Canada Small Business Financing Program Funding

Startups and small businesses are critical to the success of Canada’s economy, however many of these companies are struggling to get started or grow their business. This is often the result of limited cash flow; early-stage businesses simply can’t afford to complete the same projects that large businesses can. These young companies also struggle to access funding, either through their financial institution or through Canadian government funding.

The Government of Canada recognizes this disparity and created the Canada Small Business Financing Program to alleviate the growing pains experienced by businesses across the country. Through this program, the Government of Canada shares the financial risk of investments with lenders, increasing early-stage business’ ability to receive funding.

Startups and small businesses may be eligible to receive up to $1 million in repayable funding from financial institutions to carry out business expansion projects, such as purchasing new equipment or performing leasehold improvements. Since its inception in 1999, the program has contributed approximately $15 billion to nearly 150,000 businesses. Although the program has historically focused on startup funding, the program’s recent changes made it more accessible to established, growing small businesses.

How the Canada Small Business Financing Program Works

To access this program, all business owners must apply through a participating bank, credit union, or caisse populaire.

The Canada Small Business Financing Program provides competitive-rate loans up to $1 million in support of business expansion projects. Applicants of CSBFP are typically startups and early-stage businesses that would find difficulty being approved for loans that are provided directly by financial institutions. Because the risk of CSBFP investments are divided between financial institutions and the Government of Canada, traditional “high-risk” loans may be supported with greater ease.

Costs to Participate in the Canada Small Business Financing Program

Participating businesses should note the following cost associated with using CSBFP:

Registration Fees: To participate in the program, small businesses will be required to pay 2% of the loan’s total value. This can be financed as part of the loan.

Interest Rates: As determined by the financial institution, lenders may provide either a variable or fixed interest rate.

  • Variable: Lender’s prime rate +3%
  • Fixed: Lender’s single family residential mortgage rate +3%

Lender Fees: Depending on the lender you contact, they may have their own fees to establish the loan. These fees cannot be financed through the business’ loan.

Startup and Small Business Eligibility to Receive CSBFP Funding

To become eligible to receive Canada Small Business Financing Program funding, businesses should ensure that they:

  • Operate and hold assets within Canada;
  • Provide products or services to Canadian customers;
  • Are a for-profit company; and
  • Do not exceed $10 million in annual revenue.

Ineligible Businesses

Some businesses will not be considered for participation in the Canada Small Business Financing Program, including:

  • Agricultural producers;
  • Charitable or religious organizations; and
  • Not-for-profit organizations.

Is Your Project Eligible for CSBFP Small Business Funding?

Small business loans will support business expansion projects for startups and small businesses within Canada. These projects include the:

  • Purchase or improvement of commercial land or buildings;
  • Purchase or improvement of new or used equipment;
  • Leasehold improvements, such as renovations to property leased by a tenant.

Projects Not Eligible to Receive CSBFP Funding

Some projects are ineligible to receive Canadian government funding support through CCSBFP. These include:

  • Purchasing inventory;
  • Research and development projects;
  • Development of goodwill;
  • Extending working capital; and
  • Paying-off franchising fees.

Canada Small Business Financing Program – Eligible Expenses

Program applicants may incorporate the following expenses as part of their small business financing application:

  • Architecture, engineering, or design costs;
  • Display cases;
  • Fences;
  • Landscaping included in leasehold improvements;
  • Water and drainage systems;
  • Parking lot development and paving;
  • Sidewalks to access the business;
  • Development of moulds for production;
  • Dies and jig fees; and
  • Profits made by contractors (if shown separately on their invoice).

Please Note: This is not an exhaustive list; your business’ expenses may be eligible as long as they are not considered ineligible, as listed below.

Ineligible Expenses

The following costs will not be eligible for cash flow extension financing through the Canada Small Business Financing Program:

  • Labour provided by the borrower;
  • Expenses already financed through other instruments;
  • Purchase of shares in another company; and
  • Assets acquirers by exchanges or bartering.

Canadian Government Funding Resources for Startups and Early-Stage Businesses

Canadian startups may have limited access to government grant and loan funding programs, however taking steps to prepare their business will increase the likelihood of funding success in the coming years. To accelerate your startup or small business’ ability to receive government grants and loans in the future, entrepreneurs should download Mentor Works’ free Startup Funding Checklist and view our Startup Resources page to learn about other ways to become funding-ready.

Canadian Government Funding for Startups

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Written by

Jeff Shepherd holds an Honours Bachelor of Business Administration at the University of Guelph. He is passionate about Canadian business, economics, and politics. As Marketing Coordinator for Mentor Works, Jeff educates business leaders about proactive funding strategies.

Comments 18

1 November 2018 Reply

Hi,
My ñame is Cristina. I want to speak with you about my business.
Could you pelase contact me by email.

7 November 2018 Reply

Hi Cristina, thanks for your comment. I’ve asked one of my colleagues to follow-up with you to discuss, however, you might be best off exploring our Startup Resources page. Until your business is incorporated for 2-3 years, there is not much funding available from the government, therefore you might be better-off exploring other financing options.

