Securing financial aid is often the most challenging part of starting or growing your business in Canada. While there are various types of financing programs available including government-assisted grants, the truth is that most of business owners tend to be nervous when the thought of securing a loan crosses their minds.

However, what they forget is that most financial institutions have various resources that help them provide their clients with the appropriate financial services based on their circumstances. One such resource is the Canada Small Business Financing Program (CSBFP).

What is CSBFP?

CSBFP is a federal government sponsored program, which is administered by Industry Canada to make it simpler for small business owners to obtain funds from financial institutions to improve, renovate, or get their businesses started.

CSBFP, which recently celebrated its 50th anniversary, is a loss-sharing initiative between the federal government and the private sector lenders. This implies that if by any circumstance the borrower is incapable of repaying the loan’s principle or interest, the federal government will offer a guarantee to the financial institution and cover a particular percentage of the amount owed by the borrower.

However, to avoid such cases, financial institutions are careful when administering and granting these loans and must ensure that they meet all the requirements of the CSBFP Act as well as exercise their due diligence in conducting credit investigation of the borrower, ability to repay the loan, and the viability of the proposed business.

The program, which gives access to loan financing of up to one million dollars, is offered in all Canadian provinces and territories via a network of financial institutions that consist of credit unions, caisses populaires, and chartered banks.

Who is Eligible for CSBFP Loans?

Initially, CSBFP Funding was only meant for small businesses operating for profit within Canada as well as professional enterprises with gross annual revenues or forecasted revenues of $5 or less. However, in light with the government’s new changes to the CSBFP that took effect on 23rd of June 2015, the eligibility will now include small business and startups with gross annual revenue of less than $10 million.

Non-profit organizations, agribusiness, charitable, and religious organizations are however not eligible for CSBFP Loans.

What do you need to do to apply?

To apply for the CSBFP loans, the government through the CSBFP Act requires you to meet the following requirements:

  • Your business must be operating or about to start operating within the Canadian territory.
  • As the business owner, you are expected to provide a personal guarantee in support of business borrowings of which does not exceed 25% of the initial amount of money borrowed. This important consideration offers the business owner a limit to their potential liability should the business fail.
  • For startups, you need to have a business plan and financial forecasts.
  • Your business must be profit oriented but not charity, religious or agricultural based.
  • The assets purchased via the grant must be used within your business.
  • The business gross annual revenue must not exceed $10 million.

What Sort of Timeframe Does this Process Take?

The maximum period the CSBFP can pertain to a loan is seven- ten years depending on the asset being financed. This is specified in the CSBFP loan document including the amount of the loans, interest rate, repayment terms, and the first payment due date of the principal and the interest.

What are the Maximum Loan Amounts?

Before the announcement of the new CSBFP eligibility guidelines, only a maximum of $500,000 could be borrowed. Currently, the new CSBFP guidelines allow borrowing of up to $1 million for small business owners of which only $350,000 can be used for leased business improvements or for purchasing new equipment.

What are the Benefits? Are There any Specific Restrictions?

The main idea behind the CSBF program is to offer a financial leg up for your business. You can use this government grant to:

  • Improve real property including real estate and purchase of land.
  • Improve or renovate any leased property.
  • Purchase business related tools such as construction tools, exhaust systems, refrigeration units and many more.
  • Pay all or a portion of any federal government CSBFP registration fees except, working capital, professional charges, general supplies, advertising, corporation shares, building permits, vehicle for personal use and goodwill.

The CSBF program continues to represent a very popular source of financing for most eligible small businesses across the country. If you are in the construction industry, real estate, oil and gas, or in any other business that meets CSBFP’s requirements, talk to your financial institution about this valuable resource they will help you get the financing you ever required.