The Canada Small Business Financing Program (CSBFP) helps businesses with gross annual revenue of $10 million or less borrow up to $1.15 million from a bank, credit union or caisse populaire, with the federal government sharing the lender's risk. You apply directly to a participating lender, the lender makes the credit decision, and the program makes it easier for that lender to say yes to start-ups and businesses with limited collateral.
How the program works
The CSBFP is run by Innovation, Science and Economic Development Canada (ISED), but ISED does not lend money, take applications or approve loans. Participating financial institutions do all of that. When a lender registers a loan under the program, the government agrees to reimburse up to 85 percent of the lender's net eligible loss if the loan defaults, up to each lender's overall liability limit.
That shared risk is why lenders use the program. It lets them finance a new business, a leasehold build out or a first equipment purchase that would otherwise fall outside their conventional credit policy. You still repay the loan in full; the guarantee protects the lender, not you.
The program is the Canadian counterpart to the US SBA 7(a) loan. The structure differs: the SBA guarantees a share of each loan, while the CSBFP reimburses a share of the lender's losses across its program portfolio.
Loan limits and eligible uses
| Category | Program maximum | What it can finance |
|---|---|---|
| Total per borrower | $1,150,000 | All CSBFP term loans and lines of credit combined, including related borrowers |
| Term loans | $1,000,000 | Real property, equipment, leaseholds, intangibles and working capital |
| Equipment and leasehold improvements | $500,000 within the term loan limit | New or used equipment, new or existing leasehold improvements |
| Intangible assets and working capital | $150,000 within the $500,000 | Software, franchise fees, website development, start-up costs, inventory and operating costs |
| Lines of credit | $150,000 | Day to day working capital |
Term loans can finance the purchase or improvement of commercial land and buildings, which makes the program a common route for owner occupied commercial real estate up to the $1 million limit. They can also finance the asset portion of a business purchase, up to the lesser of the purchase price or the appraised value of eligible assets.
The program cannot finance share purchases, assets bought by a holding company, vendor take back financing, or goodwill in place of eligible assets. Farming businesses are excluded and are served by the Canadian Agricultural Loans Act program instead. For-profit businesses, not-for-profits, charities, sole proprietors, partnerships, corporations and cooperatives can all qualify, as can start-ups with no revenue history.
Fees, rate limits and terms
The program sets ceilings rather than prices. Within those ceilings, each lender sets its own terms.
Registration fee. A one time fee of 2 percent of the loan amount for term loans, or of the authorized amount for lines of credit. The lender pays it to the government and collects it from you, and you can finance it into the loan.
Administration fee. An annual fee of 1.25 percent on the outstanding balance, which the lender pays to the government. Lenders usually account for it in the rate they offer you.
Rate ceilings. Floating rate term loans are capped at the lender's prime rate plus 3 percent. Fixed rate term loans are capped at the lender's single family residential mortgage rate for the same term plus 3 percent. Lines of credit are capped at prime plus 5 percent. Your actual rate can be anywhere under the ceiling and depends on the lender and your file.
Term. Term loans carry up to 15 years of program coverage for every asset class, and the lender may amortize over a longer period. Lines of credit carry up to 5 years of coverage, with options to renew or convert to a term loan.
Security and guarantees. Loans for real property and equipment are secured on the assets financed. Leasehold, intangible, working capital and line of credit financing is secured on business assets, usually through a general security agreement. Lenders may also take an unsecured personal guarantee from the owners, up to the original amount of the loan disbursed. Personal assets such as your home cannot be pledged as security for a CSBFP loan.
Other lender fees. Lenders can charge their usual setup and renewal fees. These are paid directly to the lender and cannot be financed through the program.
What participating lenders look for
A CSBFP application is still a credit application. The guarantee widens the lender's appetite, but the lender wants to see that the business can repay.
- A business plan with realistic projections, especially for start-ups. Lenders read the cash flow forecast closely and test the assumptions behind it.
- Owner experience in the industry and in running a business.
- Owner equity. The program can finance up to the eligible cost of assets, but most lenders expect you to contribute some of your own money, often 10 to 25 percent of the project, particularly for new businesses.
- Personal credit history of the owners and any existing personal and business debt.
- Quotes, invoices and agreements that support each eligible cost: equipment quotes, a lease for the premises, leasehold contractor estimates, a purchase agreement or a franchise agreement.
- Financial statements and tax filings for existing businesses, usually two to three years.
- An appraisal when you buy a going concern or real property. It must be dated within 365 days before disbursement.
Eligible costs incurred up to 365 days before the loan is approved can count, which helps owners who started a build out before financing was in place.
Process and timing
- Choose a lender. Most Canadian banks and many credit unions and caisses populaires participate. Ask your current institution first. ISED publishes a finance map of participating lenders by area.
- Submit your proposal. Bring your business plan, forecast, quotes, personal financial statement and any existing financial statements. Ask the lender to consider the file under the CSBFP.
- Credit decision. Expect two to six weeks, depending on the lender and the completeness of your file. Start-up and franchise files with clear documentation tend to move fastest.
- Disbursement and registration. The lender advances funds against proof of cost or payment and registers the loan with ISED within six months of first disbursement.
Not every branch offers the line of credit product yet, so if you need a CSBFP line, confirm availability early.
Which lenders offer it
The major Canadian banks all participate and handle the largest share of CSBFP volume, especially for franchise and start-up financing. Credit unions are active participants across the country, notably in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario, and caisses populaires serve many borrowers in Quebec. A local credit union or a bank's small business centre often has the most CSBFP experience in a given community.
If your project is larger than the program limits, a lender can pair a CSBFP loan with a conventional term loan or with financing from the Business Development Bank of Canada. If you need cash quickly or lack the documentation the program requires, compare it with equipment financing or a conventional line of credit. For start-ups, franchise buyers and owners making a first leasehold or equipment investment, the CSBFP is usually the first program to ask about.
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