The Canada Small Business Financing Loan: how it works, what the banks want, and why more London startups should use it

Most people who open a restaurant, a franchise, a shop or a small manufacturing space in London do it with a bank loan that the federal government stands behind. It is called the Canada Small Business Financing Loan, or CSBFL, and at Ledgers London, my accounting practice, it is the single most useful tool we see for getting a new business off the ground. It is also widely misunderstood. Here is how it actually works, what the banks look for, and why I think more people should know about it before they sign a lease.

What the program is

The Canada Small Business Financing Program is run by Innovation, Science and Economic Development Canada, but you never deal with Ottawa. You apply at your bank or credit union, the lender makes the decision, and the government shares the loss if the loan goes bad: it covers 85% of the lender's eligible loss on each loan, and the lender carries the other 15%. That guarantee is the whole point. It is why a bank will lend $400,000 to someone with no operating history, which it would almost never do on its own.

Any for profit business in Canada with gross revenue of $10 million or less can use it, including a startup that has not opened yet. Farms are the main exclusion. The program financed 6,409 loans worth close to $1.9 billion in the year ended March 31, 2025, the most in its history. Ontario took 46% of those loans, and 74% of the money went to businesses less than a year old.

The limits, in plain numbers

On top of the term loans, there is a separate line of credit of up to $150,000 for working capital, which lifts the total possible exposure to $1.15 million per borrower. Term loans can run up to 15 years for every loan class since the July 2022 rule change; before that, equipment and leasehold loans were capped at 10 years, and many banks still write them at 10. The interest rate on a floating loan cannot exceed the lender's prime plus 3%. With prime at 4.45% this week, that is a ceiling of 7.45%. Fixed rate loans are capped at the lender's residential mortgage rate plus 3%, and the line of credit at prime plus 5%. The government charges a one time registration fee of 2% of the loan, which you can roll into the loan.

The building portion rarely makes sense to me. You pay a premium rate for what is essentially a commercial mortgage, so if you are buying real estate and you qualify conventionally, do that instead. Where the program shines is the fit out: the leasehold improvements, the kitchen and shop equipment, the franchise fee and the first months of working capital. Leasehold improvements alone were 65% of all program lending last year.

What the bank will actually ask for

• Your own money in the deal. The program lets a lender finance up to 90% of eligible costs, but in practice the banks I deal with want the owner to inject about 30% of the total project cost and will finance the remaining 70%. Some banks have a preferred list, mostly the big national franchises, where they will go to 90%. Ask which concepts are on the list before you fall in love with one.
• Cash for the HST. Refundable taxes are not an eligible cost, so the HST on your build out and equipment comes out of your pocket. You get it back as an input tax credit on your first HST return, but you need to carry it for a few months.
• A personal guarantee. The program allows a lender to take an unsecured personal guarantee up to the full loan amount. Most banks start at 25%. Expect them to look at your personal net worth against the size of the loan as well; as a rule of thumb I tell clients to have net worth equal to at least a quarter of what they want to borrow.
• A lease as long as the loan. If the money is going into leasehold improvements, the bank wants the lease, counting renewal options, to match or exceed the amortization of the loan. A 10 year loan on a 5 year lease with no renewal option will not get approved, because the security disappears when the lease does. Negotiate the renewal options before you sign, not after.
• A business plan with real projections. The lender has to assess your ability to repay, and the government audits that they did. A clear plan with a monthly cash flow forecast is not paperwork for its own sake. It is what gets the file approved. This is the part Ledgers London does every week: we advise on whether a project fits the program, build the plan and projections, and take the file to the right lender.
• Invoices, not estimates. This is the part that catches people. The loan is disbursed against proof of purchase and proof of payment: invoices with make, model and serial numbers for equipment, and progress invoices from the contractor for leasehold work. Your own labour does not count. Subcontractor costs do. Banks also check that the general contractor is a registered, reputable business before they release money against its invoices.

Where the banks have pulled back

Restaurants and food services are still the biggest users of the program at 48% of all dollars lent last year, down slightly from the year before. But the mix inside that number has changed. In my experience the banks have become much more selective about standalone, independent restaurants, while franchised concepts on their approved lists still move quickly. If you are opening an independent place, expect a bigger injection, a harder look at your experience, and more questions about the location.

My take

This is one of the few government programs for small business that is not a grant competition or a tax credit you claim a year later. It is money, at the start, when you need it, and the data says three quarters of the businesses using it would not have been approved without it. London is a city of franchises, strip plazas and small industrial units, and a lot of the businesses in them exist because of this loan. The frustrating part is that most first time owners find out about it late, after they have signed a lease or paid a deposit with no plan for the HST or the equity injection. When people come in prepared, a CSBFL file is smooth. When they do not, it is a slog of back and forth with the bank, and the build out waits.

If you are planning a London startup

• Talk to the bank before you sign the lease. Find out whether your concept is on a preferred list, what injection they expect, and how long a lease they need to see for the amortization you want.
• Budget the full project cost, then add the HST on top as cash you need to carry.
• Get your leasehold quote itemized by trade and by phase, from a contractor who invoices properly. The bank will fund against those invoices.
• Keep the amortization long and the payment low while you build sales. You can always prepay a floating rate loan.
• Watch Wednesday. The Bank of Canada announces its next rate decision on October 28, and prime follows. A floating CSBFL moves with it.

If you want help deciding whether a CSBFL fits your project and getting it approved, Ledgers London are the experts in advising on and securing these loans for London businesses. And if you are fitting out a shop, clinic, restaurant or small industrial unit and your lender needs a proper quote and clean invoices, that is exactly how HW Contracting works.