Personal Guarantee Insurance for CSBFP loans

What is the Canada Small Business Financing Program?

The Canada Small Business Financing Program (CSBFP) is a federal loan program administered by Innovation, Science and Economic Development Canada (ISED) under the Canada Small Business Financing Act. It helps small and mid-sized businesses access financing they might struggle to get on conventional terms. The government does not lend directly. It shares default risk with participating chartered banks, credit unions and caisses populaires, which makes those lenders more willing to approve small business loans.

CSBFP is one of the most widely used business loan programs in Canada. Thousands of businesses each year use it to finance equipment, leasehold improvements, commercial real estate, intangible assets and working capital.

CSBFP loan limits (2026 rules)

Under current ISED rules, eligible businesses can borrow up to a combined maximum of $1.15 million in CSBFP term loans, plus a separate working capital line. The limits break down by purpose:

• Real property (land and buildings): up to $1,000,000 per borrower
• Equipment and leasehold improvements: up to $350,000 per borrower
• Intangible assets and working capital costs: up to $150,000 per borrower
• Lines of credit (working capital): up to $150,000, added in the 2022 modernization
• Total combined maximum: $1,150,000 across all CSBFP term loan categories

Who is eligible

• For-profit small businesses operating in Canada with gross annual revenues of $10 million or less in the fiscal year the loan is approved
• Sole proprietorships, partnerships and incorporated businesses are all eligible
• Farming businesses are excluded and served by the separate Canadian Agricultural Loans Act program
• Charitable and religious organizations are excluded

Why does CSBFP require a personal guarantee?

Although the government shares default risk with the lender, it does not eliminate it. Lenders still carry a meaningful share of the potential loss, and ISED expects borrowers to have personal skin in the game. The personal guarantee is how that accountability is written into the loan.

Under CSBFP regulations, lenders may require a personal guarantee, capped by statute at 25% of the original loan amount for corporations and partnerships. This cap does not exist on most conventional commercial loans, which typically require an unlimited guarantee for the full outstanding balance.

The 25% cap is a core feature of CSBFP and one of the main reasons Canadian owners prefer CSBFP-structured financing when they qualify. The program framework is at ised-isde.canada.ca.

How much is the personal guarantee on a CSBFP loan?

The maximum personal guarantee on a CSBFP loan is 25% of the original loan amount. The cap applies to the principal at closing, not the current balance. If you pay the loan down, the capped exposure does not scale down with it.

Worked examples

• On a $500,000 CSBFP equipment loan, your maximum personal guarantee is $125,000
• On a $1,000,000 CSBFP real property loan, your maximum personal guarantee is $250,000
• On a $150,000 CSBFP working capital line, your maximum personal guarantee is $37,500
• On a $1,150,000 combined CSBFP facility, your maximum personal guarantee is $287,500

What about multiple owners?

Lenders generally require guarantees from every owner holding 25% or more of the borrowing entity. The 25% cap is applied at the loan level, not per guarantor. Each owner is typically jointly and severally liable for the full capped amount, so the lender can pursue any single guarantor for the entire 25% if the loan defaults. That guarantor then has a right of contribution from the others, but the lender does not have to collect proportionally.

Can a lender require more than 25%?

Not under CSBFP. The 25% cap is a statutory maximum. A lender can require less, but anything larger is outside the program. If a lender is pushing for more than 25%, the loan is being structured as a conventional commercial loan, not a CSBFP loan.

Sole proprietors

Sole proprietors do not benefit from the 25% cap. Because a sole proprietor is not legally separate from the business, the owner is personally liable for the full loan. For this reason, most CSBFP borrowers structure as a corporation or partnership before applying.

How does PGI work on a CSBFP loan?

Personal Guarantee Insurance is a separate contract between the owner and an insurer. It does not change the CSBFP loan agreement and does not reduce the 25% guarantee owed to the lender. What it does is transfer a covered share of the financial consequence if the guarantee is ever enforced.

On a CSBFP loan, PGI applies to the capped guarantee amount, not the full loan. The premium is calculated on the 25% exposure. Coverage, up to 80% of the capped amount, applies if the business defaults, the lender enforces the guarantee, and the claim meets the policy terms.

Worked example: $500,000 CSBFP equipment loan

• Original loan: $500,000
• CSBFP 25% capped personal guarantee: $125,000
• Maximum PGI reimbursement at 80% coverage: $100,000
• Remaining guarantor exposure after a covered claim: $25,000

A claim is triggered by qualifying events defined in the policy, which typically include the business entering formal insolvency proceedings, the lender accelerating the loan, or a written demand for payment under the guarantee. Subject to exclusions, the insurer may then reimburse a covered portion. Your CSBFP guarantee with the lender remains in full force as a separate legal obligation.

CSBFP vs BDC vs conventional: how do they compare?

Canadian borrowers typically have three structural choices for financing, and the guarantee treatment varies significantly across them.

Compared with the US SBA program, the CSBFP 25% cap is the single largest structural difference. The SBA requires an unlimited guarantee from every owner with 20% or more on 7(a) and 504 loans. For that breakdown, see the SBA loan personal guarantee page.

Who offers CSBFP in Canada?

CSBFP is delivered through participating lenders, not by ISED directly. It is available at most major institutions across the country.

• Big 5 banks: RBC, TD Canada Trust, BMO, Scotiabank, CIBC
• Other national banks: National Bank of Canada, HSBC Canada, Laurentian Bank
• Credit unions and caisses populaires: Desjardins, Vancity, Meridian, Alterna, Servus, Coast Capital, Prospera, Innovation Credit Union, ATB Financial and many regional credit unions

The Business Development Bank of Canada (BDC) is a federal Crown corporation, not a CSBFP participating lender. BDC lends on its own terms, typically with unlimited guarantees, and is often used alongside or instead of CSBFP when the borrower is outside eligibility or needs a larger facility.

Interest rates on CSBFP loans are regulated. Lenders can charge up to prime plus 3% on variable-rate loans, or their single-family residential mortgage rate plus 3% on fixed-rate loans, plus a registration fee and annual administration fee set by ISED.

How do you apply for PGI on a CSBFP loan?

The process is three steps and usually runs in parallel with the CSBFP loan closing. You do not need the loan fully bound before starting.

1. 1 Complete the CORE Score. A short online assessment at app.pgicover.com. No credit check for the indicative result. You will need basic details about the CSBFP loan and your business.
2. 2 Review your indicative quote. The CORE Score returns an indicative premium and an eligibility read, giving you a clear cost-and-feasibility picture ahead of closing.
3. 3 Proceed to underwriting and bind. Approved applicants complete full underwriting, which may require additional documentation. Once the loan closes and you accept the terms, coverage is bound and documents are issued electronically.