The five eligible cost categories
The Canada Small Business Financing Program covers five categories of costs. The first three (real property, equipment, and leasehold improvements) have been part of the program since its inception. The fourth and fifth (intangible assets and working-capital costs) were added in July 2022 as part of the most significant expansion of the program in its history.
1. Real property: land and buildings
Real property financing covers the purchase, construction, renovation, or improvement of land and buildings used for the business. This includes:
- Purchasing an existing commercial building for business owner-occupation
- Purchasing raw land for construction of a business facility
- New construction of an owner-occupied business facility
- Major capital improvements to an existing owned building (structural, mechanical, electrical)
The real property sub-limit is $500,000, inside the $1,000,000 overall term loan cap. Real-property loans are the only CSBFP loans that can fully utilize the $1M ceiling — a borrower doing a $1M commercial building purchase can borrow up to $1M under CSBFP for that purchase (subject to loan-to-value constraints).
Important: the building must be used for the business operations, not held as an investment property. Pure real-estate investment is not an eligible use — the owner must operate the business from the property.
2. Equipment, vehicles, and software
Equipment financing covers tangible assets used in the operation of the business. The July 2022 amendments explicitly added software to this category, which is the most significant change for technology-oriented businesses and any business that runs on licensed software platforms.
- Equipment: Manufacturing machinery, commercial kitchen equipment, medical and dental equipment, HVAC systems, printing and production equipment, office furniture and fittings, point-of-sale systems, and any other tangible operational asset.
- Vehicles: Commercial vehicles used in the business — delivery vans, work trucks, specialty vehicles. Personal-use vehicles and vehicles used primarily for commuting are not eligible. The vehicle must be registered for commercial use and primarily operated in the business.
- Software (post-2022): Licensed software, ERP systems, practice management platforms, reservation systems, and other operating software are now eligible. SaaS subscriptions (recurring monthly/annual fees) are generally not eligible — CSBFP covers capital expenditures, not operating subscriptions. Perpetual software licences and multi-year prepaid licences are the common eligible form.
Equipment and leasehold improvements combined share the $500,000 non-real-property sub-limit. A business doing a $300K equipment purchase and a $250K leasehold build-out is at $550K — $50K over the sub-limit. The loan would need to be restructured to $500K across both categories.
3. Leasehold improvements
Leasehold improvements are permanent or semi-permanent physical changes made to a leased commercial space to make it operational for the business. These improvements become the property of the landlord at the end of the lease; the business has the benefit of them only for the lease term.
- Restaurant and food-service fit-outs (kitchen build-outs, plumbing, ventilation, flooring, millwork)
- Retail fit-outs (flooring, shelving, lighting, display systems)
- Medical and dental office build-outs (operatory rooms, HVAC, cabinetry, plumbing)
- Office space improvements (partitions, wiring, HVAC modifications, accessible entrances)
One hard constraint: the CSBFP loan for leasehold improvements cannot be amortized past the expiry of the underlying lease. If the lease has 8 years remaining when the loan closes, the loan must be fully repaid within 8 years — or the borrower must secure a lease extension or landlord consent to renewal that extends beyond the loan maturity. Lenders pull and read the lease on every leasehold-improvement file; a lease that expires before the loan does is a standard decline reason.
4. Intangible assets and franchise fees
The July 2022 amendments created a new category for intangible assets. The primary use case is franchise fees — the licence fee paid to a franchisor for the right to operate under their brand. This is often the largest single cost of opening a franchise location, and it was previously ineligible for CSBFP financing.
Eligible intangible assets include:
- Franchise fees paid directly to the franchisor for the initial licence
- Intellectual property purchased outright (trademarks, patents, domain names, software IP)
- Other intangible assets with a demonstrable useful life and clear ownership transfer
Goodwill — the premium paid above identifiable net asset value in a business acquisition — is not eligible. The business purchase price can be broken down into tangible assets (equipment, leaseholds), real property, and intangibles (IP), with CSBFP financing the eligible components; but the pure goodwill component has no CSBFP coverage. See CSBFP for buying a business for a detailed breakdown of business-acquisition structuring.
