Understanding the 20% Rule for SBA Loans in Canada
Understanding the 20% Rule for SBA Loans in Canada If you’ve been looking into SBA-style loans (or their Canadian equivalents like government-backed small business loans), you might have heard the mysterious term: the 20% rule . It sounds like something out of a math horror movie, but don’t worry—we’re breaking it down in plain English (and maybe a little humor). So, What Is the 20% Rule? The 20% rule is a guideline lenders use to ensure your business doesn’t borrow too much relative to the total project or business cost . Essentially, the government-backed portion of a loan should not exceed 80% of the total cost, leaving you responsible for at least 20% . Think of it like a pizza: the lender gives you 80% of the slices, but you still have to bring 20% to the table. And no, you can’t cheat by just ordering extra garlic bread. How It Works in Canada While Canada doesn’t have SBA loans exactly, the Canada Small Business Financing Program (CSBFP) operates similarly. Here’s how the 20% ...