How to save money with an interest-free loan

An indepth look at the financial impact the Clarence Campeau Development Fund can have

A typical question we get from would-be clients is, “do you offer grants for Métis-owned businesses?”

The answer is yes, with an explanation. While we do have grants for business planning and business supports, our equity contributions are in the form of an interest-free loan. This interest-free loan is offered under a variety of programs, most notably the Business Development Program 

When Métis entrepreneurs hear that we offer loans they ask, “what is the interest rate”? The answer is 0%. The great thing is an interest-free loan has similar benefits to grant funding, it is a form of equity and we don’t charge interest or take personal property as security! Over time, you’ll save a ton of money and the flexibility you would not get from other lenders. It’s a lot more than you would think!  

Let’s break it down for you in a typical case.  

Starting a Business without the Clarence Campeau Development Fund 

For example, say you were buying a business for $300,000. You had $25,000 in cash to contribute to the purchase and the bank was lending you the other $275,000.  

Using an interest-rate of 6%, with the loan being repayable over 10 years, you’d pay $91,367.66 in interest. The breakdown of the details are shown below:

Your Business with the Clarence Campeau Development Fund 

Now, say that you’ve realized that purchasing the business isn’t feasible if you have to pay that munch interest on your loan and you need to find alternate financing options, or you were planning on expanding in a few years and needed to save additional cash to help finance some new equipment. You now decide to call CCDF. We look at your prospective business and after some due diligence we’re able to continue to the next stage (see items required by us!).

The updated financing structure now includes CCDF with a $100,000 interest-free loan under our Business Development Program. The bank is now financing only $175,000, with $100,000 interest-free loan from CCDF, and your cash of $25,000.

You would now pay $58,143.05 in interest over 10 years using that same interest rate! The details now look like this: 

That’s a savings of $33,224.61! It’s kind of hard to wrap your head around it if we don’t break it down like this, but that’s money you would’ve had to pay the bank. In other words, the interest-free loan is a grant over time. It’s interest charges that you’re not required to pay.  

Métis entrepreneurs can choose to use this extra money on whatever they think is necessary. Some use it on new equipment, essential repair and maintenance, hiring new employees, or improving cash flow. Entrepreneurs know their business best.   

Final Word 

As we mentioned above, the amount of money saved depends on many factors (bank interest rate, term, when it compounds, when you pay, etc.). Every situation is unique and the amount of money you save over time will be different!

But one thing is for certain, our Business Development Program can help Métis entrepreneurs save money, improve your cash position, and set you up for success!  

Let’s get started!

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Business Advice Blog for Métis Entrepreneurs in Saskatchewan