Canada small business financing program

Small business finance can easily be obtained in Canada with the help of the various small business financing programs. According to the Small Business Financing Act that was established in 1999 the aim of the program is to reorganize the loan administration and give out finance to small businesses that would otherwise be difficult to avail.

In Canada the financial institutions are responsible for making all the credit decisions that are to be made for giving out the loan. The application for loans for small business under the Canada Small Business Financing Program can be availed from any bank, caisse populaire or any credit union or from any other private financial institution. Canada has approximately 1,540 lenders including all the provinces and territories. The lenders are however responsible for taking all the decisions related to giving out finance.

For being eligible for the Canada Small Business Financing Program the business is supposed to be carried out in Canada, the aim of the business should be to make profits, if the finance is being taken for an existing business then the estimated gross annual revenue that is made from all the operations of the small business should not be more than $5,000,000 for the economic year in which the Canada Small Business Financing Program loan is being taken or is approved. If the finance is being taken to set up a new business then the approximate income that is forecasted should not be more than $5,000,000 during the first 52 weeks of the business being established.

The Canada Small Business Financing Program can finance up to 90% of the cost of purchasing or improving real estate property or any other immovable property owned by the business; the purchase of leasehold improvements to the leased property and the purchase of new or used equipment. The Canada Small Business Financing Program would finance a loan amount up to $250,000.

Off late there have been some improvements in the Canada Small Business Financing Program and it has become a lot better. This would mean that there are more opportunities made available to the borrowers. The Canada Small Business Financing Program has introduced access to finance for lease of used or new equipment required for the business under the 5-year Capital leasing pilot project.

The aim of the Canada Small Business Financing Program is to increase the availability of finance and capital leases to small business for their establishment, modernization or expansion. The Canada Small Business Financing Program does this by motivating the financial institutions and the leasing companies to make the services available to the small business. With the help of the Canada Small Business Financing Program the small business can apply for finance or lease through any financial institution or the respective leasing company that is a part of the program. If the finance application is accepted then the federal government takes the responsibility to guarantee 85% of the lenders loss in any case of default.

In most of the cases the small business that are operating or people who want to start a small business are eligible to apply for finance from Canada Small Business Financing Program. Partnerships, sole proprietorships and even incorporations are eligible to qualify for the loans from Canada Small Business Financing Program. But religious organizations, farming and charitable organizations are not eligible for the finances provided by Canada Small Business Financing Program.

When you apply for a loan from the Canada Small Business Financing Program you would wonder about the security. For both loans as well as leases the same security requirements are made. According to provincial laws both the financial institutions as well as the leasing companies are required to take security in the form of assets. Besides these institutions can also require personal or corporate guarantees. However, the personal guarantees cannot be secured and should not exceed 25% of the total amount that is being taken.

The interest rates charged on the loans from the Canada Small Business Financing Program could either be fixed or floating. The fixed rates cannot exceed 3% more than the lenders residential mortgage rate for the loan; whereas for floating interest rates they cannot exceed 3% of the lenders prime lending rate. On the other hand the lease payments would include an interest rate of up to 13.25% in addition to the Government of Canada bond rate for the term of lease. The interest rates would also include 1.25% of the administration fees and also 2% of the registration fees. These fees would cover the costs of the Canada Small Business Financing Program that is self-financing. The loans and the leases sponsored by the Canada Small Business Financing Program are to be paid back within a period of 10 years.

With the help of the Canada Small Business Financing Program the small businesses, the leasing companies, the lenders and also the residents of Canada can have a lot of benefits. The small businesses can have finance made available to them, which might not be available otherwise. The lending and the leasing companies get the benefit of broadening their customer base and would help the businesses meet their needs. The residents of Canada are benefited with the Canada Small Business Financing Program because these programs promote the growth of businesses hence creating jobs for eligible candidates and hence helping the growth of the Canadian economy.

You can obtain more information about the Canada Small Business Financing Program from the Canada business service centers and other useful websites.