Canada Small Business Financing Program

Find out what it takes to receive funding as a small business owner in Canada.

Funding is a crucial factor for running a business successfully. It does not matter whether you are in your home country or far away from home; you still need adequate funds to run your business. If you are in Canada, however, you are at an advantage of getting financial help for your business through the Canada Small Business Financing Program.

This page will provide you with comprehensive information on the Canada Small Business Financial Program, how it works, and how you can apply to get funding for your business.

What is the Canada Small Business Financing Program?

The Canada Small Business Financing Program (CSBFP) is a small business funding scheme administered by the Small Business Financing Directorate of Canada. The aim of this program is to encourage small business owners and start-ups to obtain financial aid that can help scale up their businesses.

While you can approach banks and other financial institutions directly to get loans, the Canada Small Business Financing Program makes it easier for you as a small business owner to get those loans from financial institutions. The program shares the risk involved with lenders, making them more eager to give loans to small business owners in Canada.

Since the past decade, more than 56,000 different loans have been granted to small business owners in Canada through this program. This totals to about #10 billion dollars.

How Much Financing is Available through this Program?

Through the Canada Small Business Financing Program, a business owner in Canada can obtain a maximum of $1,000,000 as funding from any borrower. Out of this amount, a maximum of $350,000 is applicable for use in purchasing or improving new or used equipment and leasehold properties.

Who is Eligible for Loans Under the Small Business Financing Program?

Suppose you are a small business owner or start-up operating in Canada, and your business makes a gross annual revenue of no more than $10 million. In that case, you are eligible to obtain loans through CSBFP. In essence, even if your gross annual revenue is below $10 million, you will be able to get a loan through this program. Business owners with annual revenue above $10 million are not eligible for loans under CSBFP.

Farming businesses are also not eligible for this program. However, they can benefit from other funding programs for business owners in the farming industry. Farmers can check the Canadian Agricultural Loans Act Program for more information.

Before, non-profit, charitable, and religious organizations could not obtain funding through CSBFP. The restriction was removed on June 30, 2021, allowing these categories of organizations to also receive funding through the program.

Trust and holding corporations are not eligible borrowers for loans under the Small Business Financing Program. This is because:

  • A trust –whether personal, private, or social trust is not a legal entity. Therefore, it is not eligible for a CSBFP loan.
  • The asset a holding corporation acquires is not used in the operation of a business. Rather, it is owned by another legal entity who is not the borrower.

Further Clarification on Eligible Businesses

Eligible businesses are businesses which:

  • Are carried on in Canada. With a business place in Canada and with assets held in the country.
  • Offer their products or services to the public (business could be wholesale or retail).
  • Their gross annual revenue does not (or will not) exceed $10 million during the fiscal year to receive the loan.
  • For a new business, the estimated gross annual revenue during the first one year (52 weeks) should not exceed $10 million.
  • In addition, a borrower can operate different businesses or incorporations and be able to obtain CSBF loans for as many of the businesses that are eligible. In this case, each business must operate as separate legal entities and at different premises. Also, none of the businesses should derive more than 25% of their actual or projected gross revenues from the other. That is, each business owned by one owner must be entirely independent of the other for each of them to be eligible to receive separate CSBF loans.
  • Businesses owned and operated by foreign citizens are also eligible for funding. However, the business must fully operate in Canada, and all assets to be purchased must be used within Canada.

What Can Be Financed?

A loan obtained through the Canada Small Business Financing Program can be used to finance the following expenses:

  • The purchase or improvement, or expansion of land or buildings used for business purposes.
  • Maintenance, or improvement, or buying of new (or used) equipment.
  • The purchase of new or existing leasehold improvements. This is mostly about renovations that the tenant does to a leased property.

A loan you obtain through Canada Small Business Financial Program is not for financing costs like:

  • Working capital
  • Inventory
  • Goodwill
  • Franchise fees
  • Research and development

However, you can use the loan to finance the following, for example:

  • Commercial vehicles
  • Compute or telecommunications equipment and software
  • Production equipment
  • Hotel or restaurant equipment
  • Eligible costs to buy a franchise
  • etc

How do you Apply for a Loan?

