No. The interest rate on a Canada Small Business Financing Program loan is capped by regulation, and a lender cannot recover extra risk through a fee instead.
Short answer
A conventional lender prices marginal risk into the rate or a fee. A CSBFP lender cannot do either, because the ceiling and the list of chargeable amounts are both set by law rather than negotiated. The Regulations fix the maximum for a floating-rate term loan at “the aggregate of 3% and the prime lending rate that is in effect at that lender on each day of the loan term”, and for a programme line of credit at “the aggregate of 5% and the prime lending rate that is in effect at the lender on each day of the line of credit term.” There is no higher tier for a weaker file.
The Act closes off the obvious workaround. Section 8 limits the government’s own exposure on a defaulted loan to the lesser of “85%, or any prescribed lesser percentage, of its eligible loss, calculated in accordance with the regulations” and a prescribed maximum — a per-loan figure, distinct from the five-year portfolio tiers in section 6(2) that cap what the Minister owes a lender across all its loans in a period, starting at “90%, or any prescribed lesser percentage, of that part of the aggregate principal amount of the loans…that does not exceed $250,000.” Neither section lets a lender bill the borrower for the gap. The only real flexibility in the scheme is the two-point spread between a term loan (prime plus 3%) and a line of credit (prime plus 5%) — moving a working-capital component from one class to the other is the one lever the Regulations actually permit.
a file the lender could not price for the risk traces exactly this: a credit committee tried to reprice a marginal file for key-person and concentration risk, could not under s.12, and instead resized the facility between the term-loan and line-of-credit classes to land inside both ceilings.
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