Government Small Business Loans: Complete Canadian Funding Guide | 7 Park Avenue Financial

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UPDATED 07/17/2025

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Canada Small Business Financing Program: Loans for Business Growth    

Government Small Business Loans: Government-Guaranteed Loans to Support the Growth of Your Business  

Most Canadian business owners and financial managers are not aware that if they have been “refused” a loan by a Canadian chartered bank, they can still apply (to that same bank!) for a government-guaranteed Small Business Loan.

We have observed this loan is called a number of things by a number of people. Borrowers refer to it as an “SBL” (Small Business Loan), or a “government small business loan.” Bankers tend to refer to it by its more formal and legal names: the BIL loan, or the CSBFL.

The bottom line is that it’s helping small businesses get loans via federal government loans for small business.

Once approved, the loan funds are typically deposited directly into the borrower's bank account, streamlining access to capital. Entrepreneurs know well that financing a business in Canada is a challenge in the SME/SMB landscape.

Whatever you want to call it when it comes to finance for small businesses, the loan is a great part of the government of Canada’s focus on assisting businesses with financing.

Key Benefits  

Only eligible purchases you have made within a specified period are eligible for financing, provided you have proper documentation around the purchase.

Repayment options are very flexible, and the amortization period can be tailored to your needs, including terms that allow for prepayment with no penalty.

So how do you get the loan, and what’s involved? What are the costs? Credit approval is required and is based on meeting certain credit and security requirements.

Although the loan is directly guaranteed (90 percent) by the government, the loan is actually administered by the Canadian chartered banks.

The government emphasizes that they like the banks to participate in this program as the originating financial institution, and the government guarantees to the banks 90 percent of the loan amount. There is a one-time 2 percent registration fee that is due on loan funding approval—by the way, this amount can be bundled into the loan amount.

The interest rate is determined based on Canada’s prime rates, with additional client-specific variances, and it directly impacts your repayment terms over the amortization period. When it comes to how to get a business loan in Canada, SBL loans should be a “go-to” option!

Funding Amount—Eligible Applicants

How much financing is available? What can be financed? Loans can be used to finance the following costs:

The current maximum borrowing limit is $1,000,000 for real estate and $350,000 for the asset categories of equipment, leasehold improvements, land, buildings, and vehicles.

Only eligible purchases—such as land, buildings, vehicles, equipment, and leasehold improvements—qualify under the program. Any business with under $10 million in revenues can apply for SBL loans—that includes sole proprietorships and partnerships. The number of employees may also be considered as part of the eligibility assessment.

The program is available to start ups and businesses of all sizes, including those with a small number of employees. Borrowers will be pleased to know that in other Canada Small Business Financing Program news, entrepreneurs purchasing franchises can now include the franchise fee in the borrowing amount!

Financing small businesses in Canada in the franchise industry is a major use of the program, as are BDC loans.

Note that you cannot use a loan to finance the following costs such as lines of credit, working capital needs, etc. This is a lump sum term loan repayable with fixed installments at variable or fixed rates.

Cost of Financing

This is not an interest-free loan unlike some of the other government loan programs and grants, but the interest rate under the program is very attractive. T

he interest rate is typically composed of a base rate plus a client-specific variance, and it directly impacts the total cost of financing. In some cases, interest can be deferred for a period of time.

The biggest issue, we think, with the program is the misconceptions that come with the program. Business owners think they can get a “line of credit” under the program. This is not the case.

In certain instances, the program tends to be confused with another program called the Community Futures program. This is a separate program that is funded by certain economic regions to promote employment and business in that particular area or geography.

It tends to be a bit more “rural” in focus. Please note, the program is not available to businesses in the farming industry; there is a separate program specifically tailored to the farming industry.

Again, we emphasize, the Community Futures program is not the government-guaranteed Small Business Loan. (In the United States, our government loan is called an “SBA” loan, as it’s administered by a separate organization set up by the government.)

So, who qualifies? Hopefully your business! You must have revenues under $10 million per annum as we have noted.

