Factors Used to Assess Applications
The equity contributed by the applicant - The BDC requires that the applicant have at least 5% to contribute towards all parts of the project to be financed except funds to be used as operating capital. The Investment Review Committee will assess the amount of cash equity and sweat equity that an applicant is willing to contribute to the project on a case by case basis.
Creditworthiness of the applicant - Since the applications we consider are usually high risk, the character (which includes his/her willingness to honor his/her indebtedness) of the applicant is very important. Each applicant will have their credit history examined to determine their desire to maintain good credit with all creditors.
Ability to repay the loan or capacity to repay - A persons willingness to repay is measured above. The ability to repay is a separate issue. To assess this factor we must look at the income of the applicant and the proposed business to determine if funds are sufficient to repay the amount requested.
Competition - Although the Business Development Center is separate from government, we still use funds given to us by government to provide loans to new and existing businesses. Therefore, we must be careful when assessing the competitive impact, or market disruption, that a new business will have on those that already exist. Competition will also come into play when assessing the company's ability to generate enough revenue to repay the loan.
Viability - Viability is really a combination of all factors together. This factor considers the proposed revenue and expenses of the business and attempts to discern whether the numbers are actually achievable in the business's market area. Financial projections can easily be manipulated to show large profits. Unrealistic projections, however, reflect badly upon management. They are either unable to correctly assess the level of expected business or have a good idea of the expected levels and yet intentionally inflate the figures to increase the chances of success of the loan application.
Collateral - Collateral is simply the items offered as security for the loan. It is used to assist with loan repayment if the client defaults. It can be something owned by the business or by anyone willing to give a personal guarantee to the company borrowing the funds.
Impact on the Community - Competitive impact as mentioned above, is one undesirable effect that new business may have upon the commmunities they provide services to. However, there are many positive effects a business can have as well, such as new jobs, more services in the community, more infrastructure and sometimes even improve the standard of living in the community. All of the anticipated effects upon the community are considered when an application is being assessed.
The Deh Cho Business Development Center (BDC) provides many services to assist businesses to start and / or expand. One of the important aspects of business start-up / expansion is the obtaining of financing to carry out the proposed idea.
The BDC can provide loans of up to $200,000 for a maximum of 10 years. Interest rates range from prime + 3% to prime + 7% depending upon the strength of the business plan / idea and the reliability of the persons involved with the proposed business. Some of the factors used to assess the idea, listed below, are also used to set the interest rate.
In addition to the provision of loans, the staff of the BDC also help prepare applications / proposals / business plans for other funding sources such as Resources, Wildlife & Economic Development, Business Credit Corporation, Aboriginal Business Canada, Federal Business Development Bank, Metis Dene Development Fund, NWT Development Corporation, banks and others.