Business financing from a financial institution, such as a loan from a bank or credit union, is one of the most common forms of start-up financing. Before approaching a financial institution, it is essential that the entrepreneur has prepared a financial plan as part of his or her business plan, which should include the various sources of financing for the project. Financial institutions will base their analysis of the financing request on these two plans. In addition, to limit their risks, financial institutions will require certain commitments and guarantees from the company and the entrepreneur. First of all, financial institutions will require that the business be operated through a legal vehicle, the most common being a corporation. The financing offer will usually contain certain financial ratios that must be met by the business during the term of the loan. The entrepreneur must therefore ensure that the requested ratios can reasonably be met, failing which the financial institution could demand full repayment of the loan while enforcing its guarantees. Various types of collateral can be provided to guarantee repayment of the loan. In almost all cases, the financial institution will require a guarantee from the company’s shareholders and/or principal officers. In the event of default, the financial institution can turn directly to one or other of these guarantors for reimbursement. Various mortgages can also be granted in favor of the financial institution. Shares, bank accounts, receivables and/or company assets may be mortgaged in favor of the financial institution. The latter can also request an assignment of rights in a life insurance policy for the company’s senior executives. In the event of the death of the principal officer, the indemnity payable under the policy would then be paid directly to the financial institution in repayment of the loan. It is therefore in a start-up company’s interest to negotiate the terms and conditions of its financing carefully. Undertakings and guarantees that are too restrictive could hinder the company’s growth.