title: "CSBFP term loan vs. line of credit — what each one does, and why most businesses end up with both" description: "A side-by-side comparison of the two CSBFP products: the term loan up to $1,000,000 for long-lived assets, and the working-capital line of credit up to $150,000. Includes the eligible uses, the rate caps, the registration fees, the amortization windows, and the practical scenarios where each one fits." date: "2026-05-22" author: "Capital Toolkit" tags: ["csbfp", "term loan", "line of credit", "comparison", "canadian financing", "working capital"] videos:
- understanding-the-csbfp
- what-can-you-finance
- understanding-the-sbl-fees
Under CSBFP, the term loan funds long-lived assets up to $1,000,000; the line of credit funds working capital up to $150,000; and a single Canadian small business can hold both at the same time, for a combined $1.15 million.
That's the answer most owners are actually looking for when they ask which CSBFP product to apply for. The two are not alternatives. They are designed to sit side by side, with the term loan covering the things you buy once and use for years, and the line of credit covering the day-to-day cash that keeps the business running between collections.
This post lays out the difference cleanly — what each product finances, what each one costs, how long the federal coverage lasts on each, and the scenarios where a business genuinely only needs one of the two.
At a glance
| CSBFP term loan | CSBFP line of credit | |
|---|---|---|
| Maximum amount | $1,000,000 | $150,000 |
| Real-property sub-limit | Up to $1,000,000 | Not eligible |
| Non-real-property sub-limit (equipment, leaseholds, intangibles, working capital) | Up to $500,000 | Not eligible |
| Of which: intangibles + working capital | Up to $150,000 (nested inside the $500,000) | n/a — LOC is for working capital |
| Eligible uses | Real property, leasehold improvements, equipment (incl. software and vehicles), intangible assets, working capital, the 2% registration fee | Working capital only — inventory, payroll, rent, software development costs, printed materials, professional fees, similar day-to-day operating expenses |
| Interest-rate cap (floating) | Prime + 3% (inclusive of 1.25% admin fee) | Prime + 5% (inclusive of 1.25% admin fee) |
| Interest-rate cap (fixed) | Posted residential mortgage rate + 3% (inclusive of 1.25% admin fee) | Floating only — no fixed-rate option |
| Registration fee | 2% of the loan amount, paid once at registration | 2% of the authorized amount at registration; another 2% on the renewed authorized amount if the line renews after 5 years |
| Annual administration fee | 1.25% on month-end outstanding balance (bundled into the interest rate) | 1.25% on daily-average outstanding balance (bundled into the interest rate) |
| Maximum government coverage | 15 years from the first scheduled payment | 5 years per term, renewable for additional 5-year periods |
| Available since | Original program | July 2022 (newer product) |
| Can a business hold both? | Yes — limits are independent | Yes — limits are independent |
The term loan, in plain English
The CSBFP term loan is what most people picture when they think "CSBFP." A business borrows a fixed amount, signs a promissory note, and pays it back in scheduled instalments over a period of years.
The maximum is $1,000,000, with two nested sub-limits that matter:
- The full $1M is available only when the loan is financing real property — buying, building, renovating, or modernizing commercial real estate where the business uses at least 50% of the property for its operations.
- Up to $500,000 is available for everything else that isn't real property: equipment (including software and commercial vehicles), leasehold improvements, intangible assets, and working capital.
- Within that $500K, a further sub-cap of $150,000 applies specifically to intangible assets (goodwill, franchise fees, licenses, intellectual property) and working capital.
So the practical ceilings for most businesses are:
- Buying a building → $1,000,000
- Outfitting a restaurant, factory, or shop → $500,000
- Buying out a franchise or financing working capital through a term loan → $150,000
The federal government covers the term loan for up to 15 years from the first scheduled payment. The loan itself can be amortized over a longer period — a 25-year amortization on a real-property loan is common — but after 15 years from the first payment, any remaining balance converts to a conventional loan (the government coverage simply ends; the loan continues as a regular bank loan).
Interest is capped at prime + 3% floating or the posted residential mortgage rate + 3% fixed, both inclusive of the 1.25% annual administration fee that the lender pays to ISED. Lenders can charge less than the cap; in practice most price at or near it.
The registration fee is 2% of the loan amount, paid once when the loan is registered. On a $500,000 term loan, that's $10,000; on a $1M loan, $20,000. It can usually be financed as part of the loan itself, so the cash impact is amortized across the loan term.
The line of credit, in plain English
The CSBFP line of credit is a more recent product — added in July 2022. It works like any other commercial line of credit: the lender approves a maximum authorized amount, the business draws against it as needed, interest accrues on the daily-average balance, and the line revolves indefinitely as long as it stays in good standing.
