In order to be successful, local franchised small business owners need access to the financial support that will help them start their business on the right foot and weather the challenges that small businesses face. To help ensure this support, the CFA is advocating for the following actions:
Allow RRSP withdrawals for the purchase of a new or existing business:
Raising sufficient capital to purchase a new or existing business remains one of the most significant barriers for aspiring entrepreneurs. Many Canadians, however, have accumulated meaningful savings in their RRSPs or RESPs that could help them take this step if they had a practical and responsible way to access those funds.
The CFA therefore proposes the creation of a new federal program, modelled on the Home Buyers’ Plan, that would allow individuals to withdraw up to $100,000 from their RRSPs or RESPs to finance the purchase of a business without incurring immediate tax on the withdrawal.
This program would unlock a new, reliable source of start-up capital while maintaining the long-term integrity of Canadians’ retirement savings. As under the HBP, participants would be required to repay the withdrawn amount to their RRSP or RESP on a non-deductible, structured schedule, beginning in the second calendar year after the withdrawal and completed within 15 years. This ensures that Canadians who are ready to own a business can access the capital they need today while responsibly rebuilding their retirement savings over time.
To preserve the integrity of the program and prevent misuse, the CFA recommends safeguards similar to those in the HBP, including a prohibition on using RRSP or RESP withdrawals to refinance an existing business, a need already met through traditional lending and government-supported financing programs.
A similar mechanism exists in the United States, where individuals may borrow up to $50,000 or half of their vested 401(k) balance to support a new business venture through the Rollover for Business Startups (ROBS) structure. This demonstrates that retirement based lending models can operate safely, effectively, and in direct support of entrepreneurship.
Our Ask
Create a new federal program that allows individuals to withdraw up to $100,000 from their RRSPs or RESPs to make a down payment on the purchase of a new or existing business without immediate tax consequences, with repayment required on a non-deductible basis over a period of up to 15 years.
Increase the Small Business Deduction Threshold
While the CFA appreciates the federal government’s support for small businesses during recently challenging economic times, the Small Business Deduction (SBD) threshold has remained unchanged and no longer reflects current economic realities.
The SBD has long served as an essential tool to promote the growth of Canadian small businesses by allowing entrepreneurs to reinvest more capital into their operations. Small businesses, including franchised small businesses, are key drivers of employment, community investment, and economic growth across Canada. For this reason, both federal and provincial governments have historically supported the sector by offering the SBD as a means to promote stability and expansion.
However, unlike personal income tax systems, which the federal government and most provinces have indexed to inflation, the business tax system has not kept pace. As a result, the static SBD threshold has contributed to hidden tax increases each year, eroding its intended benefits.
The SBD threshold has remained fixed at $500,000 for the past 16 years, during which time the Consumer Price Index (CPI) has increased by nearly 44%. To maintain the same financial impact today as it had in 2009, the threshold would need to rise by almost $225,000. Increasing the threshold to $750,000 in the upcoming budget represents a reasonable and necessary first step. Moreover, indexing the SBD to the CPI would ensure that its value is preserved going forward.
For franchised small businesses, many of which operate on thin margins, every dollar counts. These are locally owned and operated businesses that contribute significantly to their communities. Rising expenses in recent years have placed considerable pressure on franchisees, reducing the funds available for salaries, capital investments, and even discretionary community contributions such as local sponsorships and charitable support.
Our Ask
That the Government of Canada increase the Small Business Deduction threshold to $750,000 and index it to the Consumer Price Index (CPI)