After CSBFP approval: closing conditions, disbursement, and registration

title: "After CSBFP approval: closing conditions, disbursement, and registration" description: "Getting a CSBFP loan approved is not the finish line — it is the starting gun for a closing process that has specific requirements, a hard 365-day deadline, and steps that can stall if not managed carefully. A practical guide to what happens between approval and first disbursement." date: "2026-05-26" author: "Capital Toolkit" tags: ["csbfp", "closing", "disbursement", "registration", "365-day rule", "how to apply", "canadian financing"] videos:

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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 365-day disbursement window 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 caps the personal guarantee at 25% of the original registered loan amount, which for a $400,000 loan is $100,000)
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 loan is not registered by the expiry date, the commitment lapses and a new application is required.

How CSBFP registration works

Before any funds are disbursed, 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:

The 365-day clock starts from the date of first registration.

Once the loan is registered with ISED, the borrower has 365 days to incur and pay for all eligible costs and request disbursements. Costs incurred or invoiced after day 365 are not eligible for reimbursement from the loan, even if the project is still underway.

The practical implication: if registration happens on June 1, all eligible project costs must be invoiced and paid by May 31 of the following year.

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 within the 365-day window.
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.

This process means that if you have already paid a vendor before the loan is registered, the lender cannot reimburse you. CSBFP loans do not reimburse pre-registration costs. Every eligible cost must be invoiced and paid after the loan registration date.

There is a narrow exception: costs incurred within 365 days before loan registration are eligible in some circumstances under ISED guidelines, but this exception is applied on a case-by-case basis and is not a reliable workaround. The safest approach is to ensure registration precedes all major project expenditures.

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 in the 365-day window: From the registration date, count forward. Any expected cost that might slip past day 365 needs to be flagged early.
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 365-day window is a hard deadline under ISED rules. However:

Partial disbursement before day 365 is sufficient for the portion disbursed. You do not need to disburse the full loan amount by day 365. Whatever is disbursed within the window is eligible; any undisbursed portion is simply not drawn.
ISED has granted 365-day extensions in documented cases of regulatory delays outside the borrower's control (a licensing authority's processing backlog, a municipal permit delay caused by government processing times). These are not guaranteed and must be applied for through the lender.
Phased projects where the second phase extends beyond 365 days typically require a separate CSBFP registration for the second phase. The first registration covers costs in the first 365 days; a new registration covers the next phase.

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 without penalty. Businesses that generate stronger-than-projected cash flow can accelerate repayment without a breakage fee — a significant advantage over fixed-payment commercial mortgages.

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.