The Canada Government Small Business Loan guarantee programThe Canada Government Small Business Loan program is operated by The Business Development Bank of Canada, and is a financial institution wholly owned by the Canadian government.The Business Development bank (BDC for short) plays a leadership role in delivering financial and consulting services to Canadian small businesses, with a particular focus on providing Canadian small business loans to the technology sector and companies wishing to export. The BDC's debt obligations, underwritten by the Canada government, are issued to the public and private sector institutions
The following is a list of some of these startup assistance programs:
Canada Small Business Financing ProgramThe Canada Small Business Financing Program seeks to increase the availability of loans and capital leases for establishing, expanding, modernizing and improving small businesses. It does this by encouraging financial institutions and leasing companies to make their services available to small businesses. Under the Program, a Canadian small business must apply for a loan or lease to the financial institution (bank, credit union or caisse populaire) or the participating leasing company of its choice. If the application is granted, the federal government will guarantee 85 percent of the lender's losses in the event of default. Most small businesses starting up or operating in Canada are eligible for the Canada Small Business Financing Program loans and leases, as long as their estimated gross revenues do not exceed $5 million during the fiscal year in which they apply. Sole proprietorships, partnerships and incorporated companies all qualify. Farming and charitable or religious enterprises do not qualify. Commercial term loans can finance up to 90 percent of the cost of the purchase or improvement of real property and physical assets, the improvements to leased property, and the purchase new or used equipment. Capital leases can finance the cost of various types of new and used equipment including: vehicles, hotel and restaurant equipment, medical and health services equipment, computer hardware and software, telecommunications equipment, and manufacturing equipment. The maximum amount a small business can access under the program is $250, 000. This is the combined total that it is allowed for all its Canada Small Business Financing loans and capital leases. For Canada government small business loans and capital leases alike, the same security requirements apply. Both financial institutions and leasing companies are required to take security in the assets financed in accordance with individual provincial law. They may also require corporate and/or personal guarantees; however, personal guarantees cannot be secured or exceed 25 percent of the total financing amount. Interest rates on loans may be either floating or fixed. The floating rate cannot be more than 3 percent higher than a lender's prime lending rate. Fixed rates cannot be more than 3 percent higher than the lender's residential mortgage rate for the term of the loan. Lease payments include an interest rate of up to 13.25% plus the Government of Canada bond rate for the term of the lease. The interest rates include a 1.25% administration fee. In addition, at the time of registration all participants must pay a 2% registration fee. The fees cover the costs of the Canada Small Business Financing Program, which is self-financing. All loans and leases must be paid in full within 10 years.
The Canada Small Business Financing Program benefits small businesses, the lending community and the participating leasing companies. Small businesses gain access to financing that might not otherwise be available to them. The lending community and participating leasing companies can broaden their client base and meet the needs of emerging businesses.
Canadians benefit because the Canada Small Business Financing Program helps businesses grow and create jobs - and the result is a more dynamic Canadian economy.
MicrocreditMicrocredit funds are designed for Canadian small businesses who don’t have access to bank credit. The funds are managed by local economic development centers that offer security to the lending institutions. These funds, with a budget allocated to each region, primarily support community projects that promote employment for specific target clienteles (women, immigrants, people with disabilities, etc.).
The purpose of these loans, which are under $25,000, is to provide Canada small business financing for the startup of very small businesses (less than five employees and gross revenues under $500,000). They can be used to finance working capital or to purchase assets. Because of the guarantees offered to the lenders, these loans come with technical support and are closely monitored with respect to repayment dates.
Provincial programs
Provincial governments offer numerous Canadian small business financing programs that meet the specific needs of local communities with regard to preserving jobs. These programs are administered by provincial networks of the regional economic development agencies. They support businesses at the seed and startup stage. They are not administered nor guaranteed by Business Development Bank of Canada, but BDC consultants can assist in the process of obtaining the financing.
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