The Canada Small Business Financing Program (CSBFP) is a loan loss-sharing program that partners with private sector lenders to increase the availability of financing to small businesses. Under the program, small businesses can access loans up to $1 million to purchase or improve real property, leasehold improvements and equipment. To be eligible, borrowers must be for-profit businesses with annual revenues of $10 million or less. The CSBFP is a national program that operates through a network of financial institutions in all provinces and territories.
The role of federal government
Innovation, Science and Economic Development (ISED) Canada is responsible for the design and administration of the CSBFP. It reviews and evaluates the legislative and regulatory frameworks and recommends improvements on a periodic basis. It also administers the program by registering loans, collecting fees and paying lenders eligible portions of losses on defaulted loans. ISED, however, is not involved in the disbursement and administration of the loans.
The role of lenders
Private sector lenders are responsible for making all credit decisions, approving and disbursing the loans, registering the loans with the CSBFP and administering the loans. Each lender has its own lending criteria subject to the requirements of the CSBFP. Once the loan is approved, the borrower receives the funds from the lender, not the government. If a loan is in default, the lender must recover all assets taken as collateral, before submitting the claim for loss to the CSBFP. Once the lender's information is reviewed and the claim is approved, the lender is paid 85 percent of the net eligible loss.
Lending decreased slightly
- 5,651 loans were made to Canadian small businesses valued at $1.3 billion;
- Compared to the previous year, the number of loans decreased by 454 loans (7.4 percent), and the value of loans decreased by $11.6 million (1 percent);
- The average loan size was $229,821 which represents an increase of 7.1 percent from 2018–19.
- Fee revenues were $72.1 million, which represents an increase of $4 million (5.5 percent) relative to the previous year.
Claims increased slightly
The CSBFP paid a total of 680 claims to lenders representing $53.8 million. These claims were associated to defaulted loans made during the previous 10 to 15 years;
- The number and value of claims paid increased by 0.3 percent and 21.6 percent respectively compared to the previous year;
- The average claim size was $79,072, which represents an increase of 21.2 percent relative to 2018-19.
Start-ups and new businesses received the largest share of financing
- Start-ups and businesses operating less than one year continued to receive the majority of loans, which accounted for $848.7 million (65.4 percent).
Equipment and leasehold improvements were the most common assets financed
- Leasehold improvements and equipment loans represented $675.4 million (52 percent) and $321.7 million (24.8 percent) respectively;
- Real property accounted for the remainder at $301.6 million (23.2 percent);
Lending was accessible in every province and territory
Three provinces; Ontario, Quebec and Alberta represented the majority of overall CSBFP lending in 2019-20, accounting for 4,495 loans (79.5 percent) and $1.07 billion (82.3 percent).
Figure 1 shows lending across all Canadian provinces and territories during 2019-20. The breakdown by regions from highest to lowest volumes is as follows:
- Ontario: 2,497 loans (44.2 percent) totaling $615.2 million (47.4 percent);
- Quebec: 1,221 loans (21.6 percent) totaling $269.9 million (20.8 percent);
- Western Canada: 1,633 loans (28.9 percent) totaling $354.2 million (27.3 percent); and
- Atlantic Canada: 300 loans (5.3 percent) totaling $59.5 million (4.6 percent).
The most popular sectors were the accommodation and food services and retail trade
- Accommodation and food services continues to be the largest industry sector using the CSBFP at $555.7 million, representing 42.8 percent of the total value of loans made followed next by;
- Retail trade sector at $137.6 million, accounting for 10.6 percent of the total value of loans, followed by;
- Arts, entertainment and recreation at 4.0 percent and Transportation and warehousing at 2.7 percent.
CSBFP's website, telephone and emails were common channels for small business information
The CSBFP website continued to be one of ISED's most popular sites, with close to 250,000 visits, a 21.7% increase in visits relative to 2018-19. In addition, more than 1,577 telephone and 397 email inquiries were received from small businesses and lenders through the program's info line and website. Finally, 34,340 information pamphlets were distributed.