Credit approval is required for this program and is contingent upon the applicant’s creditworthiness and the security provided. Security interests are often required on financed assets to secure the loan or financing agreement.

So when should you proceed? We would recommend right now, not when your venture is in desperate need, at which point your chances might be less than successful. What is the $1 million issue on the program?

It’s as follows—dealing with banks and paperwork requires proper preparation, detail, and you need to allow for some reasonable time frames. That is your million dollars’ worth of advice!

Major Changes to the Program Were Made  in 2022  

On July 4, 2022, significant amendments were made to the Canada Small Business Financing Regulations and Canada Small Business Financing Act. These changes expanded the program’s scope and increased financing options for small businesses.

The maximum loan amount for a borrower was increased from $1 million to $1.15 million. The breakdown now includes up to $1 million for term loans, with a maximum of $500,000 for equipment and leasehold improvements (up from $350,000), and $150,000 for intangible assets and working capital costs. Additionally, $150,000 is available for lines of credit for working capital costs.

A new line of credit product was introduced specifically for working capital costs. This allows businesses to finance day-to-day operating expenses such as inventory, payroll, rent, professional fees, and research and development costs. The line of credit can be used for ongoing expenditures or commitments that arise or were invoiced no more than 365 days prior to authorization.

The maximum amortization period for all loans was extended to 15 years, up from the previous 10 years for equipment and leasehold improvements.

This means that interest and principal payments can now be spread over a longer duration, reducing the annual payment burden for borrowers. The time period to finance expenditures or commitments was also increased from 180 days to 365 days prior to loan approval.

These changes provide greater flexibility for businesses to access funding for both immediate needs and past expenditures.

Canada Small Business Financing Program: How to Qualify  

So what are those key next steps?

Ensure you have a crisp financial package—balance sheets and income statements, your personal financial statement of net worth (more on that in a moment), and a clear business plan and summary of your business. The funds needed and the purpose of the loan should be clearly articulated.

Providing details about the security (collateral) you can offer may also strengthen your application.

A proper description of any assets being purchased (quotes/invoices, etc.) helps also.

7 Park Avenue Financial business plans we prepare for clients meet and exceed the requirements of banks and other commercial lenders.

The application must be handled by a Canadian bank. Here is where we recommend that if you either don’t have a banker or if you don’t have a strong relationship with a bank/banker, you use the resources of a business financing advisor/expert in this area. The nominal fee you might pay this person is worth its weight in gold if they have solid contacts and experience.

Business Needs Assessment: Determining the Right Loan for Your Business  

Before applying for financing, it’s crucial to conduct a thorough business needs assessment to ensure you’re choosing the right loan for your unique situation.

Start by evaluating your current financial position and identifying the specific areas where additional funds could make the biggest impact—whether that’s covering working capital costs, investing in leasehold improvements, or acquiring intangible assets like software or intellectual property.

Consider how the Canada Small Business Financing program can support your business needs, from purchasing new or used equipment to acquiring real property or making improvements to existing assets.

By aligning your financing strategy with your long-term goals, you can select the most suitable loan option, such as a term loan, to help drive economic development and business growth.

Understanding your business’s priorities will ensure you secure the right amount of funding to support expansion, innovation, and ongoing operations, making the most of the available financing options in Canada.

Uses of Funds: How You Can Invest Your Loan  

A small business loan through the Canada Small Business Financing program offers flexibility in how you can invest the funds to strengthen your business.

Eligible uses include making leasehold improvements to your premises, purchasing new or used equipment to boost productivity, and covering working capital costs to manage day-to-day expenses. You can also use the loan to finance real property improvements, such as renovations or expansions, or to acquire intangible assets like technology, patents, or trademarks that can give your business a competitive edge.

For farming businesses and other small enterprises, these funds can also be used to refinance existing debt or to support new business ventures, provided the purchases are eligible under the program.

By strategically investing your loan, you can improve cash flow, increase profit margins, and contribute to the economic development of your business. Careful planning and wise use of funds will help ensure your business loan delivers maximum value and supports your long-term success.

