The Canada Small Business Financing Program (CSBFP), explained

The Canada Small Business Financing Program is the federal government's main way of helping small businesses borrow from banks. It is not a grant and the government does not lend the money. Your bank or credit union lends it, and the federal government shares most of the loss if the loan is not repaid — which makes the bank willing to lend to businesses it otherwise might not.

The figures below are from the program's published guidelines from Innovation, Science and Economic Development Canada. Programs change, so check them with the lender before you rely on them.

Who qualifies

• For-profit businesses operating in Canada
• With estimated gross annual revenue of $10 million or less in the year the loan is approved
• Most industries — farming is the main exclusion, and it has its own federal program

You apply through a participating lender: most banks and many credit unions and caisses populaires take part.

How much you can borrow

Up to $1,000,000 in term loans, split by what the money is for:

• Real property — buying, building or improving commercial property: up to $1,000,000
• Equipment and leasehold improvements: up to $500,000 of that
• Intangible assets and working capital combined: up to $150,000 of that

Plus a line of credit of up to $150,000, on top of the term loan limit, for working capital.

What it costs

The program caps what the lender can charge:

• Floating-rate term loans: the lender's prime rate plus up to 3%
• Fixed-rate term loans: the lender's residential mortgage rate plus up to 3%
• Lines of credit: prime plus up to 5%

Those caps include a 1.25% annual administration fee, which the lender pays to the government and passes on in the rate. There is also a 2% registration fee on the amount loaned (or the amount authorized, for a line of credit), which can be financed as part of the loan.

That makes a CSBFP loan one of the cheapest forms of small business credit in Canada — when you can get one.

Terms

• Term loans: up to 15 years
• Lines of credit: up to 5 years, renewable

What it cannot pay for

• Buying shares of a company (buying a business's assets can qualify)
• Refinancing existing conventional debt
• The owner's own labour on improvements
• Personal-use vehicles
• Farming operations

Personal guarantees

A lender can take an unsecured personal guarantee of up to the amount of the loan. It is common, and the loan agreement will spell it out.

Why the bank might still say no

The government guarantee lowers the bank's risk. It does not replace the bank's credit decision. A CSBFP loan is still underwritten by the bank, so the usual bank requirements apply — financial statements, credit history, often a business plan for newer businesses — and it moves at bank speed.

If the bank declines, or the timeline does not work, ask why. The reason tells you where to go next:

• Too young or too small for the bank — BDC, or Futurpreneur for owners aged 18 to 39.
• Revenue is fine but the paperwork is not — lenders who read bank statements rather than financial statements. See bank, BDC or broker.
• Buying equipment — equipment financing is secured by the machine and often arranged faster.
• Timing gaps rather than a purchase — a line of credit.

Is it worth applying for?

If you fit the bank and you can wait, yes — for equipment, leaseholds or property it is hard to beat on cost. Ask your bank directly whether a loan would be made under the CSBFP; not every branch raises it unprompted.

For the whole route, including where the alternatives fit, see how to get a business loan in Canada.