AFO · Stack
Equipment, working capital, and the R&D layer underneath.
Manufacturers carry hard assets, long working-capital cycles, and a programmatic R&D spend — three traits that open distinct funding pools in the Canadian system. The default growth-stage stack layers equipment finance (the asset side), ABL or senior revolvers (the working-capital cycle), and the non-dilutive R&D layer (SR&ED + IRAP + Clean Tech ITC where applicable). Each piece is independently underwritten but designed against a single business case so the lenders and the grant programs see a coherent overall plan.
What this stack delivers
- Equipment finance + CSBFP equipment stream sized together.
- ABL or senior revolver for the working-capital cycle.
- SR&ED + IRAP + Clean Tech ITC layered underneath for the R&D and capex pool.
How this stack works
Manufacturer growth stack, layered correctly.
CSBFP is the first equipment dollar for manufacturers under $10M revenue — Prime + 3%, government-guaranteed, up to $1.15M combined. Above the CSBFP ceiling, conventional equipment finance or leases handle the rest at 75–90% LTV on the asset itself, with rates climbing through Prime + 2–5% depending on the equipment class and credit profile. Mixed-fleet operators (production lines, trucks, light equipment) often run a single equipment line with a specialist equipment lender rather than collecting separate facilities per asset class.
On the working-capital side, ABL revolvers fit manufacturers with material AR and inventory. 85% advance on eligible AR, 50–65% on finished-goods inventory. The line grows as AR grows, pays down as cash lands. For manufacturers with cleaner balance sheets and a 5+ year operating history, conventional senior revolvers can replace the ABL at lower cost. Factoring is a faster, smaller-scale alternative where the issue is DSO rather than coverage.
The R&D and innovation layer is where Canadian manufacturers most often leave money on the table. SR&ED refunds 35% of qualified expenditures up to $3M as cash (CCPCs); IRAP funds up to 80% of internal technical salaries on approved projects plus advisory; the Clean Tech ITC refunds 30% on eligible clean-tech equipment investments. For larger industrial projects, the Strategic Innovation Fund covers $10M+ projects at 25–50% cost-share. Stacking these credits and grants under the senior and equipment layers is the single biggest lever on the blended cost of capital.
8 layers in the stack
The layers, in order.
Each layer below names the program AND the role it plays inside this specific stack — what it funds, how much of the structure it covers, and how it interacts with the layers above and below.
Role in this stack: First equipment + leasehold dollar at Prime + 3%, government-guaranteed.
Typical size: Up to $1.15M combined ceiling
Role in this stack: Above the CSBFP ceiling, equipment-specific term or lease at 75–90% LTV.
Typical size: $50K–$10M per facility
ABL Revolver (Asset-Based Lending)
Coming soonRole in this stack: Working-capital revolver scaled to the AR + inventory base.
Typical size: $1M+, scales with assets
Role in this stack: Lower-cost alternative to ABL for manufacturers with cleaner balance sheets + audited financials.
Typical size: $500K–$25M, Prime + 1–4%
Family: Grants & refundable tax credits
Role in this stack: Refundable tax credit on the R&D-eligible technical-labour pool.
Typical size: 35% refundable on first $3M CCPC
Family: Grants & refundable tax credits
Role in this stack: Pre-approved contribution on internal technical salaries for approved projects.
Typical size: Up to 80% of approved technical-labour costs
Clean Technology Investment Tax Credit
Coming soonFamily: Grants & refundable tax credits
Role in this stack: Refundable ITC on eligible clean-tech equipment investments within the capex pool.
Typical size: 30% refundable (20% if labour requirements not met)
Strategic Innovation Fund (SIF)
Coming soonFamily: Grants & refundable tax credits
Role in this stack: Project-grant capital for larger industrial expansion or innovation projects.
Typical size: $10M+ project size, 25–50% cost-share
When this stack fits
Who this is the right answer for.
Canadian manufacturers in the early-revenue to growth stages ($1M–$25M revenue) with a meaningful equipment + working-capital + R&D mix. The default capital plan for owner-operator manufacturers scaling production.
Common variations
Exporting manufacturers add CanExport SME and (where applicable) EDC working-capital guarantees on top of the base stack. Clean-tech manufacturers swap the broad Clean Tech ITC layer for the full clean-tech grant stack (SDTC + ITC + SIF).
Common questions
Questions people ask about this stack.
The answers below are the specific Q&A patterns that come up on this combination. For broader AFO questions, the main module FAQ on the module landing page covers the cross-stack basics.
Other stacks
Different question, different combination.
Each stack solves a distinct capital-structuring question. The ones below cover the other common shapes — non-dilutive R&D, leverage stacks for buyouts, project-grant stacking for clean tech, working-capital cycles for exporters, and the broader owner-operator default.
- 3 layers
CSBFP + working-capital line
The single most common owner-operator capital stack in Canada layers a CSBFP equipment + leasehold loan with a conventional working-capital revolver. CSBFP covers the asset purchases at the cheapest available rate (Prime + 3%, government-guaranteed); the revolver handles the AR + inventory cycle. The two facilities never compete for the same dollar — they fund different parts of the business — but the package needs to be designed together so the lender sees a coherent overall ask.
Read the stack
- 3 layers
SR&ED + IRAP
SR&ED and IRAP are the two workhorses of Canadian R&D funding. They cover overlapping eligible expenditures but work through fundamentally different mechanisms — SR&ED is a refundable tax credit claimed in arrears against the corporate return; IRAP is a contribution program with pre-approval and draw-down funding. Run together on the same project, the two programs fund a meaningful share of a Canadian tech company’s technical labour. The trap is double-claiming the same hours: IRAP cannot pay for time also claimed as SR&ED, and the timesheet discipline matters.
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- 3 layers
MBO leverage stack
Management buyouts are leverage transactions first and equity transactions second. The senior tranche carries the cheapest dollar but the tightest covenants; the mezzanine layer unlocks the upper-leverage band at higher coupon; the vendor note bridges the equity-injection gap; the management team injects the equity that closes the deal. Each layer has distinct economics that compound over the five-to-seven years it usually takes to retire the debt — and the wrong ratio at close costs the management team materially at exit.
Read the stack
Stack design is where the engagement starts.
Twenty-minute call. Bring the business profile and the capital ask; we’ll walk through which layers fit, which programs in each layer to pursue, and the sequencing that keeps lenders and grant programs from tripping on each other.