The maximum is $150,000. There is no equivalent of the term loan's nested sub-limits — the entire authorized amount is available for working capital, and only for working capital. Eligible uses include inventory, software development costs, printed materials, professional fees, payroll, rent, and other day-to-day operating expenses. It cannot finance equipment, real property, leasehold improvements, or intangibles — those go on the term loan.
The federal government covers the line of credit for up to 5 years at a time. At the end of each 5-year period, the line can be renewed for another 5 years. A 2% registration fee is paid on the authorized amount at the start of each 5-year coverage period, so a renewal triggers another 2% fee on the renewed authorized amount.
Interest is capped at prime + 5% floating — two percentage points higher than the term loan cap, inclusive of the 1.25% admin fee. There is no fixed-rate option for the LOC.
The administration fee is calculated slightly differently from the term loan: on a line of credit, the 1.25% is charged on the daily-average outstanding balance, not the month-end balance. That distinction matters for businesses that spike usage at month-end (paying suppliers, for example) — those days are averaged in, so the admin cost reflects the realistic usage of the line.
When you actually need both
Most small businesses that use CSBFP end up with both products, because the two cover non-overlapping problems.
The term loan funds the one-time, long-lived purchase: a piece of equipment, a leasehold build-out, a real-property acquisition, a franchise fee. These purchases are big, infrequent, and don't recur — once you've bought the espresso machine, you don't buy another one next month.
The line of credit funds the recurring cash gap: the difference between when you pay your suppliers and when your customers pay you. Inventory that sits in the warehouse for 60 days before it sells. Payroll on the 15th when the big invoice doesn't clear until the 28th. These are the working-capital cycles that every operating business runs, and they don't get financed cleanly by a term loan.
A typical pattern:
- Buying a building plus outfitting it: Term loan covers the building (up to $1M) and the equipment / leasehold improvements (up to $500K of that). A separate $150K line of credit covers working capital while operations ramp up.
- Opening a new restaurant location: Term loan covers the leasehold build-out and the kitchen equipment (within the $500K sub-limit). A $150K line of credit covers food and labor for the first quarter while the customer base builds.
- Buying out a franchise: Term loan covers the franchise fee (within the $150K intangibles sub-limit) plus any equipment financed at the same time. A line of credit covers working capital between royalty payments and revenue.
Each product is sized for what it does. Trying to fund working capital through a term loan, even one that allows it, runs into the $150K sub-limit fast. Trying to fund equipment through a line of credit isn't allowed at all. The two products are designed to be used together precisely because no single CSBFP product can do everything.
When one product is enough
Two scenarios where a business genuinely only needs one of the two CSBFP products:
Real-property purchase with no operational ramp-up. A profitable, stable business buying its own building to replace a lease, with no new operational expansion, can fund the purchase entirely through a $1M term loan and stay on its existing conventional line of credit (or no line of credit at all) for working capital. Adding a CSBFP LOC would mean paying a 2% registration fee on an unneeded facility.
Service business with no inventory and no major asset purchases. A consultancy, accounting practice, law firm, or similar service business often has no equipment to finance and no inventory to carry. A $150K CSBFP line of credit can be the entire CSBFP relationship — covering payroll between billings, professional development, technology subscriptions — without ever opening a term loan.
For most product-based businesses, retail, hospitality, manufacturing, construction — both products are part of the structure.
How to decide which to apply for first
Sequencing matters, because each product has its own registration fee and its own underwriting process.
A practical rule: apply for the term loan first if the immediate need is an asset purchase, and stack the line of credit on as a follow-up once the asset is in operation. Lenders are more comfortable approving a working-capital line after they can see the business operating with the new asset; trying to approve both at the same time, especially for a younger business, often slows the term-loan decision.
The reverse — line of credit first, term loan later — works for service businesses or any case where the immediate need is purely cash-cycle management with no asset purchase pending. The line is cheaper and faster to underwrite, and it builds a relationship and a payment history with the lender that strengthens any future term-loan application.
The qualification and document-rating step on the Capital Toolkit platform looks at the file as a whole and recommends the sequence that fits. For the full list of documents each product needs at submission, see the CSBFP document checklist. For the program-level rules behind the numbers in the table above, the CSBFP overview is the canonical reference.
The short version
The term loan and the line of credit are two products with the same federal backstop, different size caps, different eligible uses, different rate caps, and different coverage windows. The term loan handles the things you buy and keep. The line of credit handles the cash that moves through the business every month. Most operating small businesses need both. Apply for them in the order that matches your immediate need, and use the qualification process to figure out which lender is the right partner for both.
Written by Capital Toolkit