Canada Small Business Financing Program

Canada Small Business Financing Program works to increase small business loan availability for over 50 years. Industry Canada established the program in 1961. It is designed to make it easier to get financing from banks and institutions for small businesses by sharing the lenders’ risk.

This program is designed to assist new businesses and existing firms who want to improve their business. Canada Small Business Financing Program facilitates small businesses access to loans that would otherwise be inaccessible to them. This is done to encourage economic growth.

The program provides loans to small businesses worth more than $1 billion each year.

Who is eligible to apply for Canada Small Business Program?

This program is available to small businesses in Canada with less than $5 million annual gross revenues.

Non-profit and charitable organizations, religious and philanthropic organizations, and farmers who have access to an identical program run by Agriculture and Agri-Food Canada are exempt from the program.

What can the loan be used for?

Canada Small Business Financing Program can be used by both new and established businesses. The program only allows for specific purposes. It can finance up to 90% of the cost:

Land, immovables and real property improvements;
Leasehold improvements purchased or improvements to leased property
Purchase or improvement of used or new equipment.

The maximum amount of $500,000 that a successful applicant can receive for their business is $350,000. This can be used to improve existing equipment or leasehold improvements.

What is excluded from the loan?

Non-commercial improvements to a family home
Buy shares
Finance working capital, such as (finance inventory and accounts receivables, etc.
To issue permits and licenses for the operation of eligible assets
Franchise fees
Small business feasibility studies; professional fees (e.g. Legal, accounting, and appraisal
Survey costs
Building permits
Personal use of vehicle
Intangible costs (i.e. Research and development costs, prepaid expense, goodwill, etc.
Purchase real estate for resale

Who provides the financing?

An approved list of financial institutions, including Scotiabank, Bank of Montreal, HSBC and Industrial and Commercial Bank of China (Canada), can provide finance. The following list contains a complete listing of lenders industry Canada websites.

What does Industry Canada do to help?

Industry Canada is not involved in the decision-making process of lenders, but it gives lending banks and unions reassurance that they will take on the risk and recover the cost of the loan. This makes otherwise ineligible candidates more viable for lending programs.

After a lender approves a loan candidate, they will inform Industry Canada.

What are the interest rates?

The financial institution that provided the loan will determine the interest rate. Variable or fixed interest rates are possible.

Variable interest rates cannot exceed 3% of the prime lending rate of the financial institution. Fixed interest rates cannot exceed 3% of the residential mortgage rate at the financial institution.

What are the fees?

Business owners must pay the registration fee of two percent to the lender. This fee may be included in the loan or spent as part of the scheduled payments.

What are some other terms?

Lenders must take collateral on loans. This can be in the form of the assets to be financed. Lenders have the option of obtaining an additional personal guarantee – which can not exceed 25% of the loan amount.

The expected economic life of the asset being funded will usually coincide with its full payment. This can be up to 10 years. The loan will normally have monthly charges, but specific details will depend on each lender.