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Small Business Loans in Canada

This Page's Content Was Last Updated: November 13, 2024
WOWA Simply Know Your Options

What You Should Know

  • To qualify for a small business loan, lenders usually want to see at least $10,000 per month in revenue and at least 6 months of being in business.
  • Some lenders may also have minimum personal credit score requirements.
  • Online small business lenders typically evaluate based on a business’s performance.
  • Small business loan types include term loans, line of credit, and commercial mortgages.
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Small businesses are the backbone of our economy, with 98% of businesses in Canada being small businesses that together employ 68% of Canadian workers. Small business loans enable entrepreneurs to fuel growth, manage cash flow, and expand their operations. Despite the importance of small businesses, access to capital can be a challenge. If you’re a Canadian small business owner looking to borrow money, this guide to small business loans will provide an overview of the different types of loans, how to find the right lender, and advice on how to successfully apply for a small business loan.

Small Business Loan Interest Rates

As of November 2024

LenderInterest RateTerm LengthLoan AmountMin. Months in BusinessMin. RevenueMin. Credit Score
logo lender8% - 29%3 - 24 months$5k - $300k6 months$100k/year600
logo lenderFrom 8%3 - 24 months$15k - $1M3 months$10k/month550
logo lenderVaries6 - 12 months$5k - $500k6 months$15k/month500
logo lenderFrom 7.99%Up to 24 Months$10k - $1.5M6 months$10k/month500
logo lenderVaries4 - 12 months$5k - $500k---
logo lenderFrom 7.99%6 - 24 months$5k - $800k6 months$10k/month-
logo lender5.49% - 22.79%12 - 60 months$1k - $300k100 days$4,166/month-
logo lenderPrime + 3% for Futurpreneur, and BDC Floating Base Rate + 1.65% for BDCUp to 60 monthsUp to $25k with Futurpreneur, plus up to $50k with BDCOwner aged 18-39 years oldNoneNone

Small Business Lines of Credit

As of November 2024

LenderCredit LimitMin. Months in BusinessMin. RevenueMin. Credit Score
logo lender$10k - $300k6 months$100k/year600
logo lender$6k - $100k6 months$10k/month500
logo lenderVaries3 months$10k/month550
logo lender$7.5k - $125k6 months$10k/month-

Types of Small Business Loans

The main types of small business loans in Canada are:

  • Term loans
  • Lines of credit
  • Commercial mortgages

Below, we’ll talk about the differences between these types of loans, what they are used for, and where to find them.

Term Loans

Term loans are a type of financing that provide funds for a predetermined amount of time, such as 1 year or 5 years, which is known as the term. You’ll receive the entire amount of the loan upfront. Loan repayments are equal installments of both interest and principal, which means that the loan would be fully paid off at the end of the term. This type of loan is usually best for large one-time investments, such as new machinery or equipment.

Small business term loans can be secured or unsecured, and can have a fixed interest rate or a variable interest rate. A secured loan means that you’re putting up some of your assets as collateral, which the lender will take if you fail to pay the loan back. In return, you’ll be able to borrow more money at a lower interest rate. Unsecured loans don’t require any collateral and are usually used for shorter terms and smaller amounts. Unsecured loans will have a higher interest rate than secured loans.

Lines of Credit

A line of credit is a form of revolving credit that allows you to access funds up to a predetermined limit. You can draw on the line of credit as you need it and pay back the amount borrowed with interest over time. It differs from a term loan in that you don’t have to use all the funds at once, and it's best for businesses that have ongoing or seasonal needs, such as to purchase inventory or to meet payroll.

Commercial Mortgages

Commercial mortgages, also known as non-residential mortgages, are used to finance the purchase of a business property. Examples of business property include stores, factories, warehouses, and office buildings. Due to the large amount of money typically borrowed with a commercial mortgage, they usually have a longer repayment period than other types of small business loans, ranging up to 25 years or even longer for some mortgage types.

As a recap, here’s what each type of small business loan is typically used for:

Term LoansLarge one-time investments such as new machinery and equipment
Lines of CreditOngoing or seasonal needs such as to purchase inventory or to meet payroll
Commercial MortgagesFinancing the purchase of a business property such as a factory, warehouse, or office building
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Where to Find Small Business Loans

Small business loans can be found from a variety of different sources, including banks, credit unions, and alternative lenders. Each lender will have its own criteria for approving applications, so it is important to shop around to find the best option for your needs. Below, we’ll take a look at some of the most popular small business loan lenders in Canada.

logo lender
Journey Capital
  • Term Loan Amounts: $5k - $300k
  • Line of Credit Amounts: $10k - $300k
  • Interest Rate: 8% - 29%
  • Min. Months in Business: 6 months
  • Min. Revenue: $100k/year

Journey Capital (formerly OnDeck) markets itself as a leading SMB lender in Canada, having funded over $1B in capital. The lender has been in the market for over 15 years and offers three types of lending products — Term Loans, Business Line of Credit and Flex Funds Advance.