Application Process: Step-by-Step Guide  

Applying for a small business loan under the Canada Small Business Financing program involves a straightforward process designed to help you access the funds you need.

Begin by confirming your eligibility—your business should have gross annual revenues under the program’s threshold and meet other requirements. Next, gather all necessary documentation, including your business plan, up-to-date financial statements, and a personal guarantee if required.

Submit your completed application to a participating financial institution, such as a bank or credit union. After your application is reviewed and you receive loan approval, you’ll sign a loan agreement and the loan will be registered with Innovation, Science and Economic Development Canada.

A registration fee of 2% of the loan amount applies, which can often be included in the total amount financed. Throughout the process, consider working with a financial advisor to ensure you understand all terms and conditions, and to help you navigate the application efficiently for the best chance of success.

Repayment and Default: What to Expect  

Repaying your small business loan typically involves making regular payments, which may be structured as interest-only or as combined principal and interest payments, depending on your agreement.

The repayment period can vary based on the loan amount and the terms set by your lender, with options for longer amortization periods to help manage cash flow. If you’re able, making lump sum payments can reduce your overall interest costs and shorten the repayment timeline.

It’s important to stay on top of your payment schedule to avoid default, which can result in penalties, additional interest charges, or even a demand for full repayment of the outstanding loan amount. The Canada Small Business Financing program is designed to reduce risk for both lenders and borrowers, as the government backs a significant portion of the loan.

By understanding your repayment obligations and planning accordingly, you can maintain a healthy financial position and ensure your business continues to benefit from the support provided by this valuable financing program.

What Else Do You Need to Know? The Loan Is Guaranteed!  

In our experience, many government small business loans are not automatically approved the first time.

They are in fact reviewed and adjudicated by people at the bank that you will never meet. So be prepared to enter into healthy dialogue on any questions or issues that might come up!

It is not unusual to go back and forth a bit clarifying any of your issues that might have come up in the application. So what's the bottom line on small business and government loans?

It's as follows: this is a solid government financing program. Business owners should understand it's administered by the bank, but not run by the bank, so to speak.

Conclusion: Get Help Applying for Business Funding  

How do I apply for a loan?

We get that one a lot at 7 Park Avenue Financial when it comes to the small business government loan.

To apply for funding, ensure you prepare a good package;

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor on the government small business loan (SBL).

Be patient, and hopefully those government funds will be "flowing" into your firm shortly from the financial institutions in the program via your successful application. This will allow you to grow sales of your products and services with financing that works and is tailored to your needs.

FAQ: Frequently Asked Questions  

How Can I Get a First-Time Business Loan?

Borrowers in Canada should ensure they have a good personal credit history and credit score and be able to produce proper financial statements or a business plan. The ability to demonstrate management and industry experience is also helpful. In many cases, collateral may be required to qualify for a loan.

The Canada Small Business Financing Program is one of the best start-up business loan programs.

What Credit Score Is Needed for a Small Business Loan?

In Canada, a credit score in the 650 range and up is required for a federal small business loan. Various types of financing such as lines of credit, equipment leasing, and short-term working capital loans/merchant advances place a strong emphasis on the credit score of the owner for business borrowing.

Citations

1. Business Development Bank of Canada. "Small Business Financing in Canada: 2024 Report." BDC Publications, 2024. https://www.bdc.ca
2. Government of Canada. "Canada Small Business Financing Program: Annual Report 2023-2024." Innovation, Science and Economic Development Canada, 2024. https://www.ic.gc.ca
3. Canadian Federation of Independent Business. "Access to Capital Survey: Small Business Financing Trends." CFIB Research, 2024. https://www.cfib-fcei.ca
4. Statistics Canada. "Small Business Financing and Growth Study." Government of Canada, 2024. https://www.statcan.gc.ca
5. Canadian Bankers Association. "Small Business Lending: Industry Overview and Trends." CBA Publications, 2024. https://www.cba.ca
6. 7 Park Avenue Financial ." Government Business Loans In Canada". https://www.7parkavenuefinancial.com/government-business-loans-canada.html