating your expenses for costly operations such as marketing.
- Refinance or consolidate. When better rates are offered, it’s wise to jump on them because you’ll ultimately end up saving money. And, if you consolidate multiple loans, you’ll save yourself the headache of having two or three different payments a month.
- Get a balance transfer credit card. Sometimes credit card providers will offer interest-free and low balance transfer rates. This is a smart decision if you have a small amount to pay off on your loan. You’ll pay no interest if you can lock in a card with a 0% balance transfer rate, but be careful to pay attention to the time frame of the promotion.