What fees and rates apply to a CSBFP loan?

Anyone asking about the cost of CSBFP loans should start with the Canada Small Business Financing Act. Section 10 makes every loan subject to a condition: no fee or charge is payable by a borrower in respect of the loan other than interest, the registration fee, and any other prescribed fee or charge that the regulations say the borrower can pay. This page explains each part without quoting figures, because rates and fees are set in the Regulations and change.

The registration fee

Under s.11, the lender pays the Minister a registration fee, calculated under the Regulations, when it submits the loan for registration. The Act says the lender may charge that fee to the borrower. The program guidelines add that if the registration fee is financed, the maximum loan amounts include it. Ask your lender whether it passes the fee on and whether it is added to the loan.

The annual administration fee

Section 12 requires the lender, not the borrower, to pay the Minister an annual administration fee on each loan, calculated under the Regulations. The program guidelines say the maximum interest rates include the annual administration fee. Because s.10 limits what can be charged to the borrower, ask the lender how it prices the loan overall and what it charges you.

How the interest ceiling works

Section 12(1) of the Regulations sets a maximum annual rate, measured on the day the loan is made, renewed or amended. For a floating rate loan, the ceiling is a set margin above the lender’s prime lending rate in effect each day of the loan term. For a fixed rate loan, it is tied to the lender’s single-family residential mortgage rate. Your lender may charge less.

Other charges the Regulations allow

Section 13(1) of the Regulations lets a lender also require the borrower to pay charges for taking security, for converting between fixed and floating rates and for prepayment, and, for loans made after March 31, 2014, any other charge, but only what the lender would charge on a conventional loan of the same amount. It also allows a life or disability insurance premium payable to the lender, if the lender pays it under the loan agreement. Ask for the lender’s full charges in writing.