Term loan limits vary from $5,000 to $300,000 with rates starting from 8% to 29%. Lines of credit can also be up to $300,000. Journey Capital requires at least $100,000 in annual revenue and 6 months of being in business, with a minimum credit score of 600.

logo lender
Advance Funds Network
  • Term Loan Amounts: $15k - $1M
  • Line of Credit Amounts: Varies
  • Interest Rate: From 8%
  • Min. Months in Business: 3 months
  • Min. Revenue: $10k/month

Established in 2008, Advance Funds Network is a lender offering loans to small and medium-sized businesses in the USA and Canada. The lender has funded over 10,000 businesses and over $1.8 billion so far. Advanced Funds Network offers a variety of business funding solutions including term loans and lines of credit.

While the lender generally requires a minimum credit score of 550 to approve a borrower, it aims to offer tailored solutions to all borrowers, irrespective of their credit score. The lender suggests that it can approve a business for funding within 30 minutes.

logo lender
Bizfund
  • Term Loan Amounts: $5k - $500k
  • Interest Rate: Varies
  • Min. Months in Business: 6 months
  • Min. Revenue: $15k/month

Bizfund is a business lender based in New York with offices worldwide. It has over 10 years of lending experience and offers funding to small and mid-sized businesses. The lender provides term loans and merchant cash advances.

Bizfund suggests that it approves businesses for funding based on their performance rather than the borrower’s credit scores. Thus, borrowers with less-than-perfect credit scores can also apply. After all the documents are provided, the business can be funded in as little as 8 hours.

logo lender
Breeze Capital
  • Term Loan Amounts: $10k - $1.5M
  • Line of Credit Amounts: $6k - $100k
  • Interest Rate: From 7.99%
  • Min. Months in Business: 6 months
  • Min. Revenue: $10k/month

Breeze Capital is a lending company offering loans of up to $1.5 million in Canada and most parts of the USA. The lender offers three types of services: term loans, business lines of credit, and equipment financing.

While Breeze Capital generally requires a credit score of at least 500, it does consider borrowers with a lower credit score for financing. Applicants can receive an approval within as little as 24 hours.

logo lender
CanaCap
  • Term Loan Amounts: $5k - $500k
  • Interest Rate: Varies
  • Min. Months in Business: -
  • Min. Revenue: -

CanaCap is a lender offering a wide variety of financing options to businesses in Canada. Its approval rate is over 90%, and businesses can get funded in as little as 24-48 hours.

logo lender
Merchant Growth
  • Term Loan Amounts: $5k - $800k
  • Line of Credit Amounts: $7.5k - $125k
  • Interest Rate: From 7.99%
  • Min. Months in Business: 6 months
  • Min. Revenue: $10k/month

Based in Vancouver, Merchant Growth is an online alternative lender that provides business loans to small businesses in Canada. They offer term financing, line of credit, and even e-commerce financing.

For Merchant Growth’s term loans, you can borrow between $5,000 up to $800,000 for terms ranging between 6 months to 24 months.

For Merchant Growth’s line of credit, you can borrow between $7,500 up to $125,000.

All of Merchant Growth’s small business loans require you to have been in business for at least 6 months, with at least $10,000 per month in revenue.

logo lender
Sharpshooter Funding
  • Term Loan Amounts: $1k - $300k
  • Interest Rate: 5.49% - 22.79%
  • Min. Months in Business: 100 days
  • Min. Revenue: $4,166/month

Founded in 2015, Sharpshooter Funding’s slogan, “Funding is for the Boys”, has become their trademark. Sharpshooter Funding markets itself as approving 75% of all applications, with interest rates ranging from 5.49% to 22.79% for loans $1,000 up to $300,000.

Sharpshooter Funding requires 100 days of operating history and $4,166 revenue per month.

logo lender
Futurpreneur
  • Term Loan Amounts: Up to $25k with Futurpreneur, plus up to $50k with BDC
  • Interest Rate: Prime + 3% for Futurpreneur, and BDC Floating Base Rate + 1.65% for BDC
  • Min. Months in Business: Owner aged 18-39 years old
  • Min. Revenue: None

Futurpreneur is a non-profit organization that partners with governments to provide assistance for younger Canadians looking to start their own business. This includes pre-launch coaching, financing, and two years of business mentoring.

Since Futurpreneur helps startups, there’s no minimum revenue requirement. Instead, you’ll need to be 18-39 years of age.

You can borrow up to $20,000 with Futurpreneur with an interest rate based on CIBC Prime + 3%. If the prime rate is above 9%, then the interest rate for the loan will only be CIBC Prime.

