title: "CSBFP working capital line of credit: how the $150K LOC works" description: "The 2022 CSBFP amendments added a working capital line of credit as a distinct product separate from the term loan. The LOC has different mechanics, a higher interest rate cap, and a separate sub-limit from the term loan. A practical guide to when the LOC makes sense, how it is structured, and how it interacts with the term loan ceiling." date: "2026-05-26" author: "Capital Toolkit" tags: ["csbfp", "working capital", "line of credit", "2022 amendments", "canadian financing", "small business", "financing structure"] videos:
- understanding-the-csbfp
- what-can-you-finance
- wtf-are-bankable-economics
Until 2022, the Canada Small Business Financing Program was exclusively a term loan product. The 2022 CSBFP Act amendments introduced two new categories:
- Intangibles and working capital costs under the term loan
- A standalone working capital line of credit (LOC)
These are related but distinct. Both address working capital needs — but they operate very differently, and understanding the difference matters for how you structure your application.
What the working capital LOC is
The CSBFP working capital line of credit is a revolving credit facility — not a term loan. It works like a conventional operating line of credit: you draw on it when you need it, repay when you have the cash, and can redraw up to the limit during the facility's term.
Key parameters:
- Maximum amount: $150,000
- Interest rate cap: The lender's prime rate + 5% per year (higher than the term loan cap of prime + 3%)
- Registration fee: 2% of the LOC amount (same registration fee as the term loan)
- Annual administration fee: The 1.25% annual admin fee applies (same as the term loan)
- Term: Up to 5 years (the LOC cannot be renewed beyond 5 years without a new registration)
- Security: The lender takes security over the assets purchased or financed using the LOC proceeds
Ceiling interaction: The LOC ceiling of $150,000 is entirely separate from the term loan ceiling of $1,000,000. A business can have both a $1,000,000 CSBFP term loan and a $150,000 CSBFP LOC simultaneously — for a combined maximum of $1,150,000 in CSBFP financing.
How the LOC differs from the working capital sub-limit on the term loan
The 2022 amendments also added working capital costs as an eligible category under the term loan — with its own $150,000 sub-limit within the $500,000 non-real-property term loan cap.
These two products are not the same:
Term loan working capital component:
- Fixed amortization (not revolving)
- Disbursed as a lump sum against eligible working capital costs
- Interest rate: prime + 3% (variable) or residential mortgage rate + 3% (fixed)
- Part of the $500,000 non-RP sub-limit of the term loan
Working capital LOC:
- Revolving (draw, repay, redraw)
- Separate $150,000 ceiling outside the term loan cap
- Interest rate: prime + 5% (variable only — there is no fixed-rate option for the LOC)
- Security interest in working capital assets
The right product depends on the nature of the working capital need:
- If you need a lump sum for a defined working capital cost (franchise fee, initial inventory investment, software license) — the term loan working capital component may be appropriate
- If you need revolving access to working capital for ongoing cash flow management — the LOC is the better fit
When the LOC makes sense
Seasonal businesses with off-season cash needs. A campground or tourism operator that earns most revenue in summer has off-season months where payroll, maintenance, and fixed costs continue. A revolving LOC bridges the gap, allowing draws in the shoulder season and repayment when the operating season produces cash. This is the classic LOC use case.
Businesses with payment timing mismatches. A service business that invoices net-30 or net-60 may have 6–8 weeks between delivering service and receiving payment. An LOC covers payroll and supplier payments in the interim, reducing the owner's personal funding requirement.
Businesses scaling into new contracts. A commercial cleaning company winning a large new contract may need to purchase supplies and pay labour before the first invoice is collected. An LOC provides the working capital to onboard the contract without disrupting existing operations.
Businesses with an inventory-intensive model. A retailer or distributor that needs to fund inventory purchases before the inventory sells can use the LOC to fund the inventory cycle.
What the LOC cannot finance
The CSBFP LOC is for legitimate working capital purposes — funding the operational gap between expenditures and receipts. It cannot be used to:
- Finance capital assets (equipment, leaseholds, real property — those belong on the term loan)
- Refinance pre-existing debt
- Pay personal expenses of the business owners
Lenders draw down on the LOC by advancing funds and securing them against working capital assets (receivables, inventory). The security interest the lender takes confirms the revolving, asset-based nature of the facility.
The registration and cost structure
Like the term loan, the CSBFP LOC has a 2% registration fee payable to the federal government. On a $150,000 LOC, the registration fee is $3,000. This fee is payable upfront at registration and is not refundable.
Total cost calculation for a $150,000 LOC:
- Registration fee: $3,000 (upfront)
- Annual interest at prime + 5% (approximately 9.7% with prime at 4.7%): $14,550/year on a fully drawn facility
- Annual administration fee (1.25% of outstanding balance): $1,875/year on a fully drawn facility
The effective cost is higher than the term loan — primarily because of the prime + 5% rate cap versus the term loan's prime + 3% cap. The LOC's higher cost is the price of revolving flexibility.
Can you have both a CSBFP term loan and a CSBFP LOC?
Yes. A business can have:
- Up to $1,000,000 in CSBFP term loans (non-RP and real property combined)
- Up to $150,000 in a CSBFP working capital LOC
- Combined total: up to $1,150,000
The term loan and the LOC can be from the same lender or from different CSBFP lenders — the per-borrower ceiling applies regardless of how many lenders are involved.
Note: Not all CSBFP lenders offer the LOC product. The LOC is available at lenders that have registered to offer the CSBFP line of credit product under their CSBFP participation agreement with the federal government. Ask specifically whether the lender offers the CSBFP LOC, not just the term loan.
Structuring the application
When applying for both a CSBFP term loan and a LOC simultaneously, the lender typically underwrites them as a combined file. The DSCR analysis covers both the fixed term loan payment and the modelled LOC interest cost. For the LOC, lenders typically assume a partial draw (not 100% utilization) for DSCR purposes — modelling, say, 50% average utilization — rather than assuming the full $150,000 drawn at all times.
For the CSBFP term loan structure and eligible costs, see CSBFP eligible costs. For the maximum loan amounts and how the sub-limits interact, see CSBFP maximum loan amount. For an alternative when CSBFP does not fit the working capital need, see CSBFP for working capital.
Written by Capital Toolkit