Canada Small Business Financing Program (CSBFP)

The CSBFP is neither a grant nor a government loan. A participating bank, credit union or caisse populaire lends its own money, decides whether to approve the loan and sets the rate within program caps. Under section 8 of the Canada Small Business Financing Act, the federal Minister's liability on a defaulted loan is limited to 85% of the lender's eligible loss, calculated under the Regulations. The lender can claim only after taking the recovery steps the Regulations require, such as realizing on its security and any guarantees, and section 6 caps the total the Minister will pay each lender.

The guarantee protects the lender, not the borrower. The business owes the full loan, and anyone who signed a personal guarantee owes what they signed for. The program's purpose is to make lenders willing to finance small businesses, including newer ones and buyers of existing businesses, that might not qualify for an ordinary commercial loan on the same terms.

Status in 2026. Innovation, Science and Economic Development Canada (ISED) administers the program. Budget 2025 announced that delivery will move to the Business Development Bank of Canada. ISED's 2026–27 Departmental Plan says it will continue to prepare for that transfer during 2026–27, and ISED's November 2025 bulletin to lenders says the program will continue to operate as usual in the meantime. Neither announcement changed the limits and rules described below. Check ISED's CSBFP frequently asked questions before relying on a figure.

Eligible borrowers. Sole proprietorships, partnerships, corporations and co-operatives carrying on a business in Canada with gross annual revenues of $10 million or less. Since June 30, 2021, not-for-profit and charitable organizations that carry on a business also qualify. Farming businesses, holding corporations, trusts and buyers of real property held purely for rent are not eligible.

Loan limits (as of October 2026, per the April 2024 ISED Guidelines):

Intangible assets include franchise fees and goodwill bought as part of a going concern. Related borrowers, such as companies under common control or sharing facilities or expenses, share one set of limits unless each passes an independence test (separate legal entities at separate premises, and neither earns more than 25% of its revenue from the other).

Terms and pricing. Government coverage on a term loan lasts up to 15 years; a line of credit is covered for five years and can be re-registered. The maximum floating rate on a term loan is the lender's prime rate plus 3%, and the maximum fixed rate is its single-family residential mortgage rate plus 3%; a line of credit is capped at prime plus 5%. These caps include a 1.25% annual administration fee the lender pays to the government. A registration fee of 2% of the loan applies, and it can be financed within the limits. The Act and Regulations set no minimum down payment; the lender decides how much of the eligible cost it will finance.

ISED's FAQ states that a CSBFP loan cannot finance share purchases or assets acquired by a holding company. The Guidelines explain why: a share purchase advances money to a shareholder to buy shares, not to an eligible small business to buy eligible assets. A CSBFP-funded acquisition must therefore be an asset purchase made by the operating company that will run the business. That matters in negotiation, because many sellers prefer a share sale for tax reasons; see asset purchase vs. share purchase and the free asset vs. share sale checker.

Three other rules shape acquisition loans:

• Appraisal. Buying all or substantially all of the assets of a going concern, or buying from a non-arm's-length seller, requires the borrower to give the lender an appraisal by an arm's-length appraiser, made within 365 days before the first disbursement. The eligible cost is the lesser of the purchase price and the appraised value.
• Price allocation. The asset purchase agreement should allocate the price among equipment, leaseholds, inventory and goodwill, so the lender can fit each item into its loan class. See purchase price allocation.
• No financing of the seller's share. Any part of the price the seller lends back through vendor financing is not eligible for the CSBFP loan.

A franchisee buying a resale from another franchisee, or buying a franchise the franchisor controls, is treated as buying a going concern, so the appraisal rule applies. Read the transfer and guarantee terms in the franchise agreement before applying. Our buying a business in Ontario checklist puts financing in the context of the whole deal.

Security. A term loan for real property or equipment must be secured by a valid, enforceable first-ranking charge on the assets financed. A loan for leasehold improvements, software, intangible assets or working capital must be secured on other business assets, usually through a general security agreement. The Guidelines state that personal assets cannot be used to secure a CSBFP loan.

Personal guarantees. Under section 19 of the Canada Small Business Financing Regulations, a lender may take only unsecured personal guarantees. For loans made after March 31, 2014, the guarantees may cover up to the original amount of the loan plus interest on a judgment and enforcement costs; for older loans the cap was 25% of the loan, the figure older sources still quote. Where several people guarantee, the documents must state that their combined liability does not exceed that cap. Corporate guarantees may be secured and are not subject to that cap.

Fees. Besides the registration fee, lenders may charge their usual set-up and renewal fees, but those cannot be financed under the program.

Arjun Mehta and Sofia Rossi incorporate an Ontario company to buy an existing franchised café in Mississauga for $520,000: $210,000 for equipment, $160,000 for leasehold improvements and $150,000 for goodwill. The seller first offered to sell the shares of its corporation, but a share purchase cannot be financed under the CSBFP, so the parties sign an asset purchase agreement that allocates the price, with the franchisor's consent to the transfer as a condition.

Because it is a going-concern purchase, Arjun and Sofia give the lender an appraisal from an arm's-length appraiser. The appraiser values the equipment at $190,000, so eligible costs are $500,000: $190,000 equipment, $160,000 leaseholds and $150,000 goodwill. The lender finances 90%, or $450,000, plus the $9,000 registration fee, for a term loan of $459,000 at a floating rate within the prime-plus-3% ceiling. It takes a first charge on the equipment, a general security agreement over the company's other assets and joint and several unsecured guarantees from Arjun and Sofia, with their combined liability capped at the original loan amount plus judgment interest and enforcement costs. The lender takes no security on their personal assets.

Arjun and Sofia fund the remaining $70,000 from savings and open a separate $50,000 CSBFP line of credit for opening inventory and payroll. If the café later fails, the lender generally must realize on its security and call on the guarantees before claiming under the program, and the government's 85% share of the eligible loss does not reduce what Arjun and Sofia owe on their guarantees.