Canada Small Business Financing Program – A Complete Guide
Are you a small business owner in Canada who is fed up asking for financial assistance from here and there? Look no further because the Canada Small Business Financing Program is the right choice for you.
In this guide, we will explore everything about this small business loan program in Canada. Right from the eligibility requirements to the application process, everything is covered. It doesn’t matter if you want to expand your business or start one, this program will lend you all the support you need.
So, let’s delve right into it and explore all the ins and outs of this amazing assistance program.
What is the Canada Small Business Financing Program?
For every country startups and small businesses are the key to boosting the economy. Despite this, these businesses suffer due to low cash influx. In the early phase, it is impossible to manage the cash flow until some investors invest or the government provides some assistance.
Luckily, the government of Canada has been working on this issue to support all possible small startups and businesses. To do that they created the Canada Small Business Financing Program. For Canadians, this program offers the opportunity to alleviate their monetary issues in early business.
The reason why this scheme is beneficial is because the government is protecting small businessmen from financial risks in the early on-set of business. If you are eligible under the CSBFP then you get funding up to $ 1 million.
Who can apply?
Now, the very basic question in your mind would be “Who can apply?”. The Canadian government has defined an eligibility criteria and whoever falls in it, is eligible to apply. Let’s see what the criteria are.
Businesses should hold their operations and have assets in Canada.
The products and services must be offered to Canadians.
Its main purpose should be to earn profits.
Its revenues must not exceed $ 10 million annually.
Despite this, there are certain exceptions. It means some types of businesses are not eligible. They are as follows:
Non-Profit Organizations
Charitable Institutions
Religious Organizations
Farming Business
It is important to note that in the case of farming business, only those that have availed benefits under the Agri-Food Canada or Agriculture program are ineligible.
It is interesting to note that all these 4 types already have certain tax benefits and opportunities to get funds easily. Thus, the government has excluded them from taking the benefits twice.
Costs involved in Canada Small Business Financing Program
By costs involved, we mean that businesses who are thinking of applying to this program must bear some costs. It includes registration fees, lender fees, and interest fees. Let’s learn about them one by one.
1. Registration Fees
Whatever amount of loan you are planning to apply for, you have to pay 2% of it as a registration fee when participating in this scheme. What if small businesses cannot afford this 2% amount? In such cases, it can be easily financed as a loan.
2. Lender Fees
Every lender and financial institution will have its fee to initiate the loan formalities. The catch here is that this fee will not be a part of the loan or financed by a loan.
3. Interest Rates
Every financial institution will determine a set interest rate. At this rate, the lender will offer the amount. It totally depends on the lender whether this amount will be fixed or variable. Here is the standard rate:
In case of variable- Prime rate + 3%, and in case of Fixed- single family residential mortgage rate +3%
Which costs can be covered in CSBFP?
While filling out the application for the canada small business financing loan, you will be allowed to include some expenses and costs. Here is a list.
Architecture costs
Designing costs
Engineering costs
Fences
Leasehold improvements
Water systems
Drainage Systems
Parking lot construction
Dies
Developing molds for production, etc
Likewise, certain expenses are not eligible, for example:
Any cost related to labor which was provided by the borrower.
Expenses already covered under any other scheme/program.
Investment in shares of other companies.
Any asset acquired via barter system or exchange.
Projects eligible/ineligible for financing under CSBFP
The small business financing Canada allows the expansion of startups and small businesses. But there is a limitation. It is specifically mentioned by the government that not every project will be financed through this loan. How will you know if your project will be approved or not?
Don’t worry because here is a list of eligible projects. Let’s find out.
Purchasing any land/building or its improvement.
Purchasing new/old equipment or their improvements.
Renovations or leasehold improvements.
Here are ineligible projects.
Inventory purchase
R&D projects
Goodwill development projects
Working capital extensions
Paying franchising fee
Canada Small Business Financing Program: Is it worth it?
The ultimate question is to decide whether the Canada Small Business Financing Program is an ideal choice for small businesses and startups. One thing we know for sure is that every new business will face a definite shortage of cash in their lifetime. Furthermore, a limited access to funding programs and support systems will make it worse. Therefore, the decision must be made quickly.
The global economy is integrating and to boost it, a country needs to promote start-ups. In the coming years, it will be evident that to accelerate growth and development, programs like CSBFP will play a very integral role.
What do you think about the Canada Small Business Financing Program? Comment down below.
