A CSBFP loan is approved and registered based on the project budget presented at the time of application. The registered loan amount sets the ceiling for disbursements. The lender can only disburse against invoices for eligible costs up to the registered amount. This means that project changes, cost increases, scope additions, equipment substitutions, contractor changes, have real implications that differ from conventional project financing.
The disbursement framework
CSBFP disbursement works on a reimbursement or vendor-direct model: the borrower or the lender pays eligible vendors/contractors, and the lender advances against eligible invoices. The lender can only disburse against:
- Invoices for costs that are eligible under the CSBFP program
- Costs within the applicable sub-limit (non-RP maximum $500,000, real property up to the $1,000,000 overall ceiling, intangibles and working capital combined maximum $150,000)
- Invoices presented while the file remains within the lender's registration deadline and CSBFP's other timing rules (see below)
The registered loan amount is the ceiling, but actual disbursements are limited to actual eligible costs. If the project comes in under budget, the disbursement is lower than the registered amount; the registered amount is not a binding commitment to advance the full sum.
What happens when costs increase
Minor cost increases within the registered amount
If the project has cost overruns that are still within the registered loan amount (the total eligible costs remain below the ceiling), the lender can typically disburse against the higher-cost invoices without any formal amendment. The borrower presents the actual invoices; the lender advances against eligible amounts.
Example: A registered CSBFP loan of $275,000 for equipment ($200,000) and leaseholds ($75,000). The leasehold contractor encounters unexpected structural issues that increase costs to $95,000. Total eligible costs are now $295,000, above the registered loan amount. The lender cannot advance the extra $20,000 without a formal amendment or supplemental application.
Cost increases that exceed the registered loan amount
If total eligible project costs increase beyond the registered amount, the borrower has three options:
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Cover the overage from the equity injection / working capital. The CSBFP loan disburses up to the registered amount; the borrower funds the remainder. This is the simplest path, no lender re-approval needed, but requires the borrower to have unencumbered funds available.
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Request an increase to the registered loan amount. The lender can amend the CSBFP registration upward, subject to:
- The increase not pushing total non-RP borrowings (across all CSBFP loans from all lenders) above $500,000
- The lender's underwriting remaining sound after the change (DSCR still clears the threshold)
- The increased cost being for eligible assets (not a new asset category not previously approved)
- No change to the fundamental project or business viability
This is not automatic, the lender re-underwrites the higher amount. Timeline depends on the lender's approval process.
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Reduce scope to stay within the registered amount. If certain assets are no longer needed or if lower-cost substitutes are available, the borrower can reduce the project to fit within the existing registration. The lender disbursed against the revised (lower-cost) invoices.
Cost increases driven by a contractor change
If the original contractor cannot complete the work (bankruptcy, abandonment, disputes) and a replacement contractor is engaged at a different price, the CSBFP loan applies to the replacement contractor's invoices for the same scope of eligible leasehold improvements. The lender needs to confirm that the new invoices relate to the same eligible work and that total disbursements remain within the registered amount.
Document the contractor transition carefully: the reason for the change, the scope comparison between original and replacement contractor proposals, and any cost differential.
Equipment substitutions
If the specific equipment in the original project list changes (a different model, a different manufacturer, or an entirely different piece of equipment that serves the same function) the CSBFP eligibility depends on whether the substitute is:
- Still an eligible asset under the CSBFP program (equipment, improvements to a leased or owned property, real property, or intangibles)
- In the same cost category (if the substitution moves cost from equipment to another sub-limit, confirm the sub-limit capacity)
Equivalent substitutions (same function, similar cost, same eligibility category) can generally proceed without formal amendment, the borrower simply presents invoices for the substitute equipment.
Material category changes (for example, replacing a piece of equipment with a cost that falls under the $150,000 intangibles-and-working-capital limit, such as a licence; note that software counts as equipment, not as an intangible) should be confirmed with the lender before purchase, to verify that the revised cost allocation stays within sub-limits.
What happens when costs decrease
If the project comes in under budget (the contractor bids lower, equipment costs less than quoted, or certain items are not purchased) the CSBFP loan disbursement is limited to actual eligible costs. The borrower cannot "draw down" the remaining registered amount for a different purpose or as general working capital.
If the project scope contracts materially (say, 3 of the 5 equipment items on the original list are no longer being purchased) the lender's disbursement reflects only the items actually acquired. The remaining registered headroom does not carry over to other uses.
The registration deadline
Separately from the 365-day look-back rule (which lets costs incurred up to 365 days before approval qualify, see below), the lender faces its own timing obligation to the program: the loan must be registered with ISED within 6 months of the date of first disbursement. Before the 2022 reforms, that window was 3 months. This is an administrative deadline on the lender, not a confirmed deadline on how long the borrower has to complete disbursements, and it's easy to conflate the two since both get shortened to "the 365-day rule" in casual conversation, when only the look-back rule actually uses that number.
What borrowers should know:
- The registration deadline is the lender's obligation to ISED, not a rule that by itself limits how long a project has to draw down funds
- Project delays, contractor backlogs, and supply-chain issues are still worth flagging to the lender early, since they can affect the file's overall timeline and the lender's own registration planning
- If a project is running long, the right move is to ask the lender directly what deadlines apply to the specific file, rather than assuming a fixed disbursement-completion date
Pre-existing costs and the 365-day lookback
Some leaseholds and equipment purchases are made before the CSBFP loan is approved, during the construction period before financing is confirmed. CSBFP allows costs paid or committed up to 365 days before the date the lender approves (or conditionally approves) the loan to be included as eligible costs, provided:
- The costs are documented (invoices with proof of payment, or the signed contract or purchase order for costs committed but not yet paid)
- The costs are for the same project as the approved loan
- The costs meet all other CSBFP eligibility criteria
This lookback provision is valuable for projects that break ground before financing closes, but it means that costs paid or committed more than 365 days before the loan approval date are ineligible even if they are physically part of the completed project.
When a change requires a new CSBFP application
A scope change is effectively a new application if:
- The borrower wants to finance a materially different project than was originally approved (a different business purpose, a different location, new asset categories not contemplated in the original approval)
- The increased loan amount would push the borrower's total CSBFP borrowings above the per-borrower ceiling ($1,000,000 in term loans; $500,000 non-RP sub-limit; $150,000 intangibles-and-working-capital sub-limit)
- The original CSBFP registration has already been fully disbursed and closed, a new CSBFP loan can be applied for, subject to the per-borrower ceiling
Communication is the most important lever
Every CSBFP lender has a relationship manager or account officer responsible for the file between approval and final disbursement. When the project scope shifts (costs increase, a vendor changes, the timeline slips) the correct step is to communicate with the lender before acting, not after.
A borrower who surfaces a $30,000 cost overrun before spending the money has many options. A borrower who surfaces the same overrun after spending it and presenting invoices has fewer. Lenders working within the CSBFP program framework can often accommodate reasonable changes when they are notified proactively.
For the CSBFP disbursement and closing process, see CSBFP after approval: closing, disbursement, and registration. For the document package lenders need during disbursement, see the CSBFP document checklist. For the 365-day rule in detail, see what is the CSBFP 365-day rule.
Written by Capital Toolkit