How the Canada Small Business Financing Loan Program Can Help You Start or Grow Your Business

Filed in archive Business Loans and Financing on August 25, 2006

Did you know that the Canada Small business financing Loan Program (CSBFP) can provide a Canadian business with $250,000 in financing for leasehold improvement, equipment, and land or business premises? The little known program was created in 1961 to help small businesses get term business improvement loans to finance the purchase or improvement of fixed assets for new or expanded operations.

Without this program financing may not be available to you unless you would be willing to include your personal assets as loan security. In most cases (other than financing leasehold improvements or computer software) a lender will ask for a personal guarantee, but the program limits the guarantee to just 25 percent of the original amount of the loan.

CSBFP One-Time Loan Registration Costs

Lenders are required to pay a one-time loan registration fee to the government equal to 2 percent of the amount loaned. Then the bank will recover the fee from you. As long as your loan does not exceed $250,000 in total you can pay the registration fee when you get your loan proceeds loans are advanced or have the amount of the fee added to the loan.

No Free Lunch

Your business still needs to be credit worthy and as long as your annual gross revenue does not exceed $5,000,000 during the first fiscal year in which you apply for the loan most small businesses in Canada will qualify.

In most commercial loan transactions the lender requires you to invest at least 25% of the value of the amount you are borrowing and the remaining 75% is financed using loan proceeds, whereas using the CSBFP a lender can provide up to 90 percent financing, reducing your down payment to just 10%.

You will most likely still be required to sign a personal guarantee but the bank can only ask for a personal guarantee up to 25% of the original loan amount. Which is a lot better than signing an unlimited personal guarantee.

Loans are available through chartered banks, caisses populaires, most credit unions, many trust, loan and insurance companies. Next time you speak to your banker, ask her about the CSBFP and perhaps you will get a nice loan to help you grow your business and take it to the next level.