Canada Small Business Financing Program: How to Qualify
Startups and small businesses are critical to the success of Canada’s economy. However, many of these companies struggle to get started and grow their business. This is often the result of limited cash flow. Early-stage businesses simply cannot afford to complete the same projects as large businesses can. These young companies also struggle to access start-up funding, either through their financial institution or through Canadian government funding.
The Government of Canada has recognized this discrepancy and in an effort to address it, created the Canada Small Business Financing Program to alleviate the growing pains experienced by small businesses across the country.
Through this program, the Canadian government shares the financial risk of investments with lenders, increasing an early-stage business’ ability to receive government 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.
How the Canada Small Business Financing Program Works
The Canada Small Business Financing Program (CSBFP) 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. Due to the risk of CSBFP, investments are divided between financial institutions and the Government of Canada so that traditional “high-risk” loans may be supported with greater ease.
Since its creation in 1999, the program has contributed approximately $17 billion to nearly 170,000 businesses. Although the program had historically focused on primarily startup funding, in 2015 it introduced changes to make the funding more accessible to established, growing small businesses.
To access this program, all business owners must apply through a participating bank or credit union.
Costs to Participate in the Canada Small Business Financing Program
Participating businesses should note the following costs 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 CSBFP, 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 expansion projects for startups and small businesses within Canada. These projects include:
- Purchase or improvement of commercial land or buildings;
- Purchase or improvement of new or used equipment; and
- 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 CSBFP. 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 molds 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 CSBFP:
- Labour provided by the borrower;
- Expenses already financed through other instruments;
- Purchase of shares in another company; and
- Assets acquired 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 the free Mentor Works Startup Funding Checklist to better your business eligibility for government funding programs down the road. Also be sure to view our Startup Resources page to learn about other ways to become funding-ready.
Hi,
My ñame is Cristina. I want to speak with you about my business.
Could you pelase contact me by email.
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.
Jeff, we provide buildings to the agricultural sector. Can you please provide a link to the criteria for funding options around buildings? Thanks
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!
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
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!
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.
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.
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?
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.
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
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!
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?
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!
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?
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.
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?
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.
Hello. We are a small IT firm located in Calgary that has been operating since 2004 and incorporated sometime around 2011/2012. Currently, we have the company president, 1 tech and 1 assistant, the latter of which was brought on board April 1 to assist with Business Development and Marketing. We are currently focused on expanding the business, as our client base is growing. We are looking for funding options. We have accessed the $40K loan offered during the onset of COVID-19. Please contact me. Thank you.
Hi Jerrod – Thanks for reaching out. For businesses of your size, you can still access the majority of business support listed on our Startup Resources page, so we would recommend that as a great place to start. As it turns out, Mentor Works can provide the most funding impact to businesses that have 15 or more payroll employees, as that is an eligibility factor for a wide variety of programs that we follow. Fortunately, those startup resources would be better suited for your IT firm.
I incorporated my business 2 years ago next month. Is it too early to look for government funding?
Hi Dan – Congrats on your upcoming 2-year anniversary! It’s never too soon to start getting in the mindset of incorporating government funding into your strategic plans. While it’s true that a lot of funding incentives are limited to established businesses (3+ years incorporated, 15+ employees), there are a wide variety of Startup Resources (click to explore) available to younger businesses, as well as COVID-19 Business Funding to help companies of all sizes. There are also new programs launched regularly, which you can receive updates on by subscribing to the Weekly Funding Newsletter.
Hi Chris I want start up small business laundromat but only have some cash I looking financially option.you can help me ?
Hi Thuy – That’s exciting! I would recommend you explore our Startup Resources page, as well as BDC’s Start-up financing and start-up loans to help you with your initial cash flow. All the best with your new business!
Hi Thuy – That’s exciting! I would recommend you explore our Startup Resources page, as well as BDC’s Start-up financing and start-up loans to help you with your initial cash flow. All the best with your new business!
I would like to learn more about the CSBFP, is it similar to CSBFL? is it fund thru financial institute? do you work with the process from start till end? i would like to know some info about it please.
i’ve multiple business which i hold the properties as well, so don’t know which website i should give you.
Hi Linda – You can learn more about CSBFP via Canada.ca’s Canada Small Business Financing Program Page. It’s an excellent option for entrepreneurs looking for additional sources of cash to establish their company.
I have lost my flying job overseas and am moving back to Quebec. I am creating a startup UAV (drone) service company. Can I qualify for funding to assist in this venture?
Hi Jeff – Thanks for the question. Québec-based startup businesses like yours should look into the support options listed on our Startup Resources Page. It’s a great place to start with several resources to help you with financing, building your business model, and receiving mentorship.
Hi I would like to start up a melting metal business and like to sell some stuff on ebay but I need some money to do so can you guys help out.
Hi Logan – Thanks for the note and congratulations on the new business venture! Although Mentor Works isn’t associated with the government and doesn’t offer funding directly, we help mature businesses (3+ years inc., 15+ employees) identify funding opportunities and assist with the application process. As a new business, we would recommend you refer to the support options listed on our Startup Resources Page. All the best with your new business!
Hello
Would this grant be applicable for purchasing land for micro-cultivation of cannabis?
Hi Andrew – When it comes to the specific business aspects that you’re seeking funding for, we would recommend that you reach out to your financial institution directly to explore your options. They will have answers to these specific questions on CSBFP.
Hello, I have started my business in 2019. The COVID phase didn’t help us at all. We didn’t close down, and manage to get through it. We started operating in November 2020. Now we have big demandes for our business, but struggling financially.
Hi Eric – For newer businesses, we recommend consulting the Startup Resources Page for financing, growth, and strategic support services. All the best.