Operating Loans/ Authorized Overdraft
- Overdraft protection on the commercial chequing account to provide working capital for the business.
- Rates may range from Prime to Prime +4.00% depending upon the security pledged and the financial strength of the borrower.
- Interest is calculated on the daily balance for the number of days the overdraft is in effect and interest is collected monthly at the end of the month.
- Security is taken and will vary with the business taking AOL.
- Expected to revolve, based upon business income.
Term Loans
- Generally used for the purchase of equipment, vehicles, machinery, etc.
- Amortization of the loans is structured to match the life expectancy of the asset being held for security, and the cash flow.
- Interest rate may be floating or fixed.
- Risk level affects rate of interest charged.
- Security is taken for most term loans. Type of security taken varies depending on the scenario and economic life of the asset.
- Payments are structured to correspond with cash flow of the business (generally monthly).
- No prepayment penalties.
Commercial Mortgages
- Commercial mortgages are charges against land and buildings owned by a commercial entity.
- Mortgages offer a longer amortization of up to 20 years. Again the amortization is linked to cash flow and life expectancy of the asset being pledged.
- Interest rates may be floating or fixed. Risk level affects the interest rate charged.
- Generally used for the purpose of land and buildings, although other eligible purposes would include refinancing and equity take outs.
- Payments are structured to correspond with cash flow of the business (generally monthly).
- Mortgages can be opened or closed.
- Prepayment of up to 10% is allowed without penalty
Letter of Credit/Guarantee
- Letters of Credit/Guarantee represent a revocable or irrevocable commitment to a third party (Beneficiary) to honour cheques, drafts, demands, or other claims on presentation or within a specific term.
- Most Letters of Credit are for domestic purposes; however, where a Documentary Letter of Credit (import/export) or domestic credits issued under the Uniform Customs and Practise for Documentary Credits is required, requests are to be referred to Credit Union Central Alberta Limited.
Canada Small Business Financing Act (CSBFA)
- Allows a small business to acquire a loan with less equity.
- Annual gross revenue of the business should not exceed $5,000,000.
- Loans under this program cannot exceed $250,000 in aggregate.
- May finance up to 90% of the cost of the asset.
- Security is taken in the assets financed.
- Maximum term is 10 years or expected economic life of the assets being financed, which ever is less.
- Interest rate may be floating at CUP + 3.0%
- Interest rate may be fixed at no more than 3.00% over the residential mortgage rate for the applicable term.
- These rates include a 1.25% annual administration fee payable by the lender to the government annually.
- Borrower pays a loan application fee equal to 2% of the amount of the loan, which is paid to the government. This fee can be added to the loan balance provided that the loan does not exceed $250,000.
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