Loan approval – Key requirements checklist


This document does not represent the comprehensive details of the requirements of the Canada Small Business Financing Act and Regulations. Please consult the complete text of the Guidelines on the Canada Small Business Financing Program website.

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Loan Approval – Key Requirements Checklist
Requirement Description Guidelines

Due Diligence

Lenders must apply the same due diligence requirements as for a conventional loan for the same amount, conduct a credit checks on the borrower and/or shareholder(s), guarantor(s) and complete an assessment of the repayment ability of the borrower.

Item 1

Eligible Borrower

Is the borrower (corporation, sole proprietor, partnership) carrying on or about to carry on a small business?

Item 2.1

Eligible Small Business

Small business must be:

  • carried on in Canada
  • with annual gross revenues not exceeding $10 million

Item 2.2

Ineligible Borrowers:

Item 2.3

Maximum Amount

  • The maximum loan amount is $1 million of which no more than $ 500,000 can be used to purchase leasehold improvements or equipment. Within the maximum limit of $500,000 mentioned above, a maximum of $150,000 can be used to finance intangible assets and working capital costs.
  • The maximum amount for a line of credit is $150,000 for the financing of working capital costs. This amount is above the maximum amount of $1,000,000 applicable to CSBF term loan.
  • The maximum loan amount includes amounts outstanding to related borrowers. Note: If an individual owns several corporations, each corporation may be eligible for a loan. See Guidelines
  • Is the loan amount equal to or less than the cost of eligible assets?

Item 3

Loan Assets

Assets eligible for financing:

  • Real property

Item 4.1.1

  • Leasehold improvements

Item 4.1.2

  • Equipment (includes software, vehicles)

Item 4.1.3

  • Intangible assets and working capital costs

Item 4.1.4

  • Registration fee

Item 4.1.5

Common ineligible assets examples:

  • Share acquisitions
  • Vehicles for personal use
  • Assets already financed by a term loan

Item 5.2

Eligible assets purchased 365 days before loan approval date can be financed whereas eligible assets purchased more than 365 days before loan approval cannot be financed.

A line of credit may be made to finance working capital costs necessary to cover day-to-day operating expenses of a business.

Item 5.1

Proof of Purchase and Payment for term loans only

Proof of purchase and payment (invoices, cancelled cheques etc.) by the borrower have been obtained for loan assets. The invoice must contain a description of the asset.

For a line of credit, did the borrower signed the attestation?

Item 5.3

Appraisals Required

Appraisals have been obtained if:

  • Purchase of asset or service from person not at arm's length
  • Purchase of a going concern (with an allocation of the price for each asset)
  • Purchase from a lender assets secured by conventional loan

Eligible amount of financing is the lesser of cost of purchasing and appraised value

Item 5.5

Terms of the Loan

Do the repayment terms, interest rate, charges and fees comply? :

  • Maximum interest rate for a term loan (including the 1.25% administration fee):
    • floating rate: lender's prime rate plus 3%
    • fixed rate: lender's posted single family residential mortgage rate plus 3%
  • at least one payment of interest and one payment of principal must be scheduled to be made each year
  • Maximum interest rate for a line of credit (including the 1.25% administration fee) is the lender's prime rate plus 5%.

Item 6


Has security been taken in the financed assets?

  • Security must be a first charge or highest available rank or an alternate security (for leasehold improvements, software, intangible assets, working capital costs and for the line of credit).
  • Security must be valid and enforceable. A security non-compliance section relates to loans defaulting after March 31, 2014.
  • Personal guarantees must be unsecured and are optional.

Item 7

Loan Registration

The loan must be registered within 6 months from date of the first disbursement of loan funds.

Item 9