27 December 2018 Reply

Jeff, we provide buildings to the agricultural sector. Can you please provide a link to the criteria for funding options around buildings? Thanks

2 January 2019 Reply

Hi Arthur, thanks for your message. To properly assess your government funding potential, we’ll need to learn more about your organization, upcoming projects, and strategic opportunities facing your business. I’ve reached out to one of my colleagues who will follow-up with you in the next 1-2 business days and start the discovery process!

12 January 2019 Reply

Hi Jeff
I am researching options for my employer. Small business that is growing with potential. I would like to go into more detail but not in an open forum

14 January 2019 Reply

Hi Blinda, thanks for reaching out. I’ve asked a colleague of mine to follow-up with you to discuss your business’ funding opportunities. They should reach out to you within the next 1-2 days to kickoff a Discovery Session. You can also use our contact page at any time to send us a message!

1 March 2019 Reply

Hi,

I’m looking for options on financing or funding for the purchase of a small business which has been established for approximately 5 years. Personal credit is in the 500-600 range and slowly on the rise. If you could point me in the direction of possibilities that would be greatly appreciated. Thanks, in advance.

5 March 2019 Reply

Hi Jayson, thanks for your comment. I believe you’re in the right place – the CSBFP supports purchasing small businesses by de-risking loans offered through your financial institution. Your bank or credit union will be able to provide you with more personalized support to identify what credit scores or capital you need to have at the time of application to the Canada Small Business Financing Program.

13 March 2019 Reply

Hello,
I”m aiming to start a self storage business in the next year or two (perhaps earlier) but looking for financing options. I’m aware the the federal government has grants for small business and looking to seek more into this. I do have some cash saved up but obviously need more then this. Looking for some direction. Could you assist me?

13 March 2019 Reply

Hello Luc, thanks for your question. The federal and provincial governments tend to invest in established businesses that are incorporated and have a proven record of profitability. Because of this, supports aimed at startups are generally quite limited. I’d recommend based on your comment that you continue exploring the Canada Small Business Financing Program (CSBFP) since this helps access bank financing for new business ventures. It’s the best, most logical support mechanism for you at this time.

Most grants are designed to support the projects undertaken by innovative companies seeking funds to drive research, improve productivity, export, or hire/train employees. If searching for grants in the future, it’s helpful if you explore the funding landscape with one or more of those investment areas in mind.

13 April 2019 Reply

Hi Jeff,
I am looking to start a food franchise in northern Saskatchewan, will i qualify for that loan? i dont own any property though but i have about $100,000 in my accounts and the cost for start a food franchise is about $300,000.
Thank you
Ahmed

15 April 2019 Reply

Hi Ahmed, thanks for your question. The Canada Small Business Financing Program is likely your best bet for establishing a food franchise, but I’m unable to assess if you’re eligible to access the program or how much you might be able to personally receive. There are many factors that affect eligibility, such as your credit rating and perceived risk from financial institutions. This program taps into Canadian government funding, but ultimately is at the discretion of a financial institution if they want to extend the loan to you. It seems that you have a good base level of understanding, so I’d suggest working with an employee at your preferred financial institution to keep the process moving forward. Good luck!

30 April 2019 Reply

Hi Jeff I co-own a stretching studio. The business is incorporated and has been open for 6 months. Its operations are breaking even. We want to open a second location and are seeking financing (leasehold improvements, furniture and fixtures at the new location). Is our business the type of applicant the CSBFP is likely to fund? Does the federal government guarantee loans made under this program?

1 May 2019 Reply

Hi Barbara, thanks for your message. I believe your studio is a good fit for CSBFP and is likely to access funding for the activities you’ve mentioned. Your track record of success and incorporation status make it an attractive proposal for a bank or credit union to consider. You’re correct that the federal government guarantees loans through the program; this de-risks the investment and makes it easier for a financial institution to approve you. Hopefully this is a quick, beneficial process for your organization to go through.

Good luck with your expansion to a second location; keep us in mind if you require any government grants for hiring and training employees!

22 August 2019 Reply

Hi Jeff,
I’m planning to purchase a small franchise business from an existing owner. It’s up and running. I need fund assistance. Is this program fit for me?

23 August 2019 Reply

Hello Ami,

If you are looking to purchase a small franchise business from its owner, you may be eligible for some government funding programs that are out there. I would suggest reaching out to us by filling out a contact form here and we can have a team member connect with you to explore this situation in greater detail.

7 September 2019 Reply

Hi I’m looking at starting an e-commerce business but I am worried I won’t have enough funds to get the advertising and marketing budget I need to grow. Would I be eligible for any grants?

11 September 2019 Reply

Hi Wes – Congrats on taking the first step in starting a new business! In this exciting early stage, I would recommend reaching out to your local Regional Innovation Centre, noted in our Startup Resources Page if you’re looking for finance or strategic support. All the best.

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