Banking & Finance - Frequently Asked Questions
(Answers supplied by the Royal
Bank Financial Group)
Q1. Can I operate business through my personal account?
A business is a separate entity with it's own responsibilities (i.e. tax reporting,
budgeting, etc.) so having separate records is advisable. From a daily transaction
point of view, you could not deposit a cheque payable to ABC Company in to your
personal account.
Q2. How much of my own money do I need to invest?
This varies based on the type of business and other circumstances. Banks will
not offer 100% financing, but may be able to assist with certain capital expenditures
or operating lines to assist with cashflow. The soft costs of a business start-up
(like advertising, stationery, printing, phone installation, etc.) should be
covered by the owner. Keep in mind that the higher the loan, the higher the
loan payment, which must be paid from your revenue stream. Also remember that
if you invest all of your money, you have no fall-back position, if faced with
a worse-case scenario (do you have a contingency plan?).
Q3. How do I obtain a merchant Visa/Mastercard machine
and how much does it cost?
Moneris Solutions, a subsidiary of Royal Bank and Bank of Montreal
are experts in "Card Commerce" either through conventional
methods such as "Retailers Machines", to wireless systems
and even secure payment solutions via the Internet for your Web
Site. Costs vary depending on your annual sales volume and desired
method of service. For a complete examination of your needs by
a Moneris Representative, we suggest you call toll-free (866)
319-7450 or via the Internet: http://www.moneris.com
Q4. I have a poor personal credit history, can I still qualify for a business
loan?
No. It is highly recommended that you review your credit rating
history with Equifax, Transunion Canada or the Credit Bureau before
you apply for a business credit, in order to uncover any irregularities
which you might then put in order. Cleaning up credit records
is a lengthy process, so give yourself plenty of lead time. Always
remember, pay at least the minimum required payment on or before
the due date in order to keep your credit record clean. Your credit
record can be your best friend, or your worst enemy.
Q5. Should I use my personal assets as security for a business loan?
In most cases specific collateral is not required. However, Personal Guarantees
are usual. If your business fails, you are personally guaranteeing repayment
of the debt. In a worst-case scenario, this may be done by way of sale of personal
assets.
Q6. Can I take out a personal loan for my business?
Yes. To fund equity in the business, some owners borrow personally to invest
in the business. The personal loan would have to be independently secured and
serviced separate from the business.
Q7. Do I need a business plan?
Yes. This is an important guide that you develop outlining your goals and objectives,
and action plans on how to achieve them. It tells you where you want to go and
how you're going to get there. If you don't have this important road map, how
will you know when you've arrived? It shows the bank that you have put serious
thought into your venture. Remember...a business plan is dynamic and should
be reviewed and updated on a regular basis. The Entrepreneurship Centre offers
courses in business planning and business plan reviews if you require assistance
with the preparation of your plan.
Q8. How do my personal debt obligations affect my ability to borrow for
the business?
It is important to review the individual's total debt servicing requirements.
If your credit is over-extended, additional debt could put serious strain on
your ability to repay. Remember, you have put forward a Personal Guarantee promising
to repay your business debt from your personal assets. If your business fails,
then you are personally responsible for the business debt.
Q9. What do I need to bring with me when I go to the bank for a loan, and
who should I make an appointment with?
Call the bank and ask to speak to a Business Banking Account Manager. Outline
your request to them and they will advise you on how to proceed. For financing
up to $100,000 a 2-page application can be faxed to you. The application along
with your Business Plan are key starting points to the credit review process.
You may also be asked to provide cashflow projections and pro forma (projected)
Balance Sheet and Income Statements. In some instances you may require the assistance
of a chartered accountant.
For financing requests under $100,000 you may call the following Royal Bank
Account Managers located around Ottawa:
- Nepean: Joanne Ironside, Tel: 721-4607
- Downtown Ottawa (90 Sparks): Tracey St Germain, Tel: 564-2196
- Bank and Heron, Ottawa: Leona Oliver, Tel: 733-8178
- St. Laurent & Smyth, Ottawa: Jo Villeneuve, Tel: 739-7118
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