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Business Lines of Credit Canada

  • chBusiness Credit Lines Up to $500K
  • chRates from 7% APR
  • chCompare offers from Top Business Lenders in Canada
up Last updated

September 03, 2025

up Written by:

Amy Orr

up Reviewed by:

Jenna West

A business line of credit is flexible, revolving financing you can draw, repay, and reuse for inventory, payroll, projects, or seasonal cash flow. Use our calculator to estimate monthly cost and effective APR, compare secured versus unsecured options, review eligibility, and apply with trusted Canadian lenders.

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AMOUNT
$5K - $500k
INTEREST RATE
Varies
TERMS
5 -9 Months
AMOUNT
$5K - $500K
INTEREST RATE
Varies
TERMS
4 - 12 Months
AMOUNT
$10,000 - $300K
INTEREST RATE
From 8.39%
TERMS
3 - 24 Months
AMOUNT
$5K - $300K
INTEREST RATE
From 7.99%
TERMS
Fixed, 4 - 18 Months
AMOUNT
$15K - $1M
INTEREST RATE
From 8%
TERMS
3 - 24 Months
AMOUNT
$5K - $500K
INTEREST RATE
From 9.99%
TERMS
2 - 24 Months
AMOUNT
$5K - $800K
INTEREST RATE
From 7.99%
TERMS
6 - 24 Months
AMOUNT
$5K - $500K
INTEREST RATE
From 7.99%
TERMS
6 - 24 Months
AMOUNT
$5,000 - $5 Million
INTEREST RATE
Varies
TERMS
12 months
AMOUNT
$5K - $50M
INTEREST RATE
From 7%
TERMS
5 - 96 Months
AMOUNT
$2.5K - $1M
INTEREST RATE
From 7.5%
TERMS
3 - 72 Months
AMOUNT
$5K - $2M
INTEREST RATE
From 7.99%
TERMS
2 - 36 Months
AMOUNT
$250 - $1M
INTEREST RATE
From 10%
TERMS
3 - 60 Months

Updated September 2025

Business Line of Credit in Canada

Flexible revolving credit for working capital, projects, and seasonal cash flow.

Use the calculator to estimate monthly cost and effective APR, learn how lines work in Canada, compare alternatives, and apply with vetted lenders.

Business Line of Credit Calculator

Estimate monthly cost based on your limit, expected usage, and fees. Choose interest only or plan a payoff schedule.

Credit limit presets
$25k $50k $100k $250k
Average utilization
25 percent 50 percent 75 percent 90 percent
Enter total approved limit in dollars.
Interest only Planned payoff
Results

Rate and cost

Enter inputs and choose a mode to see monthly interest, total monthly cost, annualized cost, and an effective APR estimate.

Estimates only Start your application

What is a Business Line of Credit

A business line of credit is revolving financing with a preset limit that you draw, repay, and reuse. You pay interest only on what you borrow, not the entire limit, and lenders may charge fees such as annual maintenance, per draw fees, or non utilization fees.

Revolving and Non Revolving

  • Revolving resets availability as you repay, similar to a credit card.
  • Non revolving allows draws until the limit is reached, then requires renewal to reuse.

Secured and Unsecured

  • Secured backed by business assets such as accounts receivable and inventory. Often higher limits and lower cost.
  • Unsecured relies on credit strength and cash flow. Often faster, typically requires a personal guarantee.

How a Business LOC Works in Canada

Draws and repayments

Draw as needed up to your limit and repay any time. As you repay, available credit resets and can be used again.

Renewals and reviews

Most lines are reviewed annually. Lenders may adjust limits, pricing, or covenants based on financial performance and bank history.

Callable risk

Agreements can allow lenders to reduce or cancel availability if risk increases. Manage utilization and covenants carefully.

Business LOC Rates and Fees Explained

Prime plus margin Annual fee Per draw fee Non utilization fee Minimum interest

Cost is usually quoted as prime plus a margin. Your effective cost depends on how much of the limit you use and how often you draw. The calculator includes fee impacts to show an effective APR estimate relative to your average balance.

Example at a glance

Limit$100,000
Average utilization50 percent
RatePrime plus 2.5 percent
Annual fee$250
Per draw fee$15 per draw

Use the calculator to tailor this example to your scenario.

Fee impact tips

  • Frequent small draws can increase costs due to per draw fees.
  • Low utilization with a non utilization fee can raise effective APR.
  • Higher utilization reduces fee drag on a per dollar basis.

Common Use Cases and Who Benefits Most

Purchasing inventory

A small business line of credit can help you purchase inventory ahead of peak periods. Secured lines that advance against accounts receivable or inventory can improve pricing and limits.

Financing campaigns

Launch new marketing or expand to new customers. Draw to fund production and media, then repay from revenue lift.

Repairing or replacing equipment

Cover urgent repairs and small equipment purchases without waiting for a term loan. Match draws to cash inflows.

