Question Period Note: CANADA SMALL BUSINESS FINANCING PROGRAM

Why are changes being made to the Canada Small Business Financing Program (CSBFP)?

• The Government of Canada recognizes the need for small and medium-sized enterprises (SMEs) to have access to financing, particularly in this economic downturn as a result of COVID-19.

• Budget 2021 proposes to improve the Canada Small Business Financing Program, delivered in partnership with financial institutions, by:
o Expanding loan eligibility
o Increasing the maximum loan amount to $500,000
o Including non-profits and charitable social enterprises
o Introducing a new line of credit option

• These changes will help more small businesses access the type of financing they need to start up and scale-up, as well as those that have been hardest hit by the COVID-19 pandemic to recover and succeed.

The CSBFP is a longstanding statutory program that partners with private sector financial institutions to increase the availability of debt financing to small businesses so they can start up, grow and modernize. The increase in the amount of financing extended to small businesses is expected to ultimately stimulate economic activity and create jobs for Canadians.

The recent 5-year Comprehensive Review Report demonstrated that the program continues to be successful in facilitating debt financing for small businesses but it must continue to evolve to meet the changing needs of small businesses in a digital and knowledge-based economy.

Through Budget 2021, the Government of Canada is taking action to improve access to financing for small businesses by expanding the CSBFP. Previously, the program could only be used by for-profit small businesses and was limited to term loans for real property, equipment and leasehold improvements. Amendments made to the Canada Small Business Financing Act will now allow not-for-profit, charitable and religious enterprises as eligible businesses. This change aligns with the recommendations made by the Social Innovation and Social Finance Strategy Co-creation Steering Group and will improve access to affordable financing for social enterprises in Canada by allowing them to access program loans from the financial institution of their choice. These enterprises are critical to the short and long-term success of the country as they generate significant social and economic benefits for Canadians.

In addition, legislative and regulatory changes will be made to introduce a line of credit financing option and to expand loan class eligibility to include the financing of intangible assets, like intellectual property (e.g., patents, copyrights, trademarks), start up costs (e.g., permits & licenses, franchise fees, customer lists, professional fees, marketing & promotion) and working capital. Together with increased maximum loan amounts (from $350,000 to $500,000) and government coverage periods extended from 10 to 15 years for equipment and leasehold improvements, these changes will better meet the financing needs of modern Canadian small businesses, especially those in the industries hardest hit by the COVID-19 pandemic, and will support their efforts to recover and succeed.

These proposed amendments are projected to increase annual financing by $560 million, supporting approximately 2,900 additional small businesses.

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