What is the Canada Small Business Financing Program?

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In Canada, our government is highly supportive of small businesses. So much so that they offer what is known as a small business financing program. The Canada Small Business Financing Program (CSBFP) was created to make it easier for small businesses to get loans from financial institutions.

In the last ten years, the small business financing program has represented over 61,000 small businesses with over 9.8 billion dollars in loans. Here’s a little more about the program: 

Is my Business Eligible for the Financing Program?

In Canada, a small business is generally considered any business that has less than 100 employees. But when it comes to the financing program, small businesses are not determined by the number of employees you have, but rather the company’s annual revenue.

To be considered a small business and eligible for the financing program, your company must have gross annual revenue of $10 million or less.

To be eligible for the Small Business Financing Program, your business must also be operating for profit and cannot be part of a not-for-profit organization. Other organizations that are not eligible for the program include religious organizations, charitable organizations, and farming industry businesses. 

What can I finance under the Small Business Financing Program? 

If you are eligible to obtain a loan from the financing program, there are certain things that you can use the loan for and certain things that you cannot. You can use your loan to purchase or improve land or commercial properties, upgrade or repair equipment, or for renovations. Things like vehicles, equipment, and software, are all acceptable uses for your small business loan.

With that being said, there are also certain things that you cannot purchase with your loan. For example, you cannot use your loan to finance working capital, research, development, or buying inventory. You can also not use your loan for franchising fees.

How much interest will be charged on CSBFP?

The small business financing program in Canada is designed to help small business owners obtain loans, but these loans must be paid back with interest – like all loans.

Because these loans are provided by financial institutions and not by the government themselves, the interest rate will vary from financial institution to financial institution. Depending on which institution you receive your loan from, rates may be fixed or variable.

Fixed loan rates refer to interest rates that remain stable throughout the entirety of the borrowing period. In contrast, variable loan rates have an interest rate that will change over the borrowing period. There are advantages and disadvantages to each of these, which you can discuss with your financial advisor before deciding. 

The government also requires that all borrowers pay a registration fee of 2% of the loan amount to the lender. These are then submitted to the government to help offset the cost of the program.

To apply for the Small Business Financing Program, visit your home banking branch and ask to speak to a financial officer regarding a small business loan. 

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.