Small business financing options are changing quickly these days – crowdfunding and peer-to-peer lending portals are on the rise. The exceptional growth of crowdfunding portals is undoubtably linked to the fact that financing a new business, particularly after 2008, was nearly impossible for entrepreneurs with little or no assets to present as collateral to traditional lenders.
However, as new ways to finance your business grow, entrepreneurs should not forget about government backed funding programs which have been successful at stepping up to finance unsecured borrowers.
Canada Small Business Financing (CSBF) Loan
One of my favourite loan programs clients have leaned on is the Canada Small Business Financing (CSBF) Loan. The CSBF Loan is designed to help businesses purchase, install, renovate and modernize business equipment and other fixed assets. The best part is that because the loan is backed by the Federal Government, in many cases, entrepreneurs are not required to have collateral to secure the loan. It makes the loan a real option for fresh entrepreneurs who otherwise would be unable to obtain bank financing.
Brian Lifchitz, a senior manager at RBC, helps the bank administer the CSBF loan program. Brian is in-tune with local startups and entrepreneurs in Toronto and works with new businesses to determine whether the loan is a good fit. If your business is looking to finance leasehold improvements or acquire new assets, we would be happy to put you in touch with Brian.
How Does This Help My Business?
The CSBF Loan isn’t right for all new businesses, but if you are establishing a retail premieses or purchasing new assets, its is certainly worth consideration.
The Loan can provide a Canadian business with up to $500,000 in financing for the purchase of land or business premises (and $350,000 for leasehold improvements and equipment). Here is a snapshot of CSBF Loan works:
- Financing can be used to cover up to 90% of the eligible costs related to leasehold improvements and equipment;
- If the loan is for the purchase of premises, 50% of the floor space must be for your business activity;
- Applications must be submitted with a business plan which includes financial statements or projections;
- Eligible purchases made within the past six months can be financed;
- Loan terms are generally 7-10 years depending on the asset being financed;
- Interest rates vary, but a maximum rate is set by the government;
- Personal guarantees are required but are limited to a maximum of 25% of the loan
- A one-time up front government registration fee of 2% of the loan amount is payable to the government and can be added to the loan principal;
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