After CSBFP approval: closing conditions, disbursement, and registration

Approval is not funding. A CSBFP approval means a lender has agreed in principle to make the loan, subject to conditions that must be satisfied before the first dollar is disbursed. Understanding these conditions, the closing process, and the registration deadline is essential for any business in the gap between approval and funding.

The approval letter and commitment conditions

When a CSBFP lender approves a file, they issue a commitment letter (sometimes called a loan offer or approval letter). This document specifies:

The approved loan amount, rate, term, and amortization
The security the lender requires (a registered security interest in the financed assets, and in some cases a general security agreement on the business's assets)
The personal guarantee required (CSBFP allows an unsecured personal guarantee, no collateral against the guarantor's personal assets, for up to 100% of the original registered loan amount)
Conditions precedent to first advance, a list of requirements that must be satisfied before the lender releases any funds

Common conditions precedent include:

Execution of the loan agreement and guarantee documents
Confirmation of insurance (property insurance naming the lender as loss payee, liability insurance)
A signed copy of the commercial lease (for leasehold improvement loans)
Executed purchase agreements or quotes for equipment being financed
Evidence of the equity injection (a bank statement showing the contributed funds, or confirmation of the source of funds)
Any licensing or permit requirements relevant to the project (a restaurant health permit, a childcare licence, etc.)
In some cases: a first appraisal for real-property components

The commitment has an expiry date, typically 90 to 180 days. If conditions are not satisfied and the first disbursement has not been made by the expiry date, the commitment lapses and a new application is required.

How CSBFP registration works

After the first disbursement, the lender registers the CSBFP loan with ISED (Innovation, Science and Economic Development Canada). This registration is what gives the loan its government-guarantee status. The registration process is internal to the lender, the borrower does not do this directly, but it has a critical timing implication for the lender:

The registration deadline: 6 months from first disbursement.

The lender must register the loan with ISED within 6 months of the date of first disbursement. Before the 2022 reforms, that window was 3 months. This is a distinct rule from the 365-day look-back that lets costs incurred up to 365 days before approval still qualify for financing (see below), and it's easy to conflate the two since both get shortened to "the 365-day rule" in casual conversation. We haven't been able to confirm a separate rule requiring all disbursements to be completed within 365 days of first disbursement, so this guide doesn't assert one; the reliable planning number is the 6-month registration deadline, and borrowers running a multi-phase project should confirm directly with their lender what disbursement timeline applies to their specific file.

The payment direction: how disbursements work

CSBFP term loans are not drawn like a line of credit. The loan proceeds are not deposited into your business account and then spent by you. They are disbursed by the lender directly to vendors or contractors, based on a "payment direction", a formal instruction from the borrower directing the lender to pay a specific amount to a specific payee.

Here is how a typical disbursement works:

You receive an invoice from a vendor or contractor. The invoice must be in the name of the borrowing entity, for an eligible CSBFP cost, within the approved project scope.
You submit a draw request to the lender. Some lenders use a standardized form; others accept a letter. The request identifies the vendor, the invoice amount, the CSBFP cost category, and includes a copy of the invoice.
The lender reviews and approves the draw. The lender confirms the cost is eligible, within the approved budget, and consistent with the loan's registration deadline and CSBFP's other timing rules.
The lender issues the payment direction and disburses funds. Payment is made to the vendor's account, not yours. You do not touch the loan proceeds, they flow directly to the party who supplied the eligible asset.

Registration itself does not set a cut-off for eligible spending, since the lender registers the loan only after the first disbursement. What matters is the loan approval date.

Costs paid or committed within 365 days before the loan approval date (or the conditional approval date) are eligible under CSBFP's look-back rule (see what is the CSBFP 365-day rule), provided they're documented and meet the program's other eligibility criteria. So if you have already paid a vendor for an eligible cost within that window, the loan can cover that cost. It's a genuine, confirmed provision, not a case-by-case workaround. Confirm with your lender how it will document and disburse against costs you have already paid, since the payment-direction process above is built around paying vendors directly.

Managing the disbursement schedule

Most CSBFP projects involve multiple disbursements over several months as the project unfolds. A restaurant renovation might involve three draws: the contractor's progress billings (25% at framing, 50% at rough-in complete, 25% at substantial completion) plus a final equipment draw when the kitchen equipment is delivered and installed.

Track the following actively:

Days remaining before the registration deadline: From the first-disbursement date, count forward 6 months. Confirm with the lender how that deadline interacts with any costs still to be invoiced.
Budget remaining: Each draw reduces the available loan balance. If project costs come in over budget, the excess is not covered. It is the borrower's responsibility.
Condition status: If the lender has outstanding conditions not yet satisfied, they will hold draws until conditions are cleared. An outstanding insurance certificate or missing signed document can block a disbursement.

The 2% registration fee

CSBFP requires the lender to pay a 2% registration fee to the federal government on the original registered loan amount. This fee is almost universally passed on to the borrower and added to the loan principal. On a $300,000 loan, the registration fee is $6,000, which is either paid upfront or financed as part of the loan (increasing the registered amount to $306,000).

The registration fee is a one-time cost, not an annual fee. It is not a hidden fee. It is specifically disclosed in the CSBFP program rules and should appear in your commitment letter.

What if the project takes longer than expected?

The registration deadline (6 months from first disbursement) is a hard deadline under ISED rules for the lender. Beyond that, we haven't been able to confirm a specific forward deadline by which a project's disbursements must be fully complete. If a project is running long:

Confirm the applicable timeline directly with the lender. The registration deadline governs the lender's own obligation to ISED; it doesn't, by itself, establish how long the borrower has to draw down the remaining loan balance, and that detail is worth confirming file-by-file rather than assuming a fixed number.
Phased projects where a second phase is expected to run well beyond the first year typically involve a conversation with the lender about whether a separate CSBFP registration is the cleaner path for the second phase, rather than stretching a single registration across a long timeline.

When the project is complete: equipment tagging and verification

After all draws are disbursed, CSBFP lenders may conduct a brief post-funding review to confirm the financed assets are in place. This typically involves:

A site visit or photo documentation confirming the financed equipment is installed and the leasehold improvements are complete
Verification that the assets match the invoices (a 5-bay restaurant kitchen should be visible at the restaurant)

This is not a burdensome inspection. It is a brief confirmation that the project was completed as described. Ensure that financed equipment is tagged or identifiable and that the completed project visually matches the scope described in the application.

What if you need to change the project scope after registration?

Material changes to the project scope after registration require lender approval. If you decide after registration to replace a planned piece of equipment with a different model, add a cost category not in the original application, or reduce the project scope significantly, notify the lender before acting. Undisclosed scope changes can create problems at disbursement or post-funding review.

Minor substitutions (same equipment from a different vendor at the same or lower price) are typically approved without friction. Adding new eligible cost categories or increasing the budget requires a formal amendment.

The loan repayment timeline

Once all draws are disbursed, the amortization schedule begins. CSBFP loans typically have a one-time option to convert from a floating rate to a fixed rate at the time of first disbursement or at the end of an initial period. Confirm the rate-lock terms with your lender.

Prepayment is permitted, but the program does not guarantee it is penalty-free. Lenders may charge a prepayment fee, no higher than they would charge on a conventional loan of the same amount. Businesses that expect stronger-than-projected cash flow should confirm the prepayment terms in the commitment letter before signing.

The 365-day rule and payment direction pages cover those specific topics in more detail. For the full application process from pre-check to first draw, see how to apply for CSBFP.