Short answer
The Canada Small Business Financing Program is federal loan insurance delivered by banks and credit unions, under which the Minister covers up to 85 percent of an eligible loss sustained by the lender. The total borrower cap is $1.15 million: up to $1,000,000 in term loans, of which no more than $500,000 can go to equipment and leasehold improvements and, within that $500,000, no more than $150,000 to intangible assets and working capital. A separate line of credit adds up to $150,000. Businesses need gross annual revenue of $10 million or less. Farming is excluded.
This page describes a federal programme and is general information. Confirm the current terms with the delivering financial institution or with Innovation, Science and Economic Development Canada before relying on any figure here.
What it is
It is not a government loan. Your bank or credit union lends the money on their own paper and is solely responsible for approving it, and the federal government carries up to 85 percent of an eventual eligible loss. That backing is what lets a lender advance against an asset they would otherwise discount, which is why the programme helps businesses whose collateral is thin.
The caps
| Component | Limit |
|---|---|
| Total per borrower | $1,150,000 |
| Term loan, total | $1,000,000 |
| Purchase or improvement of commercial land or buildings | up to the full $1,000,000 |
| Equipment and leasehold improvements, within the term loan | $500,000 |
| Intangible assets and working capital, within that $500,000 | $150,000 |
| Separate line of credit | $150,000 |
The real property row is the one people miss, and leaving it out of a table like this produces its own misleading picture. The $500,000 sub limit applies to equipment and leasehold improvements. Land and buildings used for commercial purposes sit outside it, so a business buying or improving premises is the only borrower who can reach the full $1,000,000 term loan.
Why the headline number misleads
For everybody who is not buying premises, the $500,000 figure attaches to equipment and leasehold improvements. That money buys an asset; it does not land in the operating account. The genuinely spendable portion is the $150,000 of intangibles and working capital that sits inside that same $500,000, plus up to $150,000 on the line of credit. If the requirement is cash to deploy, the programme contributes at most about $300,000 of it.
Cost
- Term loan, floating: lender prime plus 3 percent maximum.
- Term loan, fixed: the lender's residential mortgage rate plus 3 percent maximum.
- Line of credit: lender prime plus 5 percent maximum.
- A 2 percent registration fee on the loan or authorised amount, which can be financed.
Eligibility
- A small business or start up operating for profit in Canada.
- Gross annual revenue of $10,000,000 or less.
- Farming businesses are excluded; separate federal programmes cover agriculture.
Timing
It moves at bank speed. Plan for several weeks from a complete application, and longer where an appraisal or a leasehold schedule is involved. If the deadline is thirty days, this is not the instrument.
Questions
- Can CSBFP fund working capital?
- Up to $150,000, and that $150,000 sits inside the $500,000 equipment and leasehold ceiling rather than beside it. A separate line of credit adds up to $150,000. Not $500,000.
- Do I apply to the government?
- No. You apply to a participating bank, credit union or caisse populaire, and they register the loan under the programme.
- Does the guarantee mean I avoid a personal guarantee?
- No, and the exposure is larger than it used to be. The guarantee must be unsecured, but for any loan made after 31 March 2014 the regulations allow it to be for the full original amount of the loan, plus interest and costs on any judgment. The 25 percent cap people still quote applied only to loans made before 1 April 2014.
Where this shows up in practice
- Term loansA fixed sum advanced at closing and repaid over a set schedule, for growth, refinancing or a single large investment.
- Equipment and vehicle financingFinance sized against the asset itself, for machinery, fleet and production systems, including sale and leaseback on equipment you already own.
Read next
- How much can a business borrow against its revenueHow much can I borrow if my business does $1,000,000 a year?
- The document checklist for a Canadian commercial loanWhat documents do I need for a business loan in Canada?
Sources
- Helping small businesses get loansInnovation, Science and Economic Development Canada · checked
- Canada Small Business Financing Act, section 8, loss-sharing ratioJustice Laws Website · checked
- Canada Small Business Financing Regulations, SOR/99-141, section 19, personal guarantees and suretyshipsJustice Laws Website · checked