CSBFP loans are handled independently by financial institutions that offer financial aid to business start-ups. They are solely responsible for approving your business to get a loan and will manage all other processes involved.

Therefore, to get a CSBFP loan, you must apply directly to a lending financial institution of your choice in Canada. Below, we have explained the process involved in doing this in simpler terms:

#1. Discuss your Business Needs with a Financial Officer

Meeting a financial officer to discuss the needs of your business and why you think you need a loan is the first step to take. Of course, you will be submitting your business proposal to do this. The proposal would contain all those details, and you will present them as formally as possible.

The financial officer would review your business proposal and use it to determine if you are eligible for financing under the program or not.

You can approach financial officers in banks, Caisse populaire (Quebec), or Canadian credit unions.

#2. Understand the Institution’s Terms and Conditions of Loaning

Once the financial officer approves your business to be eligible for a CSBFP, you can go ahead to officially accept a loan from the financial institution. Before doing this, though, be sure to have understood the terms and conditions attached to obtaining loans from such a financial institution. Do not shy back from asking questions on certain conditions you do not seem to understand. If any of the terms do not seem fair to you, it would be best to get another financial institution with loaning terms you find more lenient.

#3. Obtain the Loan and Get it Registered

With your agreement (usually by signing a legal document), the financial institution will disburse the loan to you. They will also get it registered with Innovation, Science and Economic Development of Canada. Funding through Canada Small Business Financing Program does not earn official recognition unless the institution registers it with ISEDC.

What are the Costs and Interest Rates that Apply?

The loaning financial institution will determine the interest rates that apply to your loan. Interests can be fixed or variable. However, interest rates on CSBFP loans are guided by these rules:

For Variable Rates: The maximum amount chargeable is the lender’s prime lending rate plus 3%

For Fixed Rates: Maximum amount chargeable is the lender’s single-family residential mortgage rate for the loan period plus 3%.

Also, the borrower will pay of registration fee, which is equal to 2% of the total amount loaned under the program.

Other Terms that Apply Under Canada Small Business Financing Program

These additional terms also apply for every funding activity under CSBFP:

  • Lending financial institutions must take security in the assets they finance.
  • Lenders have the option to take additional unsecured personal guarantees on loans.

How Do I Find a Lending Financial Institution?

Through Innovation, Science and Economic Development of Canada, the Government of Canada has provided a simple means for business owners to find lending financial institutions in the country. You can either use the financing map or check the CSBFP list of lenders.

Some of these lending institutions are:

  • Bank of Montreal
  • Canada’s Credit Unions
  • Canadian Western Bank
  • Industrial and Commercial Bank of China in Canada
  • Mouvement des caisses Desjardins
  • National Bank of Canada
  • Royal Bank of Canada

How to Contact the Small Business Financing Directorate?

Like we have already mentioned, the Small Business Financing Directorate administers the Canada Small Business Financing Program. To reach out to the office for more information or further enquiries, contact the directorate through:

Mailing Address:

Small Business Financing Directorate

Innovation, Science and Economic Development Canada

235 Queen Street,

5th Floor, West Tower,

Ottawa, Ontario

K1A 0H5

Telephone (Toll-free in Canada): 1-866-959-1699

TTY (for hearing-impaired persons): 1-866-694-8389

Fax (Ottawa): 343-291-1837

Business Hours: 8:30 am to 4:30 pm (Eastern Time)

Website: https://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/home

Frequently Asked Questions

What is the Maximum Amount Available as Loan through the Canada Small Business Financing Program?

As a small business owner in Canada, you can obtain a maximum of $1,000,000 as loan from any one lender.

Where can You Obtain Funding through the Canada Small Business Financing Program?

Financial institutions in Canada like banks, Credit Unions, and Caisse populaire are responsible for giving loans under CSBFP.

When is the Deadline to Apply for CSBF Loans?

There is no deadline to apply for loans under the Canada Small Business Financing Program. Small business owners can apply for loans anytime as long as they meet all eligibility requirements.

Conclusion

The Canada Small Business Financial Program provides excellent opportunities for small business owners in Canada to obtain needed funding. The program is particularly of great advantage to foreign business owners in Canada who may find it harder to get loans using other means.