We focus on the government programs for small business finance in Canada. The general issues of financing are discussed in the Small Business Funding article elsewhere.
The Small Business Funding article discusses the usual sources and forms of finance and how you apply for these.
The Canada Small Business Financing Program
CSBF is a program under Canada Small Business Financing Act. This program helps small businesses obtain finance for fixed assets such as premises and equipments. These assets could be purchased outright or obtained under a lease agreement. Financing could also be for improvement of the fixed assets.
The loans are actually made by banks, and leases by leasing companies. CSBF program offers a guarantee to absorb part of any losses suffered by the lenders owing to non-repayment by the borrower. The program also disallows the lenders from taking personal assets of the small business person as security for the loan. Thus, small businesses would find greater availability of loans, on conditions that would not put their personal property at risk.
Loans are made upto a limit of $250,000 to small businesses other than farming, charitable and relgious enterprises (which are covered by separate programs). The estimated annual gross revenue of the borrowers should not exceed $ 5 million. Loan amount would not exceed 90 per cent of the value of asset financed.
These loans could not be used to finance personal assets and non-tangible items such as R&D and Goodwill. Borrowers would also be required to offer the financed asset, or other business asset, as security for the loan. Repayment should be completed during the economic life of the asset financed, not exceeding ten years.
Business Development Bank of Canada
Business Development Bank of Canada not only offers small business finance in Canada but also supports the business person with management services. The bank extends small and medium business finance for different business needs, not just for acquiring fixed assets.
BDC would help you prepare a sound loan proposal that would be acceptable to banks. For example, you can download their publication, Demystify Your Banker, from their web site. The publication tells you what to include in your application, what a bank looks for and how to enhance your chances of success.
Community Futures Development Corporations
CFDCs focus on economic development of rural and other communities. For example the Ontario CFDC focuses on the rural and northern communities. Federal funds made available for local investment are allocated at the local community level. A board of local volunteers, including professionals, run the CFDC programs.
The programs include strategic community planning and development, business finance and business services. Finance could be in the form of loans, loan guarantees or equity investments, and do not exceed $125,000 for a small business.
If you are an individual seeking to establish a very small business, your best source of small business finance in Canada could be a micro-credit from a local non-profit organization, community economic development program or commercial financial institution. Micro-credits do not exceed $5000, and are given to individuals who could not get any other type of finance.
You could get a Financing Info-Guide for Starting a Business from Canada Ontario Business Service Center. The guide contains a link to Sources of Micro-credit Financing. Micro-credit lenders typically serve specific geographical areas, and provide business mentoring, as well as financing, services.
Very small businesses could also use their credit cards and personal lines of credit as a source of small business finance in Canada.
If you are a young person, you could qualify for one of the assistance programs targeted at such persons. Under these programs, in addition to financial support, training in business skills is also offered. Check Canadian Youth Business Foundation program for example. Details of other programs would be available at your local CBSC or their partners.
If you are an unemployed person eligible for employment insurance, you could receive assistance under Self Employment program.
Other Sources of Small Business Finance in Canada
Commercial banks, venture capitalists and business angels also provide small business finance. However, these sources are generally for innovative small business programs that promise fast growth and high profits. Log on to Industry Canada Web site for financing sources, including venture capitalists.
When you go looking for small business finance in Canada, don’t forget to prepare yourself well as suggested in the Small Business Funding article. Use the Interactive Business Planning facility offered by CBSC to develop a complete business plan.