The intangibles category shares the $150,000 sub-limit with working-capital costs. A borrower who uses $100,000 of CSBFP financing for a franchise fee has only $50,000 of room remaining in the $150K intangibles-and-working-capital bucket.
5. Eligible working-capital costs
The working-capital category, introduced in 2022, covers operating costs incurred before the business generates revenue. This is the category that most benefits early-stage businesses and businesses launching a new location or product line.
Eligible working-capital costs under the term loan form include documented pre-revenue operating expenses: rent deposits, initial inventory for a product launch, marketing spend to drive first sales, payroll for the launch period, and similar costs incurred before the business's first operating revenue.
Working-capital costs are also available through the standalone working-capital line of credit (up to $150,000, separate from the term loan). The LOC is more flexible — it can be drawn and repaid in cycles as working-capital needs fluctuate — versus the term loan, which is advanced once and amortized on a schedule.
Working-capital costs (whether term loan or LOC) fall under the $150,000 intangibles-and-WC sub-limit for the term loan, and the $150,000 cap for the standalone LOC.
What is not eligible
The CSBFP Act and regulations explicitly exclude certain costs. The most important exclusions:
- Goodwill: The premium above identifiable asset value in a business purchase. Not financeable under CSBFP regardless of how it is labelled in the purchase agreement.
- Inventory: Purchases of inventory for resale — stock, product, raw materials — are not eligible. The CSBFP finances capital assets and working-capital costs, not the revenue-generating cycle of buying and selling goods.
- Operating losses and debt refinancing: CSBFP cannot be used to cover accumulated operating losses, to refinance existing debt, or to recapitalize a business that has run out of cash. The program finances new capital deployment, not loss recovery.
- R&D expenditures:Research and development costs — scientific research, experimental development, clinical trials — are not CSBFP-eligible. They may be eligible for SR&ED tax credits (a different program administered by CRA) but not for CSBFP financing.
- SaaS subscriptions: Recurring software subscription fees are an operating cost, not a capital expenditure, and are not eligible. Only perpetual licences and software assets with a defined useful life qualify.
- Investment real estate: Properties held for rental income or capital appreciation, not operated as the business premises, are not eligible. Owner-occupation is a requirement.
- Personal-use assets: Any asset used primarily for personal rather than business purposes — vehicles, property, equipment — is not eligible.
The July 2022 expansion: what changed
Before July 2022, the CSBFP financed exactly three things: equipment, leasehold improvements, and real property. That was the complete list. No software. No franchise fees. No working capital.
The 2022 Budget Implementation Act added:
- Software as an eligible asset class within equipment
- Intangible assets (franchise fees, IP) as a new category with a $150,000 sub-limit
- Eligible working-capital costs as a new term-loan category (also within the $150,000 sub-limit)
- A new working-capital line of credit product at $150,000, separate from the term loan
For any business that purchased software, paid franchise fees, or needed working capital for a launch — and was previously told those costs couldn’t be financed under CSBFP — the 2022 rules apply to new applications. Prior applications approved under the pre-2022 rules are not retroactively re-characterized; only new registrations after July 2022 have access to the expanded categories.
How to structure an application across categories
Most CSBFP applications involve costs in two or more categories. The key structuring rule is that each category is tracked separately against its sub-limit — the total cannot exceed $1,000,000, the non-RP portion cannot exceed $500,000, and the intangibles-and-WC portion cannot exceed $150,000.
A CPA structuring a CSBFP file will run through the cost breakdown category by category before the application is submitted, confirm that every dollar is classifiable into an eligible category, and make sure the sub-limits are not breached. Applications that fail on sub-limit structure are a common and preventable source of lender re-work.
When a project includes both eligible and ineligible costs — such as a business acquisition with a large goodwill component — the eligible costs are financed under CSBFP and the ineligible costs are either funded by the borrower’s equity injection or covered by a separate conventional loan.