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 $10,000,000 revenue, Prime + 3%, government-guaranteed, up to $1,150,000 combined. Above the CSBFP ceiling, conventional equipment finance or leases handle the rest at 75 to 90% LTV on the asset itself, with rates climbing through Prime + 2 to 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 to 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 $3,000,000 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 $10,000,000+ projects at 25 to 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 $1,150,000 combined ceiling
Role in this stack: Above the CSBFP ceiling, equipment-specific term or lease at 75 to 90% LTV.
Typical size: $50,000 to $10,000,000 per facility
ABL Revolver (Asset-Based Lending)
Coming soonRole in this stack: Working-capital revolver scaled to the AR + inventory base.
Typical size: $1,000,000+, scales with assets
Role in this stack: Lower-cost alternative to ABL for manufacturers with cleaner balance sheets + audited financials.
Typical size: $500,000 to $25,000,000, Prime + 1 to 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 $3,000,000 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
Family: 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)
Family: Grants & refundable tax credits
Role in this stack: Project-grant capital for larger industrial expansion or innovation projects.
Typical size: $10,000,000+ project size, 25 to 50% cost-share
When this stack fits
Who this is the right answer for.
Canadian manufacturers in the early-revenue to growth stages ($1,000,000 to $25,000,000 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
- 2 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.