A business plan for a Canada Small Business Financing Program (CSBFP) loan is the plan you hand your bank or credit union when you ask for a government-backed small business loan. The lender, not the government, decides whether to approve it, so the plan has to answer a lender’s questions: what the money buys, whether those costs qualify under the program, how the business will repay, and what happens if sales come in lower than you hope. This guide explains how the program works, then goes through the plan and financials section by section, and ends with a checklist of documents.

Each lender sets its own requirements. Use this guide to prepare, then ask your lender exactly what it wants before you finalize anything.

What is the Canada Small Business Financing Program?

The CSBFP is a federal program run by Innovation, Science and Economic Development Canada (ISED). It helps small businesses get loans from ordinary lenders by sharing the risk. Loans made under the program are often called CSBF loans or CSBFL.

The basics, from ISED’s program overview and FAQ for small businesses:

  • You apply at a bank, credit union or caisse populaire. ISED doesn’t accept or process applications. You present your business proposal directly to the lender you choose.
  • The lender decides. In ISED’s words, financial institutions “are solely responsible for making the decision to approve a loan,” and the money you receive is the lender’s, not the government’s.
  • The government shares the loss if you default. Under the CSBFP guidelines, the loss-sharing ratio between the government and the lender is 85/15, subject to limits on each lender’s total claims.
  • Lenders still do full due diligence. The guidelines say lenders must apply the same due diligence as for a conventional loan of the same amount, and they must check credit (yours or the business’s) and assess the borrower’s ability to repay.

That last point is why your business plan matters. A government guarantee doesn’t replace the lender’s credit decision. It makes the lender more willing to say yes to a business that can show it will repay.

Who is eligible for a CSBFP loan?

According to ISED’s FAQ, most start-ups and existing for-profit, not-for-profit and charitable small businesses in Canada with gross annual revenues of $10 million or less can apply. Corporations, sole proprietors, partnerships and cooperatives all qualify.

Details from the guidelines:

  • Existing business: estimated gross revenues of no more than $10 million in the fiscal year the loan is approved.
  • New business: estimated gross revenues of no more than $10 million in its first 52 weeks of operation.
  • The business must operate in Canada and offer its products or services to the public.
  • Farming businesses are not eligible. ISED points them to the Canadian Agricultural Loans Act program instead.

For a new business, the revenue test uses estimates, so your revenue forecast has to support it.

If you’re a young entrepreneur starting out, Futurpreneur is another Canadian lender to look at. Our guide to a Futurpreneur business plan covers who qualifies and what it asks for.

How much can you borrow, and on what terms?

These are the program limits. Your lender can offer less than the maximum, and the FAQ says the borrower and lender negotiate the amount.

Item Program rule
Term loans, total per borrower Up to $1,000,000
Anything other than real property, such as equipment and leasehold improvements (within the $1M) Up to $500,000
Intangible assets and working capital (within the $500K) Up to $150,000
Line of credit for working capital Up to $150,000
Combined maximum $1,150,000
Maximum term (government coverage) 15 years for term loans; 5 years for a line of credit
Registration fee 2% of the amount loaned (term loan) or authorized (line of credit); can be financed
Maximum interest, floating-rate term loan Lender’s prime rate + 3%
Maximum interest, fixed-rate term loan Lender’s single-family residential mortgage rate + 3%
Maximum interest, line of credit Lender’s prime rate + 5%

Sources: the program overview, the FAQ and the guidelines.

A few things in the fine print are worth knowing:

  • The rate caps include the program’s 1.25% annual administration fee, which you pay as part of the interest rate. Lenders can charge less than the caps.
  • Lenders may also charge their normal fees for a loan of the same size, such as set-up and renewal fees. The FAQ says these are paid directly to the lender and can’t be financed under the program.
  • A term loan can be amortized over more than 15 years, as with a mortgage, but any balance left after 15 years must be converted to a conventional loan.
  • The guidelines say at least one payment of principal and one of interest must be scheduled each year, and the first must fall within one year of the first disbursement. Payments can be blended, seasonal or escalating, which helps a seasonal business.
  • The 2022 program changes added the line of credit. The FAQ notes that not every lender offers it yet, so ask.

What can a CSBFP loan pay for?

