How to Write Use of Funds and Repayment Sections for a Loan Application in Canada

Every Canadian lender, whether a big bank, a credit union, BDC or a Canada Small Business Financing Program (CSBFP) lender, asks the same two questions about a loan request: what exactly will this money pay for, and how will we get it back? The business plan can be excellent in every other respect, but if these two sections are vague, the application slows down or stops.

Many owners write the use of funds as a single line ("renovations and working capital, $350,000") and the repayment section as a sentence ("the business will generate sufficient cash flow"). Credit officers need far more: itemized costs backed by quotes, a balanced table of sources and uses, and month-by-month projections that show loan payments being covered with room to spare.

Ledgerive's business plan services write these sections for lenders every week, with projections built by our financial modeling services. This guide shows you how to do it yourself, or what to expect from us.

1. What Lenders Look For

• Purpose: a specific, verifiable list of what the money buys.
• Commitment: how much the owners contribute and where that equity comes from.
• Capacity: cash flow that covers principal and interest with a cushion.
• Collateral: assets and guarantees that secure the loan if cash flow falls short.
• Consistency: numbers that match across the plan, projections and supporting documents.

Gathering the right documents first makes both sections easier; see our guide to preparing your documents before a business plan.

2. Writing the Use of Funds Section

The use of funds section lists every cost of the project, groups it into categories and explains why each is needed. Write it so a credit officer can trace each number to a document.

• Back every hard cost with a quote from a contractor, supplier or landlord, dated and attached.
• Include soft costs: permits, design, legal and accounting fees, deposits, pre-opening wages and marketing.
• Add a contingency, often around 5% to 10% of construction and equipment costs, and explain it.
• Show a working capital reserve that covers losses until the business breaks even.
• Include financing fees, such as the 2% CSBFP registration fee, as a use of funds.

3. Building the Sources and Uses Table

The sources and uses table puts the whole request on one page. Total sources must equal total uses.

In this example, the owners contribute 27% of the project. Lenders usually want to see owner equity that's large enough to show commitment, documented with bank or investment statements.

4. Matching Financing to Each Use

The principle is simple: long-lived assets get long-term loans, and short-term needs get short-term or revolving credit. Our guide to the CSBFP loan business plan in Canada covers program categories and limits in detail.

5. Writing the Repayment Section

The repayment section proves the business can afford the loan. It combines projections, a loan schedule and coverage ratios.

• Cash available for debt service: operating profit before interest, depreciation and tax, after a reasonable owner salary.
• Debt service: annual principal and interest on all loans, including existing debt.
• Debt service coverage ratio (DSCR): cash available ÷ debt service. Many lenders look for at least about 1.2 to 1.25 times.
• Ramp-up: new businesses rarely reach full sales in month one; interest-only periods can bridge the gap.
• Monthly detail: show the first year month by month so lenders see the lowest cash point.
• Sector drivers: base sales on real drivers, as in our guides to financial modeling for retail stores and financial modeling for marketing agencies.

6. Interactive Repayment Schedule Calculator

Enter your loan terms and expected cash flow to see payments, coverage and a five-year schedule. The defaults match the $255,000 term loan in the example above. The amortization period starts after any interest-only months. Results are illustrative; lenders set final terms.

7. Secondary Repayment: Collateral and Guarantees

Lenders also ask what happens if cash flow falls short. Address it directly instead of waiting for the question.

• Business assets: equipment, inventory, receivables and real property pledged as security.
• Personal guarantees: common for small business loans, sometimes limited for program loans.
• Owner resources: other income, savings and net worth that support the business through a slow period.
• Downside scenario: show sales 15% to 20% lower and how you would cut costs or draw on reserves.
• Insurance: key person and property insurance protect the lender's position.

8. CRA Business Number and Compliance Checks

Before advancing funds, lenders confirm the borrower is properly registered and current with the CRA. Every account runs through your nine-digit CRA business number.

• BN registration: include the borrower's business number in the application and complete registration before closing.
• Program accounts: GST/HST, payroll and corporate tax accounts should be open and in good standing.
• No arrears: unpaid HST or payroll remittances can rank ahead of the lender and often delay approval.
• Tax in projections: show HST remittances, payroll costs and income tax in the cash flow under your CRA business number accounts.
• Clean books after funding: lenders monitor results; our bookkeeping services and fractional CFO services handle covenant reporting.

9. Common Mistakes and Sample Wording

• Round numbers without quotes, such as "$100,000 for renovations".
• Sources that don't equal uses, leaving a funding gap the lender has to find.
• No working capital reserve, so the first slow month creates a crisis.
• Coverage calculated before owner pay, which overstates repayment ability.
• Forgetting existing debt, vehicle loans or equipment leases in total debt service.

Sample use of funds wording:

Sample repayment wording:

10. Frequently Asked Questions

Sources: ISED, Small Business Credit Condition Trends 2015–2025; BDC, Small Business Loan; ISED, CSBFP FAQ; National Bank prime rate increase, October 2026. Examples, sample wording and calculator results are illustrative.