FAQs about the Canada Small Business Financing Program

What is the Canada Small Business Financing Program?

The Canada Small Business Financing Program is a legal program created in 1998. It allows financial institutions to loan money to borrowers who need assistance with their small businesses. Banks and other lenders create payment plans for businesses to repay their loans with future profit.

How can the CSBFP help?

CSBFP loans can help companies acquire, repair or improve their operating equipment and locations to help them start or build their business. Different from loans that people may seek for general startup costs, these are loans specific to business operations. There are several small business costs that are eligible for loans:

• Commercial land or buildings: also described as “real property” or “immovables”, borrowers can apply for a loan to purchase or improve locations. This includes construction and renovation costs where you intend to use at least half of the location for operating purposes within the first three months.
• Equipment improvements: borrowers can apply for loans to purchase, repair, or improve their operating equipment. This can be physical equipment like manufacturing equipment or digital equipment like websites.
• Leased equipment or buildings: borrowers can take a loan out to improve equipment or locations they lease out.
• Registration fees: registration fees for a CSFBP loan are 2% of the total loan.

Some eligible expenditures include:

• Walkways
• Brokerage costs
• Toolmakers
• Cases and fixtures for inventory display
• Fencing
• Landscaping on the operating or leased properties
• Parking lot maintenance like paving
• Wood and building materials

What businesses are eligible to apply under the CSFBP?

Most new businesses of less than 500 employees or that make less than $10 million annually are eligible. Eligible business types can vary between corporations, sole proprietorships, and cooperatives. Businesses that apply must determine the expenditures the money will apply to and the loan application must be within the maximum amount. Other eligibility requirements include:

• The owner operates the business in Canada
• Products and services are available and sold to the public
• The business is for-profit
• The business purchases assets in Canada if operated by a non-citizen
• The business can be different from the borrower’s primary source of income, like a side business

What amount can I borrow?

The amount of your loan can largely depend on your business’s gross income and your proven history to repay. You can often negotiate amounts with lenders at financial institutions and adjust your business plan to show how much the loan can improve your profit. Some general borrowing rules include:

• Borrowers can take up to $1 million for purchases or improvements
• Borrowers can borrow up to $700,000 to purchase a new property
• Borrowers can take multiple CSBFP loans out amounting to $1 million
• Borrowers can borrow money for leased property and equipment up to $350,000

Are there borrower eligibility requirements?

Yes. Borrowers must consent to the loan and oversee repayment of the loan. Financial institutions perform a credit and background check along with an assessment to confirm their repayment availability.

What is ineligible for financing?

Businesses cannot use financing for assets like stocks and capital, inventory items they plan to sell, or goodwill. Other reasons a business need might be ineligible include:

• The equipment or building is for a non-profit organization
• The business is not yet a legal entity
• The asset doesn’t support the operation of the legal business entity

Consider your business needs and inquire at a financial institution to determine if the CSBFP can help. Some specific ineligible expenditures include:

• Permits
• Business document creation
• Equipment or building improvements where the borrower plans to sell them
• Personal improvements like home improvements
• Purchasing assets for inventory and resale
• Marketing materials like brochures
• Legal or financial fees
• Office supplies
• Training costs

How to apply for a CSBFP loan

There are a few steps you can follow to apply for a CSBFP loan:

1. Determine your need

Evaluating your equipment and property for potential expenditures is the first step. For example, if you are looking for new tools and equipment, determine if you want to spend money to improve your existing tools or if you need new tools altogether. If you know newer assets use updated technology or have more efficient features, consider new equipment.

2. Create a business plan

Once you know what you can use the loan for, draft a targeted business plan. This shows how much you plan to spend and what the potential return on investment is. This could vary based on expenditure. For example, an extended parking lot can increase the number of customers you can have in your store at one time, so you can estimate the effect of additional traffic. A clear business plan with projections can improve your odds of approval.

3. Consult a financial institution

Bring your business plan, along with any relevant business history, to a financial institution for advice. You will later submit your application to them. Finance professionals that specialize in small business financing help identify if you’re missing any information, determine approval odds, and make suggestions based on your individual standing and business performance.

4. Apply for a loan

When you have the details, apply for the loan through the financial institution near you. You may need to complete a physical form and submit it with your completed business plan and financial records. The team performs the necessary background check, credit check, and payment assessment before approval. Although this is a government program, financial funding for the loans is from the institution themselves.