Term loans can finance:

  • Buying or improving real property (land or buildings) used for commercial purposes
  • Buying or improving new or used equipment
  • Buying new or existing leasehold improvements (renovations to a space you rent)
  • Intangible assets, such as franchise fees, incorporation costs, and permits and licenses (goodwill only when you buy a going concern)
  • Working capital, meaning day-to-day operating expenses
  • The registration fee

A line of credit can finance only working capital and the registration fee.

What doesn’t qualify, per the FAQ and guidelines:

  • Buying shares of a company. If you’re buying an existing business, the FAQ says buying its eligible assets may qualify, financed at the lesser of the purchase price and the appraised value.
  • Assets bought by a holding company
  • Refinancing costs your lender has already financed with a conventional term loan or line of credit
  • Paying off an existing conventional line of credit with a CSBFP line of credit
  • The part of a price the seller finances (vendor take-back)
  • Your own labor on leasehold improvements or equipment, including the labor of your employees and, for a corporation, its shareholders and directors. Subcontractors you hire are eligible.
  • Vehicles for personal use, and improvements to a family home for non-commercial use

Timing matters too. Since July 4, 2022, the guidelines let a lender include costs incurred or committed within 365 days before the loan (or conditional approval) date. Older costs don’t count.

Personal guarantees and security also follow program rules. Lenders must take security on the assets the loan finances, and they may take unsecured personal guarantees up to the original amount of the loan. Read every guarantee you sign, and have a lawyer explain it if you’re unsure.

What do lenders want in a business plan for a CSBFP loan?

Lenders read the plan to answer three questions: Does the program cover what the loan buys? Can this business repay it? Are the owners credible and committed? For the general structure, see how to write a business plan, step by step. Below is what to stress for a CSBFP application.

Executive summary

Lead with the request: the amount, whether it’s a term loan, a line of credit or both, what it pays for, how much of your own money is going in and how you’ll repay. Then describe the business in two or three sentences. Our guide to writing an executive summary has a template and a loan example.

Business description and ownership

Give the legal name, structure (sole proprietor, partnership, corporation or cooperative), location and start date. List every owner and their share. If you own other businesses, say so: the guidelines combine related borrowers’ loans toward the same $1 million and $150,000 limits unless the businesses pass an independent business test.

Management and experience

For a start-up, this section carries a lot of weight. With no business credit history, the lender checks the owners’ credit instead, and it wants evidence that the people running the business can do the job. Describe each owner’s relevant work experience, training, licenses and who handles the books. If you’re missing a skill, name the accountant, bookkeeper or adviser who fills the gap.

Products, services and operations

Explain what you sell, how you deliver it, your suppliers and your staffing. Tie it to the assets you’re financing: if the loan buys a second oven, show what the extra output is worth.

Market analysis

Show who will buy, why they’ll buy from you, and how many of them there are near you. Name real competitors and how you differ. Base your sales estimates on evidence: foot traffic counts, letters of intent, pre-orders, competitor pricing or your own past sales. Our guide to market analysis for a business plan walks through this with worksheets.

Marketing and sales plan

Explain how customers will find you, what that costs and how quickly sales will build. Keep the ramp-up realistic; full capacity in month one is hard to believe.

Use of funds

This section matters more for a CSBFP loan than for most other loans, because every dollar has to fit a program category and be backed by an invoice or quote. Break the project into the program’s loan classes, show the source of each dollar, and attach quotes.

Example (made up for illustration): Harbour Grind is a made-up coffee shop opening in a leased space. The owner plans a $192,000 project.

Cost Program category Amount Paid by CSBFP loan Paid by owner
Counter, plumbing, electrical, flooring Leasehold improvements $95,000 $95,000 $0
Espresso machine, grinders, refrigeration, POS hardware Equipment $68,000 $55,000 $13,000
Incorporation, permits and licenses Intangible assets $4,000 $0 $4,000
Opening inventory and first three months of expenses Working capital $25,000 $0 $25,000
Total $192,000 $150,000 $42,000

The loan stays inside the program’s limits: $150,000 is under the $500,000 cap for everything other than real property, and the loan pays for no intangible assets or working capital, so the $150,000 cap on those doesn’t come into play. The 2% registration fee on a $150,000 loan is $3,000, which the owner can pay or ask to finance. If you finance it, ask the lender how it calculates the fee on the larger amount.

