As the name suggests, Canada Small Business Financing Program (CSBFP) is a small business loan program facilitated by the federal government of Canada. While the program is run by the federal government, the financing is provided by lenders such as banks and credit unions. The federal government guarantees up to 85% of the loan amount, which reduces the risk for lenders, and makes loan approval easier.
A startup or small business (including not-for-profits, charitable organizations, etc) must have a gross annual revenue of $10 million or less to be eligible for the Canada Small Business Finance Loan. Farming businesses are not eligible for the CBSFP and can instead apply for the Canadian Agricultural Loans Act Program.
The maximum amount that can be borrowed is $1.15 million, including
Most lenders finance up to 90% of the eligible purchases up to the maximum abovementioned amounts.
The borrower can get a fixed or a variable interest rate term loan. The interest rates are determined by the lending institution, with the maximum interest rate being -
Meanwhile, the maximum interest rate for the line of credit can be the lender’s Prime Rate + 5%.
The maximum applicable term for a CSBF term loan is 15 years. However, some lenders allow for longer amortization periods of up to 25 years for real property loans. In such as scenario, the balance of the loan amount at the end of the 15-year period is converted to a conventional loan, which is not guaranteed by the federal government. The term length may also vary based on the type of asset being financed, for example, the loan term for purchasing equipment can be limited to 10 years by your lender.
For a line of credit, the maximum term length is 5 years. Before the end of the five years, the line of credit can be:
The security for CSBF loans typically includes the following:
There are certain limitations to how the loan can be used. The term loans can be used for a number of eligible activities, such as,
Some examples of eligible uses of term loans are:
The term loans cannot be used for purposes such as:
The line of credit may be used for the day-to-day operating costs, i.e. the working capital cost.
All major banks and credit unions in Canada offer Canada Small Business Financing Loan (CSBFL). The lenders offering CSBFL in your region can be found using the Government of Canada’s interactive map.
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*The loan will be converted to a conventional loan at the end of 15 years.
Other small business loan options that are available in Canada are:
Disclaimer: