Canada Small Business Financing Program - Business Exchange


Canada Small Business Financing Act Program (Part I): The Ultimate Tool for Aspiring Franchise Entrepreneur

November 03, 2016 | Lawrence Gold 0 Comments


A Great Financing Tool for the Aspiring Franchise Entrepreneur


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The Canada Small Business Financing Act program (“CSBFA”) was designed to help small business entrepreneurs obtain financing from Canadian lending institutions, by sharing the risk between the lender and the Government.  Certain purchases and incidental purchase costs are eligible, and some are not eligible.

From the perspective of a prospective FRANCHISE buyer, who is contemplating buying a business that is established in a leased premises, the program can be used to fund the purchase of both new or existing leasehold improvements, and new and used equipment.

By way of examples, the following are eligible:

  • • Commercial vehicles
  • • Hotel or restaurant equipment
  • • Computer or telecommunications equipment and software
  • • Production equipment
  • • Eligible costs to buy franchise’s assets (subject to the non-eligible exclusions)

And the following are a few examples of non eligible items:

  • • Goodwill
  • • Working capital
  • • Inventory
  • • Franchise fees
  • • Research and development


From the borrowers, perspective, access to  appropriate and sufficient financing is a primary obstacle to both, commercial opportunities and commercial success.

That is one reason why the CSBFA  is a valuable tool for the aspiring FRANCHISE business entrepreneur. From the lender’s perspective, the CSBFA program has some very attractive benefits. In fact, in a 2014 study  conducted by Industry Canada,  CSBFA was reported by Canadian financial institutions, as being a “valued” financing  product:

“Without the CSBFP, program users estimated about nearly half (46%) of CSBFP loan borrowers would be rejected for a loan, and most others (30%) would have only be approved under less favourable conditions.” (1)


The rules of engagement are quite complex. Much of the fine detail is to be found in the rules and regulations.

As a personal property appraiser, two of the main asset groups that we deal with are leasehold improvements and equipment.



The CSFBP Regulations provide very specific details of exactly what leasehold improvements can be included in the appraised value:

  • • The borrower is or will become the tenant of real property or immovable; and
  • • The leasehold improvements are being made for the borrower; or
  • Leasehold improvements are made for a tenant by the owner of real property or immovable or by a franchisor, pursuant to a contract between the tenant and the owner or the franchisor; or
  • Existing leasehold improvements are being purchased from a tenant (the vendor). The SBF Directorate defines “existing leasehold improvements” as leasehold improvements belonging to a business carrying on operations at the leased premises prior to the purchase by the borrower.

As noted, there is substantial flexibility and breadth in terms of what the personal property appraiser can include in the appraisal, under the leasehold improvement category.



There are also a whole host of considerations relating to what equipment can be financed under the CSBFA. According to the Regulations, there is a  laundry list of equipment and ancillary equipment related costs that are eligible for financing.

These “eligible” expenditures include:

  • • Purchase price;
  • • Capitalized installation costs or improvements, including  construction, Renovation, modernization and installation;
  • • Purchase or development of computer software;
  • • Purchase of a website necessary for the operation of the business;
  • • Capitalized equipment repairs;
  • • Equipment (capital asset classified) used for rental purposes;
  • • Computer software including off-the-shelf software, custom-made software and system, Certain eligible web site and software development costs.

Eligible equipment must then be reviewed by the appraiser who will consider a whole host of factors in determining present equipment value. These factors include such things as age, condition, functional and technological obsolescence. The appraiser will consider and possibly use three different approaches to value determination, being the sales comparison approach, the cost approach and the income approach to value determination.


This article is intended for general information purposes only.  The Canada Small Business Financing Act, and the Regulations, should be consulted and reviewed in their entirety. If you have specific question, consult with your financing specialist.


(1) CSBFP Lender Awareness and Satisfaction Study, Industry Canada, August 8, 2014


Download FREE the Full Financing Guide – Canada Small Business Financing Act Program:

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Lawrence S. Gold


The Author, Lawrence Gold is the President of Lawrence Gold Appraisals & Asset Management Inc. and is a recognized and experienced  personal property appraiser- Member of the USA based International Society of Appraisers. Much of his appraisal work is in the area of appraisal of franchises for Canadian lenders, under the CSBFP. Lawrence is also a non practicing member of the Ontario Bar (in goodstanding) and, an Ontario Government Appointed Bailiff.

If you have any questions, Lawrence Gold can be reached at:

Phone/Text : 416-843-9324


Categories: Business Finance, Business Loans, Buy a Franchise, Small Business, Small Business Loans,

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