As a small business owner in Canada, you may be looking for funding sources to recover from the pandemic or grow your business. Federal funding programs like the Canada Small Business Financing Program (CSBFP) can be helpful to reduce the risk of financing to banks and other lenders, allowing them to lend more freely to qualified borrowers.
For aspiring startup founders, getting the funds to get your ideas off the ground can make all the difference when setting up your business for success. While it’s possible to bootstrap funding, having access to loans and grant funding can make things easier so you don’t miss out on opportunities and so you can leverage chances to grow and serve your customers better in the meantime.
The Canada Small Business Financing Program is one source of funds for your business, and over the past ten years, it’s provided over $10 billion in business financing to companies. It’s helped secure 56,000 small business loans. To help even more people in this time of economic uncertainty, they’ve made some updates to the program to open funding up to even more borrowers.
What is the CSBFP?
The Canada Small Business Financing Program (CSBFP) is a funding program under Innovation, Science and Economic Development Canada and is administered by the Small Business Financing Directorate.
The CSBFP helps reduce the lending risk so financial institutions can lend money to small business owners. Startups and existing small businesses with less than $10 million in revenue per year can apply for funding under this program.
What can I use CSBFP funds for?
The loan is designed to fund the:
- buying or improving land or buildings to be used for commercial purposes,
- purchasing or improvements of new or used equipment that is necessary for business operations, or
- renovation in a leased property by a tenant so that it can be used to run the business.
Under the CSBFP you can borrow funds to:
- finance commercial vehicles for your business needs,
- buy hotel or restaurant equipment,
- upgrade computer or telecommunications equipment and software,
- invest in production equipment, or
- support eligible costs when buying a franchise.
What’s new about the CSBFP?
Before the pandemic, the CSBFP had a restriction that did not allow financing for not-for-profit, charitable, and religious enterprises. As of June 30, 2021, that restriction has been lifted to help offset the impacts of COVID-19 on these organizations.
Funds can be freely used to start a new business or scale your existing one. They can also be used to buy an existing business or its assets.
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What can’t I use CSBFP funding for?
CSBFP funds can be used for a wide range of purposes to support your small business launch or growth. That said, the funds can’t be used for goodwill payments, working capital, inventories, franchise fees, or assets purchased by a holding company.
Farming businesses are also not eligible to borrow money under the CSBFP but can apply for funds under the Canadian Agricultural Loans Act Program.
Where can I apply for a CSBFP loan?
You can apply for a CSBFP loan at any bank, caisse populaire, or credit union. Lending is not done directly through the government but is accessible through participating financial institutions and lenders. Each lender has its own loan criteria and will decide which businesses qualify and will be granted the loan under this program.
What are the costs of a CSBFP loan?
CSBFP loans include a registration fee (2% of the total loan amount) that can be financed if needed. Borrowing costs and interest rates can be variable or fixed. Variable rates can be no more than prime lending rate plus 3%, while the fixed-rate allowable under CSBFP loans are calculated based on the single-family residential mortgage rate plus 3%.
Do I need collateral to borrow under CSBFP?
Lenders under the CSBFP have to take security in the assets they finance and can also consider unsecured personal guarantees. Your lending institutions will make their own risk-based decisions around what they require to support your loan.
What size of a loan can I get with the CSBFP?
The funding amount is determined between the borrower and the lender based on need, risk, and repayment capacity. CSBFP eligible businesses can borrow up to $1 million. Within that amount, equipment purchases and improvements and leasehold improvements need to be less than $350,000 to satisfy program lending requirements.
Do I need a business plan for the CSBFP?
To apply for the CSBFP, lenders will ask for a business plan from prospective borrowers. Having a solid Canada Small Business Financing Program business plan is essential to demonstrate that you have a plan to put funding to use and a capacity and strategy to repay borrowed funds. It shows you have thought things through and have solid research and data driving your business decisions. Your thorough business plan demonstrates to lenders that you are serious about your business and have a plan for its success, which the funds are needed to support.
Can I write my own CSBFP business plan?
While you can write your own CSBFP business plan, having a professional business plan writer can help increase your chances of success. Look for a business plan writer who has experience applying for these types of funding programs. With a well-written business plan with everything the CSBFP lenders are looking for, your funding application is more likely to end up at the top of the pile to receive that funding.
If you qualify for funding under the Canada Small Business Financing Program and need the funds to get your business launched or expand, one of your first steps is to get a professionally written business plan. Bsbcon’s professional business plan writers have experience writing for many types of government-sponsored lending programs and know what’s needed in a successful funding application.
Increase your chances of successfully applying for a business loan to grow your business with a detailed business plan. It’s a great way to invest in the future of your business.
