What is the CSBFP program for equipment financing?

The Canada Small Business Financing Program (CSBFP) is a federal loan guarantee program. The government guarantees up to 85% of the loan, making it easier for small businesses to get approved. You can finance up to $350,000 for equipment and leasehold improvements. Loans are available through participating banks and credit unions at prime + up to 3%.

Is it better to lease or buy equipment for my business?

It depends on your cash flow, tax situation, and how long you need the equipment. Buying is better if you will use the equipment for many years and want to build equity. Leasing is better if you need to preserve cash, want lower monthly payments, or the equipment becomes obsolete quickly (like technology). Lease payments are fully deductible as a business expense.

Can I deduct equipment purchases on my taxes in Canada?

Yes. Business equipment is deductible through Capital Cost Allowance (CCA). Under the Accelerated Investment Incentive, you can claim up to 100% of the cost in the first year for eligible equipment purchased before 2028. This applies to manufacturing equipment, vehicles, computers, and other capital assets used in your business.

Equipment Financing in Canada: Loans, Leasing & Tax Deductions

Equipment Financing Options Overview

Option	Best For	Typical Rate	Max Amount	Ownership
CSBFP loan	Small businesses (< $10M revenue)	Prime + 3% max	$350,000	You own it
Bank term loan	Established businesses, strong credit	5–10%	Varies	You own it
Equipment lease	Cash preservation, fast-changing tech	6–15% equiv.	Varies	Lessor owns (option to buy)
Dealer financing	Vehicle and heavy equipment purchases	0–8% (promo)	Equipment value	You own it
Credit union loan	Local businesses, relationship-based	6–12%	Varies	You own it
Online lender	Fast approval, fair credit	10–25%	$5K–500K	You own it
Operating line of credit	Ongoing smaller equipment needs	Prime + 1–5%	Credit limit	You own it

CSBFP: Canada Small Business Financing Program

Eligibility

Requirement	Detail
Business revenue	Under $10 million annual gross revenue
Business type	For-profit, operating in Canada
Loan purpose	Equipment, leasehold improvements, or real property
Excluded businesses	Farming, religious/charitable organizations, some restricted sectors

CSBFP Loan Limits

Purpose	Maximum Loan	Maximum Term
Equipment	$350,000	15 years
Leasehold improvements	$350,000	15 years
Real property	$1,000,000	25 years
Combined maximum	$1,150,000	—

CSBFP Costs

Cost	Amount
Interest rate	Prime + up to 3% (floating) or lender’s residential mortgage rate + 3% (fixed)
Registration fee	2% of loan amount (can be financed into the loan)
Annual administration fee	1.25% of outstanding balance
Total effective cost	Roughly prime + 4–5%

How to Apply

Step	Action
1	Prepare a business plan or equipment quote
2	Visit a participating bank or credit union
3	Request a CSBFP loan specifically (not all loan officers know about it)
4	Provide financial statements, business registration, equipment details
5	Lender assesses your application and submits to government for guarantee
6	Approval typically takes 2–4 weeks

Lease vs Buy Comparison

Factor	Buying (Loan)	Leasing
Monthly cost	Higher	Lower
Down payment	Often 10–20%	Often $0 or first/last payment
Ownership	You own the asset	Lessor owns until buyout
Tax deduction	CCA (depreciation) + loan interest	Full lease payment is deductible
End of term	You keep the equipment	Return, renew, or buy at residual value
Cash flow impact	Larger upfront commitment	Preserves working capital
Balance sheet	Asset + liability on books	Operating lease may be off-balance-sheet
Technology risk	You own obsolete equipment	Return and upgrade easily
Best for	Long-life equipment, building equity	Short-life equipment, cash preservation

Worked Example: $50,000 Equipment

Metric	Buy (5-Year Loan at 7%)	Lease (5-Year at 8% equiv.)
Monthly payment	$990	$850
Down payment	$5,000 (10%)	$0
Total payments	$59,400 + $5,000 = $64,400	$51,000
Residual / buyout	$0 (you own it)	$5,000 (estimated buyout)
Total cost	$64,400	$56,000
Ownership at end	✅ Yours	Option to buy for $5,000
Tax deduction	CCA + $9,400 interest	$51,000 full lease deduction

Tax Deductions for Equipment

Capital Cost Allowance (CCA)

CCA Class	Rate	Equipment Type
8	20%	Furniture, fixtures, most equipment
10	30%	Vehicles, automotive equipment
10.1	30%	Passenger vehicles over $37,000 (limited CCA)
12	100%	Tools under $500, computer software
43	30%	Manufacturing and processing equipment
44	25%	Patents, franchises, limited-life intangibles
46	30%	Data network equipment
50	55%	Computer hardware, systems software
53	50%	Manufacturing and processing machinery
54	30%	Zero-emission vehicles
55	40%	Zero-emission vehicles (>$55,000)
56	30%	Zero-emission automotive equipment

Accelerated Investment Incentive (AII)

Purchase Year	First-Year Deduction
Before 2024	Up to 100% (AIIP — immediate expensing, for CCPCs up to $1.5M)
2024–2027	Up to 75% of normal CCA in year 1 (AII enhanced)
2028+	Returns to half-year rule (50% of CCA in year 1)

Lease Payments: Full Deduction

Tax Treatment	Buying	Leasing
Equipment cost	Deducted via CCA over multiple years	Not applicable
Interest on loan	Deductible as business expense	Not applicable
Lease payments	Not applicable	Fully deductible as business expense
GST/HST	ITC on purchase price	ITC on each lease payment

Types of Equipment Commonly Financed

Industry	Common Equipment	Typical Cost Range
Construction	Excavators, loaders, trucks	$50K–500K
Restaurant	Commercial kitchen, HVAC, POS	$20K–200K
Medical/dental	Imaging, chairs, instruments	$25K–300K
Technology	Servers, computers, networking	$5K–100K
Manufacturing	CNC machines, presses, automation	$50K–1M+
Trucking	Trucks, trailers	$100K–300K
Agriculture	Tractors, combines, irrigation	$50K–500K
Retail	POS systems, fixtures, signage	$5K–50K

How to Choose the Right Financing

Decision Factor	Choose Buying	Choose Leasing
Equipment life > 7 years	✅
Equipment life < 5 years		✅
Strong cash reserves	✅
Need to preserve cash		✅
Want to build balance sheet assets	✅
Want maximum tax deduction now		✅
Technology changes quickly		✅
Equipment holds resale value	✅
Startup with limited credit		✅ (easier approval)

Application Checklist

Document	Why It’s Needed
Business plan or description	Shows viability and equipment need
Equipment quote or invoice	Confirms what you’re financing
2 years of financial statements	Demonstrates business health
Personal financial statement (owner)	Required for personal guarantee
Business registration / incorporation	Confirms legal entity
Most recent tax return (business)	Verifies revenue and expenses
Bank statements (3–6 months)	Shows cash flow
Existing debt schedule	Helps lender assess total obligations