Frequently Asked Questions — For Small Businesses
- Where can I apply for a loan under the Canada Small Business Financing Program (CSBFP)?
- Should I communicate with Industry Canada for a loan?
- Why do some financial institutions not participate in this program?
- What businesses are eligible to apply for a loan under this program?
- What is eligible for financing under this program?
- What is not eligible for financing under this program?
- How much can be financed under this program?
- What is the maximum loan amount I can access under this program?
- What are the costs?
- If my financial institution rejects my business proposal and does not approve my application for a loan under this program, what can I do?
- I have a CSBFP loan and I find that my financial institution is treating me unfairly, who can I contact?
- If I cannot access financing under this program, where can I go for additional information?
1. Where can I apply for a loan under the Canada Small Business Financing Program?
Banks, credit unions, caisses populaires and other financial institutions are eligible to make loans under the Canada Small Business Financing Program. In order to obtain a loan, a borrower must present his or her business proposal directly to a financial institution of his or her choice. Financial institutions are solely responsible for making the decision to approve a loan.
2. Should I communicate with Industry Canada for a loan?
No. This program is delivered by financial institutions on behalf of the federal government. Financial institutions are required to apply the same care and procedures in making a CSBFP loan as they would for conventional loans of similar amounts. Decisions related to approving loans rest entirely with the financial institutions.
The Small Business Financing Directorate at Industry Canada is available to provide you with information related to the program. However, Industry Canada does not get involved in the decision making process of financial institutions nor does it accept or process loan applications.
3. Why do some financial institutions choose not to participate in this program?
The majority of financial institutions participate in this program. The decision to lend under the program is up to the individual financial institution.
4. What businesses are eligible to apply under this program?
Most existing for-profit small and medium size businesses or start-ups in Canada with gross revenues or projected revenues of $5 million or less are eligible to apply for loans under this program. Such businesses can be corporations, sole proprietors, partnerships or cooperatives.
Farming businesses are not eligible under this program. The Canadian Agricultural Loans Act program, administered by Agriculture and Agri-Food Canada, is designed to increase the availability of loans for the purpose of farming.
5. What is eligible for financing under this program?
Loans can finance the cost of:
- the purchase or improvement of real property and immovables
- the purchase of new or existing leasehold improvements; and
- the purchase or improvement of new or used equipment
6. What is not eligible for financing under this program?
You cannot use a loan to finance items such as:
- working capital;
- franchise fees;
- research and development.
This list is not exhaustive. When in doubt, speak with your financial institution.
7. How much can be financed under this program?
Financial institutions can finance up to 90% of the cost of asset acquisition or asset improvement.http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/h_la02296.html#s7
8. What is the maximum loan amount I can access under this program?
The maximum loan amount a borrower can access under this program is $500,000, of which $350,000 can be used to finance the purchase or improvement of equipment and the purchase of leasehold improvements.http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/h_la02296.html#s8
9. What are the costs?
The registration fee is 2% of the total amount of the loan. The registration fee can be financed.
The interest rate may be variable or fixed. For a variable rate, the maximum chargeable is the lender's prime lending rate plus 3%. For a fixed rate, the maximum chargeable is the lenders' single family residential mortgage rate plus 3%.
10. If my financial institution rejects my business proposal and does not approve my application for a loan under this program, what can I do?
Decisions to lend are based on lending criteria of each financial institution. You could contact another financial institution since lenders have different criteria related to the approval of commercial loans.http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/h_la02296.html#s10
11. I have a CSBFP loan and I find that my financial institution is treating me unfairly, who can I contact?
Often your financial institution will want to resolve a complaint promptly and fairly. You should:
- Talk with your financial officer or the person you originally dealt with at your financial institution and explain the problem.
- Make a complaint to the next level (i.e. branch, district or regional manager) of dispute resolution with the firm.
- Contact the Ombudsman for Banking Services and Investments.
12. If I cannot access financing under this program, where can I go for additional information?
For more information on other government programs and services, visit the Canada Business website. This site provides information on government services for entrepreneurs related to business start-up, financing, taxes, importing, exporting, etc.http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/h_la02296.html#s12
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