The purpose of this program is to assist small business owners with the start-up, growth or modernization of their business operation, by making it easier for them to obtain financing up to a maximum of $500,000.
Under the Canada Small Business Financing Program, the Canadian Government guarantees 85% of the bank’s losses in the event of default. However, the bank must make and manage the Canada Small Business Financing Loan with due diligence, applying the same procedures and care they would apply to any loan, to any small business.
In the event of a claim for loss, the bank must be able to prove the loan was administered in accordance with the specific requirements of the Canada Small Business Financing Program. The Canada Small Business Financing guidelines are available for reference on Industry Canada’s website.
- A maximum of 70% for leasehold improvements and equipment (up to a maximum of $350,000)
- A maximum of 90% for commercial real estate (up to a maximum of $500,000)
The small business owner’s contribution may be in the form of liquid cash or home equity. It CANNOT be equipment. This aspect has not changed.
Homes are often considered the key to security when negotiating debt serviceability, at up to 80% of the value of a house (less the mortgage). If the house is co-owned by a significant other, he or she would need to co-sign the small business bank loan. Proof of income, financials and notices of assessment for the past 2-3 years would need to be provided for both parties.
Credit history will always play a role in this assessment. This has not changed.
Can you clarify which expenses are eligible for financing with this Canadian small business loan?
- Date of the invoice
- Name of the supplier
- Total invoice amount
- Invoice amount (less taxes, which are not reimbursed)
- Amount already paid by the small business
- Amount to be paid directly to the supplier
What are the costs for this Canadian small business loan?
There are two costs to consider:
A registration fee of 2%, which can be financed as part of the loan.
The interest rate which can be: 1. Variable – the bank’s prime lending rate plus 3% or 2. Fixed – the bank’s single family residential mortgage rate plus 3%.
Have the Rules Changed for Canadian Small Business Loans? Q & A with TD Canada Trust is based on an interview between Sandra Bekhor of Bekhor Management and Melanie Porter, Manager of Business Banking at TD Canada Trust. This article is meant to serve as a resource for Canadian small business owners exploring options to generate financing. It is not meant to be a substitute for professional advice and should not be relied on as any such substitute.
Melanie Porter can be reached at (905) 875-8554 or by email at: firstname.lastname@example.org.
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