Should you apply for a CSBFP line of credit or a CSBFP term loan? It depends on what the money is for. The term loan finances one-time capital purchases — equipment, leasehold improvements, real property and certain intangibles. The line of credit funds ongoing working capital — inventory, payroll and day-to-day operating costs. Most businesses can use both.
Markham Office helps prepare and submit funding applications. We are not a lender and do not provide investment advice.
The Canada Small Business Financing Program (CSBFP) is often described as one product, but it has two distinct components that do very different jobs. Choosing the right one — or combining them — starts with understanding what each is built for. If you are still sizing your ask, see how much you can borrow under the CSBFP; if you are not yet sure you qualify, read who qualifies for the CSBFP.
The two parts of the CSBFP
The program splits into a term loan and a line of credit, and they are authorized separately even when you apply for both.
- The CSBFP term loan is instalment financing for assets. You borrow a set amount, buy the asset, and repay on a fixed schedule over the life of the loan. It is the right tool when you are making a lasting capital investment in the business.
- The CSBFP line of credit is revolving credit for cash flow. You draw on it as you need it, repay, and draw again — the same way a business operating line works. It is the right tool for the everyday costs that keep the doors open between invoices.
Thinking of them as 'buying versus running' is the fastest way to keep them straight: the term loan buys the things, the line of credit runs the business.
What each one funds
The line between the two components is about the type of cost, not the amount.
A CSBFP term loan finances capital purchases:
- Equipment and machinery, including vehicles and fixtures
- Leasehold improvements — fitting out or renovating leased premises
- Real property — buying or improving land and commercial buildings
- Certain intangible assets, such as franchise fees and other start-up costs
A CSBFP line of credit funds working capital and operating expenses:
- Inventory and supplies
- Payroll and rent
- Everyday operating cash flow between receivables
If a cost is a one-time investment in an asset you will own and use for years, it belongs on the term loan. If it is a recurring cost of running the business day to day, it belongs on the line of credit.
The limits
The two components have their own ceilings, and together they set the program maximum.
| Feature | CSBFP term loan | CSBFP line of credit |
|---|---|---|
| Maximum | Up to $1,000,000 | Up to $150,000 |
| Use | Capital purchases: equipment, leaseholds, real property, intangibles | Working capital: inventory, payroll, operating expenses |
| Repayment | Fixed instalments over the term of the loan | Revolving — draw and repay as needed |
Add the two together and you reach the program ceiling of up to $1.15 million per borrower — up to $1 million in term loans plus up to $150,000 as a line of credit. A 2% registration fee applies to the financed amount and can be rolled into the financing. These are ceilings, not entitlements: your lender approves an amount based on your eligible costs and your ability to repay.
When to use each
Match the tool to the need.
Use the term loan when you are making a capital purchase — buying equipment, renovating a leased space, acquiring premises, or paying franchise fees to get started. These are lump-sum, one-time costs with lasting value, and fixed repayment over time fits them well.
Use the line of credit when the challenge is timing rather than a purchase. If you need to stock inventory ahead of a busy season, cover payroll while you wait on receivables, or bridge routine gaps in operating cash flow, revolving credit you can draw and repay is the better fit than a fixed instalment loan.
A quick test: if you can point to a specific asset the money buys, lean term loan. If the money keeps the business running until revenue catches up, lean line of credit.
Can you combine them?
Yes — and many businesses do. The term loan and the line of credit are separate authorizations, so you can apply for both under the same program, up to the combined $1.15 million ceiling.
Combining them is common because the two needs often arrive together. A business fitting out a new location might use the term loan for the leasehold improvements and equipment, then use the line of credit for the inventory and payroll needed to open and operate. The term loan builds the capacity; the line of credit funds the working capital to use it. When you apply, sort each cost into the right bucket from the start so your request maps cleanly to the two components — that makes it easier for a lender to assess and approve.
The bottom line
The CSBFP is not a single loan you pick a size for — it is two tools for two jobs. The term loan (up to $1 million) buys the assets; the line of credit (up to $150,000) funds the working capital to run on. You can apply for either or both, up to $1.15 million per borrower, with a 2% registration fee on the financed amount. The right choice comes down to what your money is actually for.
If you want help matching your costs to the right components and packaging a clean, lender-ready application, Markham Office can help you prepare and submit your CSBFP funding application. Reach out and we will help you put your best case forward.