Is there a Canadian version of an SBA Loan?

April 15, 2021

by a searcher from IE Business School in Montreal, QC, Canada

Hey everyone, I am starting my information gathering on different financing options. I was wondering if any Canadians have any great recommendations on where to start, and if we have a SBA Loan comparable.

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Reply by a professional
from Bishop's University in Moncton, NB, Canada

The Big Six and some credit unions offer Government guaranteed small business loans up to 90% (mostly 75% in practice) of equipment, vehicles, leaseholds and real estate. Cash flow loans are available from some banks for mid-market deals or from BDC and lenders like RoyNat. Lines of credit against receivables and inventory in some situations. More seller financing is common in Canada than in the US. Also, prices are lower since goodwill generally can't be financed outside certain sectors (like dentistry and vet clinics) SBA makes it easier to borrow, this leads to more leverage and higher prices in the US. Same degree of leverage is not available in Canada for Main St. sized deals. Bigger you get, the more comparable the two countries become.

Reply by an intermediary
from Algonquin College in Ottawa, ON, Canada

There are 2 options -BDC is one, the other is a Canada Small Business Loan. This is a federal program administered through the chartered banks. They will lend a percentage of the value of Furniture, Fixtures, and Equipment only if it is an asset purchase (not shares). The interest rate is prime plus 3% and there is a 2% fee up front. The loan is backed by the federal Govt. The borrower will need to provide a business plan which demonstrates sufficient cash flow to support the borrower and do the debt servicing and will have to provide a personal guarantee, have a good credit history, and demonstrate the experience and skills to successfully operate the business.

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