So I just completed my one year in Canada and exactly after one year, I have got my business loan approved. As you all know I was running a business in India just before moving to Canada and I was always curious to start something similar in Canada. There were a few challenges. Neither I had any retail space like the one I had back in my home country nor I am familiar with the the taste of Canadian customers. So, I started checking for the retail spaces in nearby malls because those are the places with a lot of customers’ footfalls. I could have searched in other places like local shopping centers where you have stores like Starbucks, Sobeys and other small places like clinics etc but there I feel that unless my brand is well known, the customers would rarely drop in. I needed a space badly where I could keep some of my products and do some experiments to get an understanding what kind of products pulls the customers here. Also, I wanted to know what the price range of the products should be which won’t turn the customers off.
So, I started searching for a retail space which I could use for my experiments for about a month. I called up sales office of a well known local mall and explained my requirements such as a pop-up shop. They informed me that their monthly rent for a pop-up shop in their mall for about 10 feet x 10 feet space is between $6000 to $8000 based on the location in the mall. They need minimum one month commitment and I’ll need to send them my product details first which I want to sell there. Only after approval, they’ll allow any vendor to start selling their products.
As this amount was too high, someone suggested me to check local farmers’ market. This is an indoor space in most of the Canadian cities where local farmers sell their produce. This market too gets a lot of customer foot fall and opens only four days a week i.e. between Thu and Sun. I visited there and after inquiring, I came to know that their monthly rent varies between $1300 to $1800 based on the location and size of the shop. This sounded feasible to me but then the lady at their sales office informed me that they need a minimum lease of four years. So again I had to drop that idea.
After a few days, while browsing local classifieds advertisements during the weekend, I came across an advertisement to buy a shop in an upcoming local mall. This mall had a unique concept where the shops were being sold as Condo Units and the price mentioned there looked interesting too. I decided to check that out. I visited their sales office and blocked one unit of 224 square feet size by giving a cheque of 5% of the amount. I got 10 days of time to go through the sales agreement and arrange my mortgage and I was assured that in case I want to back out within those 10 days, I would get my cheque back. I had to pay a down payment of 25% of the total amount and for remaining 75% I could arrange for the mortgage. I approached 4-5 different banks – ATB, CWB, Scotia Bank, BDC and a mortgage broker. Only ATB and CWB had an option where the customer can buy a commercial property as an investment whereas Scotia and BDC give loans only for owner occupied properties where the owner himself would start his own business.
After having a lot of discussions, I have been told by ATB, CWB and Scotia bank that since I am self employed and new to Canada, they can’t fund. They need minimum past two years tax filing papers as part of the application which I didn’t have. But all of them suggested me to go to BDC (Business Development Bank of Canada) and said that I’ll have better chances of getting loan from them. My mortgage broker was sending me questionnaire to know more about the kind of business I want to open which I was replying. I was already having discussions with BDC and they needed just the following documents. I was applying through my company which I started in 2017 when I got my first contract and my wife and I both are the partners in that company.
- Credit history / report of me and my wife
- Business Plan – highlighting my past experience, if any (template available on http://www.bdc.ca)
- Cash Flow Plan and Sales Forecast (template available on http://www.bdc.ca)
During discussions, I came to know from BDC that the chances are higher for the people who have prior such business experience and since we had that, the accounts manager at BDC was quite hopeful about the loan getting approved. As this process was taking time, the account manager asked me to request for 1 week extension of the 10 days deadline from the builder. I requested my property broker and he confirmed one week extension of the back out date.
Finally, after 3-4 days, I received the approval letter from BDC. The BDC accounts manager asked me in the beginning that whether I need any loan for startup capital also. I requested her that I’ll need about $25K for getting the interiors done. So in the approval letter, this $25K too was approved. I have got a 15 days time to accept / reject the offer. As the interest rates and other terms and conditions are better than what other banks would have provided, I am going to accept the offer and submit the required documents.
So finally, I’ll have to spend some extra amount in addition to 25% that I would be paying to the builder are as follows:
- BDC Mortgage Processing Fee: 1% of the loan amount
- Legal Fee for the BDC’s lawyer: $2000 to $2500
- Legal Fee of my lawyer: $2000 to $2500
- GST of the retail space that I want to buy (not funded from BDC)
So during the entire process, I found BDC very helpful in funding the startup businesses.
Thanks for reading…