From the Federal Government website on Canada Small Business Financing Program here are some frequently asked questions and answers around the program. We hope you find it helpful. There are other aspects of this financing program which we would be happy to discuss with any business owner. Please reach out as shown on the bottom of this blog. Please also provide your comments.
1. What businesses are eligible to apply under the Canada Small Business Financing Program (CSBFP)?
Most start-ups and existing for-profit small businesses in Canada with gross revenues of $10 million or less are eligible to apply for loans under this program. Such businesses can be corporations, sole proprietors, partnerships or cooperatives.
Farming businesses are not eligible under this program. The Canadian Agricultural Loans Act program, administered by Agriculture and Agri-Food Canada, is designed to increase the availability of loans for the purpose of farming.
2. What is eligible for financing under the CSBFP?
Loans can finance the cost of:
- The purchase or improvement of land or buildings used for commercial purposes
- The purchase or improvement of new or used equipment
- The purchase of new or existing leasehold improvements (i.e. renovations to a leased property by a tenant)
- The registration fee
3. Can I purchase an existing business under the CSBFP?
The purchase of eligible assets of an existing business may qualify for financing under the CSBFP. You may finance the lesser of the cost of purchase and the appraised value of the eligible assets. Please contact your financial institution before committing to appraisal expenses to ensure all other requirements are met.
4. What is not eligible for financing under the CSBFP?
You cannot use a loan to finance items such as goodwill, working capital, inventories, franchise fees, or assets that a holding company acquires.
This list is not exhaustive. When in doubt, speak with your financial institution.
5. How much can be financed and what is the maximum loan amount I can access under this program?
It is up to the borrower and lender to negotiate an appropriate amount of financing. The maximum loan amount a borrower can access under this program is $1 million, of which no more than $350,000 can be used to finance the purchase or improvement of equipment and the purchase of leasehold improvements.
6. What are the costs associated with a CSBFP loan?
The CSBFP registration fee is 2% of the total amount of the loan. The registration fee can be financed as part of the loan.
The interest rate may be variable or fixed. For a variable rate, the maximum chargeable is the lender’s prime lending rate plus 3%. For a fixed rate, the maximum chargeable is the lenders’ single-family residential mortgage rate plus 3%.
Lenders may charge the same fees (e.g. set-up and renewal fees), that they charge for a conventional loan of the same amount. These fees are paid directly to the lender and cannot be financed under this program.
How to Apply?
7. Where can I apply for a CSBFP loan?
Banks, credit unions, Caisses Populaires and other financial institutions are eligible to make loans under the CSBFP. In order to obtain a loan, a borrower must present his or her business proposal directly to a financial institution of his or her choice. Financial institutions are solely responsible for making the decision to approve a loan. If the loan is approved, the money the borrower receives is that of the financial institutions and not the government.
8. Do I need to communicate with Innovation, Science and Economic Development Canada (ISED) for a loan?
Financial institutions in partnership with the federal government deliver this program. Financial institutions are required to apply the same care and procedures in making a CSBFP loan as they would for conventional loans of similar amounts. Decisions related to approving loans rest entirely with the financial institutions.
The Small Business Financing Directorate at ISED is available to provide you with information related to the program. However, ISED does not get involved in the decision making process of financial institutions nor does it accept or process loan application
9. Why do some financial institutions choose not to participate in this program?
The majority of financial institutions participate in this program. The decision to participate in the program is up to the individual financial institution.
10. If my financial institution rejects my business proposal and does not approve my application for a loan under this program, what can I do?
Decisions to lend are based on lending criteria of each financial institution. You could contact another financial institution since lenders have different criteria related to the approval of business loans. Another option could be to visit canadabusiness.ca to explore other government funding options that might better suit your needs.
11. I have a CSBFP loan and I find that my financial institution is treating me unfairly, whom can I contact?
Often your financial institution will want to resolve a complaint promptly and fairly. Some of the options available for complaint resolution are:
- Talk with your financial officer or the person you originally dealt with at your financial institution and explain the problem.
- Make a complaint to the next level (i.e. branch, district or regional manager) of dispute resolution with the firm.
- Contact the Ombudsman for Banking Services and Investments.
12. If I cannot access financing under this program, where can I go for additional information?
For more information on other government programs and services, visit the Canada Business website where you can search for other government grants, loans and financing options. This website will also provide information on other government services for entrepreneurs related to business start-up, financing, taxes, importing, exporting, etc.
At Labrecque Business Consulting, we have a passion for business and a desire to help!
Business Finance Consultant
Labrecque Business Consulting
P.O. Box 20067
Qualicum Beach, B.C.