You can borrow up to an additional $40,000 with BDC, at a rate of BDC Floating Base Rate + 1.65%. Futurpreneur Canada charges a one-time 1% fee on the loan amount. BDC charges a $50 processing fee. For both portions of the loan, the first year is interest-only repayments.

You can also appy for business financing through loan comparison websites like smarter.loans and Loans Canada.

Small Business Line of Credit Interest Rates

Major Banks

LenderInterest Rate
logo lender
BMO
Prime + 2% to Prime + 11%
logo lender
RBC
Prime + 2.9% to Prime + 11.9%
logo lender
CIBC
Based on Prime
logo lender
TD
Based on Prime
logo lender
Scotiabank
Based on Prime
lender logo
BMO
Current BMO Small Business Line of Credit Interest Rate: % (Prime + 2%) to % (Prime + 11%)

BMO's Credit Line for Business requires no collateral, with a variable interest rate based on prime. It ranges from Prime + 2% to Prime + 11%. You'll also receive a Mastercard that you can use to make purchases with.

logo lender
RBC
Current RBC Small Business Line of Credit Interest Rate: % (Prime + 2.9%) to % (Prime + 11.9%)

RBC Visa CreditLine for Small Business has a variable interest rate from Prime + 2.9% to Prime + 11.9%. It comes with a Visa credit card that allows you to earn Avion Points, with no annual fee.

Other Banks

Other major banks offer small business lines of credit too. For example, CIBC's business line of credit lets you borrow money if your business has had positive revenue for at least 12 to 24 months. Their line of credit starts from $10,000 and can be either secured or unsecured. Scotiabank's Credit Line for business lets you borrow up to $1 million.

Best 5-Year Fixed Mortgage Rates in Canada CanadaLeaf
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Other Small Business Loans in Canada

There are other types of small business loans or financing that can help fund your business. This includes merchant cash advance (MCA) and the Canadian Small Business Financing Program (CSBFP).

Canadian Small Business Financing Program (CSBFP)

The Canadian Small Business Financing Program (CSBFP) is run by the federal government and helps small businesses get the financing they need by providing loan guarantees to lenders, with 85% of the loan being guaranteed by the government. Since this reduces the risk for lenders, it makes qualifying for a loan to be much easier.

To be eligible, businesses must have gross annual revenue of $10 million or less, and can't be a farming business.

The maximum amount that can be borrowed is $1 million for term loans and $150,000 for lines of credit.

Specifically for term loans, only up to $500,000 can be used on leasehold improvements, property, or to purchase equipment. Of this amount, only up to $150,000 can be used on working capital and intangible assets.

Interest Rates

The Government of Canada sets maximum interest rates on these small business loans. For term loans, the maximum fixed rate is the lender's residential mortgage rate for the same term, plus 3%. For example, if the bank's 5-year fixed mortgage rate was 5%, then the 5-year term loan could have a rate up to 8%.

Term loans with a variable, or floating, interest rate can have a rate up to Prime + 3%.

Lines of credit can have an interest rate of Prime + 5%.

There is a one-time fee that borrowers must pay for this loan, which is 2% of the borrowed amount for term loans and 2% of the line of credit amount.

Available Lenders

All of Canada’s major banks offer loans under this program, however, they may have different conditions.

TD's program lets you finance up to 90% of the cost of the assets being financed. TD also requires a personal guarantee of at least 25% of the loan amount.

CIBC has a maximum term of 15 years, with a setup fee ranging between $150 to $1,000 and a renewal fee of $50 to $150. Real property can have an amortization of up to 25 years.

RBC offers an amortization up to 15 years, even for real property, while their line of credit has terms of 5 years that can be renewed.

Scotiabank has amortizations up to 20 years for real property, or up to 15 years for all other loans.

Merchant Cash Advance

A merchant cash advance lets small businesses borrow money based on their future sales. Instead of a fixed monthly payment, the lender collects a percentage of each sale until the loan is paid off. The repayment rate and term length will depend on the lender, but typically they are short-term loans in a manner of months with very high costs, similar to payday loans for consumers.

There are two key terms in a merchant cash advance: the factor rate and the holdback rate. The factor rate tells you how much you would need to pay back. The holdback rate is the percent of each sale that would be taken to repay the cash advance.

For example, with a factor rate of 1.5, you’ll need to pay back 1.5x the amount of the cash advance. For a $10,000 cash advance, you’ll be repaying $15,000.

With a holdback rate of 20%, each debit and credit card transaction that you receive will have 20% withheld until the $15,000 is fully repaid.

Since merchant cash advances cost a lot more than small business loans, they’re only used for businesses that urgently need funds and can’t qualify for a small business loan from a traditional lender.

Disclaimer:

  • Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
  • The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
  • Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
  • Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.