CSBFP vs Futurpreneur: which startup loan should you choose?

What is the difference between CSBFP and Futurpreneur?

The CSBFP is a government-backed loan from your bank for business assets; Futurpreneur is a startup loan for young founders that comes with a mentor.

Under the CSBFP, the government does not lend you anything. ISED shares the risk of the loan with the lender, the lender alone decides whether to approve it, and once it does, it disburses the money and registers the loan with ISED. That structure is why the program can reach $1.15 million and serve businesses of any age.

Futurpreneur lends directly, and mentoring is part of the deal: Futurpreneur says working with a mentor is one of the requirements of its financing, and you must receive its financing to be matched with a mentor. Its loan is collateral-free and it checks your personal credit with a hard inquiry.

When should you choose the CSBFP?

Choose the CSBFP when you are buying assets or need more than $75,000, or when Futurpreneur's age and stage rules rule you out.

• You are 40 or older, or your business has operated full time for more than 24 months. The CSBFP has no age or business-age limit.
• You are buying equipment, vehicles, a franchise, leasehold improvements or commercial property. Of the $1 million in term loans, up to $500,000 can go to leasehold improvements and equipment, and within that, up to $150,000 to intangible assets and working capital.
• You are buying an existing business. The CSBFP can finance the eligible assets of an existing business, up to the lower of the purchase cost and the appraised value, but not a share purchase.
• You need a line of credit for day-to-day expenses: up to $150,000 at a maximum of the lender's prime + 5%. ISED notes that only some lenders offer the CSBFP line of credit so far, so ask yours.

When should you choose Futurpreneur?

Choose Futurpreneur when you are 18 to 39, launching or newly launched, and want a mentor and a collateral-free loan rather than a bank loan secured on assets.

• Your business is at the pre-startup or startup stage. Futurpreneur defines startup as less than a year of significant sales, and requires that you are past the idea or R&D phase.
• You can submit your full application, including the business plan and cash flow, before your 40th birthday.
• The business will become your full-time job. (The separate Side Hustle program is the exception.)
• Your business is not on Futurpreneur's ineligible list, which includes bars and night clubs, gambling, residential construction or rentals, financial and payment services, cryptocurrency, and new or used vehicle sales and leasing.

Can you use CSBFP and Futurpreneur together?

Yes. Futurpreneur says its loan may be in addition to other sources of financing, with two limits.

First, the Futurpreneur loan cannot be used as a down payment to secure other loans, so it cannot be the equity your bank asks for on a CSBFP loan. Second, it cannot pay off existing debt. One way to combine them is to use each loan for what it is built for: a CSBFP term loan for equipment or leaseholds, and Futurpreneur for launch costs. Your bank still decides the CSBFP loan on its own credit assessment, so tell it about the Futurpreneur and BDC loans when you apply.

Which loan costs less?

It depends on the rates on the day you borrow, because both are tied to a lender's prime or base rate.

The CSBFP sets ceilings, not rates: your lender can charge less than prime + 3% on a floating term loan, and the 2% registration fee applies to the amount loaned (or, for a line of credit, the amount authorized). Futurpreneur's own portion is RBC prime + 3% with a 9% cap while RBC prime is above 6%, plus a one-time 1% management fee. Ask each lender for the full cost of borrowing in writing and compare the totals, not the headline rate.

What gets applications turned down?

For the CSBFP, the lender's credit decision; for Futurpreneur, the eligibility rules and your plan.

• CSBFP: financial institutions deliver the program and are solely responsible for approving the loan. If one lender says no, ISED says you could contact another financial institution, since lenders have different approval criteria. Farming businesses and revenues above $10 million are outside the program.
• Futurpreneur: applying at 40 or older, a business past 24 months of full-time operation, an ineligible business type, unpaid taxes, being named in a lawsuit, a bankruptcy discharged less than five years ago, or not producing a complete and viable business plan and cash flow.