The table also shows the owner putting in $42,000, about 22% of the project. The program guidelines don’t set a minimum owner contribution, but many lenders want to see your own money at risk. Ask yours what it expects.

For building your cost list, see estimating startup costs.

Financial plan

This is the part the lender reads most closely. Most lenders will ask for some version of:

  • Historical statements for an existing business, usually the last two or three years, plus recent year-to-date figures
  • Projected income statements for at least the first year by month, then two or more years by year
  • A monthly cash flow forecast for at least 12 months, including loan payments
  • A projected balance sheet
  • Your assumptions, written out: prices, volumes, wages, rent, seasonality and the interest rate you used
  • A break-even estimate
  • Personal net worth statements for each owner

The question behind all of it is repayment. Show the cash the business generates before loan payments, then compare it with the payments.

Example (made up for illustration): Harbour Grind assumes the lender quotes a 10-year loan at 8%. That rate is an assumption for this example, not a CSBFP rate. On $150,000, monthly payments come to about $1,820, or $21,840 a year. The owner’s projection shows $34,000 a year of cash available for loan payments in year one. Dividing $34,000 by $21,840 gives a debt service coverage ratio of about 1.56: the business earns $1.56 for every dollar of loan payments. Lenders use different minimums, so ask yours what ratio it looks for.

Add a downside case. Show what happens if sales come in 20% below plan, and what you’d cut. A lender is more comfortable when you’ve already thought about the bad year. Our guide to financial projections for a business plan shows how to build these statements.

Risks and security

List the main risks and what you’ll do about each. Then describe what the lender will hold: the assets financed, any other business assets, and the personal guarantees you’re prepared to give.

Checklist of documents for a CSBFP loan application

Lenders’ lists vary, so treat this as a starting point and confirm with your lender.

About the business

  • Business plan with a clear loan request and use of funds
  • Articles of incorporation, partnership agreement or business registration
  • Business licenses and permits you already hold
  • Lease or offer to lease for your premises, or the purchase agreement for real property
  • Franchise agreement, if you’re buying a franchise

About the money

  • Quotes, estimates or invoices for each item you want financed, sorted by program category
  • Contractor quotes for leasehold improvements
  • Purchase agreement and asset list, if you’re buying an existing business’s assets
  • Appraisal, if the lender asks for one (check before you pay for it)
  • Proof of your own contribution, such as bank statements

Financial statements

  • Two or three years of financial statements and tax returns, for an existing business
  • Year-to-date financial statements
  • Projected income statement, cash flow forecast and balance sheet, with assumptions
  • Break-even estimate

About the owners

  • Personal net worth statement for each owner and guarantor
  • Resumes or summaries of relevant experience
  • Personal tax returns or notices of assessment, if requested
  • Consent for a credit check

After approval, keep

  • Every invoice and proof of payment (canceled checks, receipts) for items the loan paid for. The guidelines require lenders to collect them.

How to apply, step by step

  1. Confirm eligibility. Check your revenue estimate, your industry (not farming) and that what you want to finance fits the eligible categories.
  2. Price the project. Get written quotes and sort them into program categories. Note anything you’ve already paid, and when: costs older than 365 days won’t count.
  3. Write the plan and financials. Lead with the loan request and use-of-funds table.
  4. Find lenders. Most financial institutions take part, according to the FAQ. ISED’s finance map helps you find lenders near you. Ask whether they offer the CSBFP line of credit if you need one.
  5. Meet a business banking officer. Ask for its document list, the rate and fees it would charge, the security and guarantees it wants and how long a decision takes.

If one lender declines, ISED’s FAQ points out that lenders’ criteria differ, so you can try another, or look for other government funding through Innovation Canada’s Business Benefits Finder.

Before the meeting, check for the usual weak spots: a loan request that isn’t on page one, costs the program won’t cover (share purchases, refinancing, your own labor), projections with no stated assumptions, a cash forecast that goes negative with nothing to cover it, and quotes that don’t add up to the figures in your plan. A SWOT analysis can help you spot the risks a lender will ask about.

The CSBFP sets the outer limits on amounts, rates, fees and terms. Your lender sets the actual terms inside them, so compare more than one offer. For legal, tax or lending decisions, check with your accountant, a lawyer or the lender before you sign.