Is the Canada Small Business Financing Program Right for You?

February 13th, 2015 by Florendo Llameg

What is the Canada Small Business Financing Program?

The Canada Small Business Financing Program (the “Program”) helps small businesses obtain financing. Small businesses and businesses that are just starting out may be seen as “risky” borrowers to financial institutions and as a result may have trouble obtaining financing. The Program makes it easier for businesses in this position to obtain a loan as the Government of Canada shares the risk with the lending institution. The Program is being administered pursuant to the provisions of the Canada Small Business Financing Act.

The Program has assisted more than 147,000 businesses since 1999, with loans totaling about $1 billion each year.

Who is Eligible?

You may be eligible for a small business loan under the Program if you:

1. are a for profit small business or a start up;
2. are operating in Canada; and
3. have gross annual revenues of $5 million or less.

Farming businesses, not-for-profit organizations, and charitable and religious organizations are excluded from the program.

Maximum Loan Available.

Under the Program, the maximum loan that can be advanced is $500,000, of which $350,000 can be used to finance the purchase or improvement of new or used equipment and the purchase of leasehold improvements or improvement of leased property.

Industry Canada (the agency that oversees the Program) has announced that the loan can be used to finance the costs for the following:
• purchase or improvement of land or buildings used for commercial purposes;
• purchase or improvement of new or used equipment;
• purchase of new or existing leasehold improvements, that is, renovations to a leased property by a tenant.

By way of examples, the loan can be accessed to finance costs of commercial vehicles, restaurant equipment, computer or telecommunications equipment and software, production equipment and admissible costs to buy a franchise.

There are some restrictions on the small business loan, including, but not limited to, prohibiting a borrower to use the loan to finance costs related to working capital, inventory, franchise fees, goodwill, research and development, labour or advertising.

How to Apply:

Present a business proposal to a chartered bank, credit union or caisse populaire. Your financial institution is responsible for approving the loan. The interest rate is also determined by your financial institution.

Links for more information:

Canada Small Business Financing Program.

About The Program.

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