- The program can finance the eligible assets of an existing business, capped at the lower of the purchase price or the appraised value of those assets.
- It does not finance share purchases or assets acquired by a holding company, so a share purchase of an Alberta company cannot be funded this way.
- Total financing is capped at $1.15 million, and the registration fee is 2% of the loan, which can be financed.
If you are buying an existing business in Alberta, you may wonder whether a government-backed loan can help cover the price. The Canada Small Business Financing Program, often shortened to CSBFP, is one option people ask about.
The program has real limits, and one of them can shape how you structure the whole purchase. This article explains what it can fund, what it costs, who is excluded and what to check before you sign an offer. It is general information, not advice on your deal.
This article covers the law of Alberta.
What the program can finance when you buy a business
The program can finance the eligible assets of an existing business. The financing is capped at the lower of the purchase price or the appraised value of those assets.
In practice, that means a high price will not automatically mean a bigger loan. If the assets appraise for less than you agreed to pay, the appraised value is the ceiling. The gap would need to come from somewhere else, so it is worth knowing the appraisal figure before you commit to a price.
How much you can borrow and what it can cover
The maximum financing is $1.15 million in total. That is made up of up to $1 million in term loans and up to $150,000 in lines of credit. You and the lender negotiate the actual amount.
| Type | What it can cover |
|---|---|
| Term loans | Commercial real property, new or used equipment, leasehold improvements, intangible assets, working capital and the registration fee |
| Lines of credit | Working capital and the registration fee |
Intangible assets and working capital are on the term loan list, which can matter in a business purchase where much of the value is not physical.
Fees and interest rate caps
The registration fee is 2% of the total loan amount, and it can be financed as part of the loan. Lender fees such as set-up and renewal fees are charged separately and cannot be financed under the program. You will need cash on hand for those.
- Variable-rate term loans: at most prime plus 3%.
- Fixed-rate term loans: at most the lender's single-family residential mortgage rate plus 3%.
- Lines of credit: at most prime plus 5%.
These are caps, not promises of a rate. Your lender sets the actual terms within them.
Who and what is excluded
The program does not finance share purchases or assets acquired by a holding company. A share purchase of an Alberta company therefore cannot be funded this way.
Eligibility is also generally limited to businesses with gross revenues of $10 million or less, and farming businesses are excluded.
If your target business is above the revenue limit or is a farm, or if you plan to buy through a holding company, this program is probably not the right fit.
How this affects asset deals and share deals
Because shares and holding-company purchases are excluded, the program cannot be used for a share purchase or for assets acquired by a holding company. Whether an asset purchase meets the program's other requirements depends on your situation, so it is worth confirming with a lender and a lawyer. If you want to use this financing, the deal structure may need to be settled before you negotiate further.
There are other reasons to choose one structure over the other, including tax. For example, a business sale may involve GST at 5% in Alberta, because each property and service can be treated as a separate supply unless a valid joint election applies. That election is not available where the supplier is a registrant and the buyer is not, and even with a valid election, tax is still payable on a taxable service the supplier will render and on a taxable lease, licence or similar supply of property. The election is made on CRA form GST44. Financing is only one piece, so speak with a lawyer and an accountant before you lock in the structure.
What to do next
- Check the current Innovation, Science and Economic Development Canada (ISED) program page, because rates, fees and limits can change.
- Confirm the target business is under the revenue limit and is not a farm.
- Ask for an appraisal of the assets, since the lower of price or appraised value sets the cap.
- Decide whether you are buying assets or shares before you approach a lender.
- Budget for lender set-up and renewal fees, which cannot be financed.
- Have a lawyer review your offer and conditions, including a financing condition.
Frequently asked questions
Can I use the program to buy the shares of an Alberta company?
No. The program does not finance share purchases, so a share purchase of an Alberta company cannot be funded this way. An asset purchase may be possible if the other requirements are met.
What is the most I can borrow?
The maximum is $1.15 million in total, made up of up to $1 million in term loans and up to $150,000 in lines of credit. You and the lender negotiate the actual amount.
Can I finance the registration fee?
Yes. The registration fee is 2% of the total loan amount and can be financed as part of the loan. Lender set-up and renewal fees cannot be financed.
Can a holding company use the program to buy a business?
No. Assets acquired by a holding company are not financed under the program. If you plan to buy through a holding company, talk to your lawyer and lender about other options.
Sources
- Excise Tax Act, s.167 (Justice Laws) — Justice Laws (federal)
- CRA – Form GST44 — canada.ca
- ISED – CSBFP FAQ for small businesses — ised-isde.canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a buying & selling a business question
Buying or selling a business with us is from $3,148.95, tax included. Third-party fees are extra.