Day to day working capital

Smooth payroll, supplier payments, and short timing gaps. Track usage with monthly statements and repay quickly.

Bridging seasonal cash flow gaps

Great for seasonal businesses that ramp up inventory or staffing before revenue arrives. Use the calculator to estimate fee impacts during low utilization months.

Start up flexibility

Newer businesses with strong personal credit and a clear plan may qualify for smaller unsecured limits to begin.

LOC vs Alternatives

Product Best for Limit Typical cost Speed Flexibility Risks
Business line of credit Ongoing working capital and timing gaps 25k to 500k plus Prime plus margin and fees Fast to moderate High Callable, fee drag at low use
Term loan One time purchases or projects 50k to millions Fixed or variable rate Moderate Low Rigid schedule, prepayment terms
Business credit card Small purchases and rewards Up to 50k Higher rate Fast High High interest if revolved
Merchant cash advance Card revenue based advances 10k to 250k Factor rate Very fast Medium Expensive, daily remits
Swipe or scroll sideways to see all columns

Eligibility and Requirements

Typical criteria

  • Time in business twelve months plus improves options
  • Annual revenue and margins support the limit
  • Business and personal credit quality
  • Financial statements and bank history

Documents checklist

  • Government issued ID
  • Articles of incorporation or partnership documents
  • Business license or trade name registration
  • Two years financial statements and recent bank statements
  • Ownership details and cap table

Secured lines may also require AR aging and inventory reports.

Underwriting signals

  • Stable revenue and cash conversion
  • Clean bank behavior and no recent NSF
  • Reasonable leverage and liquidity
  • Clear use of funds plan

How to Apply for a Business LOC

  1. Prepare latest financial statements, AR aging, inventory details, and business bank statements.
  2. Estimate limit and cost using the calculator on this page.
  3. Compare lenders and pricing. Review fees, covenants, and renewal terms.
  4. Submit an application with documents and a brief use of funds summary.
  5. Review approval terms, conditions, and reporting requirements before you accept.

Pros and Cons of a Business LOC

Pros

  • Pay interest only on what you use
  • Multiple draws without reapplying
  • Flexible for timing gaps and projects
  • Often lower cost than cards or advances

Cons

  • Fee drag if usage is low or infrequent
  • Approval can be more detailed
  • Lower limits than large term loans
  • Callable and subject to renewal review

What to Consider Before You Apply

  • How much you truly need and can afford including fees and variable rate risk
  • Whether collateral can improve pricing or limit
  • Discipline to repay so interest does not accumulate
  • Any covenants or reporting that you must maintain

Estimates are for education only and not a credit offer. Actual pricing and terms vary by lender and applicant profile.

Frequently Asked Questions

Q How is a business line of credit different from a term loan?
Term loans fund once and amortize. A line of credit is revolving and you reuse availability as you repay.
Q What rate should I expect on a business line of credit?
Many lines are priced at prime plus a margin. Margin depends on credit strength, financials, and collateral.
Q What fees are common on lines of credit?
Annual maintenance, per draw fees, and sometimes non utilization fees on unused availability. Minimum interest may apply.
Q Will I need a personal guarantee?
Unsecured lines often require a personal guarantee. Secured lines may also include a guarantee depending on risk.
Q Can startups qualify?
Some lenders consider young businesses with strong personal credit and clear revenue plans. Limits may be smaller and pricing higher.
Q How fast can a business line of credit be approved?
Online unsecured lines can be fast when documentation is ready. Secured lines take longer due to collateral verification.
Q Is a business overdraft the same as a line of credit?
They are similar. Overdrafts are tied to a chequing account. Lines of credit can be separate with card access or transfers.
Q Does utilization affect my effective APR?
Yes. Low utilization can raise effective APR due to fees that do not scale down with balance.
Q What is a borrowing base?
For secured lines, the limit is tied to eligible accounts receivable and inventory after advance rates and ineligibles.
Q Can my limit change after approval?
Yes. Limits can be increased or decreased at renewal or if risk changes according to the agreement.
Q Are interest payments tax deductible?
Interest used for business purposes is commonly deductible. Confirm with your accountant for your situation.
Q How can I reduce interest costs?
Concentrate draws, repay quickly, avoid carrying high balances longer than needed, and monitor fees and utilization.
Ready to compare a business line of credit
Disclosure Smarter Loans is not a lender. Tools provide estimates only and are not credit offers. Terms, eligibility, and pricing vary by lender and province.

av
writtenWritten by:

Amy Orr

Amy Orr is a professional writer and editor with over 10 years of experience in the Canadian, U.S. and U.K. financial markets. She has written for numerous publications on topics as diverse as economic literacy, corporate finance, and technical analysis of numerical data. Prior to transitioning to full-time writing, she worked in the hedge fund sector. Her academic background is astrophysics, and she has a Masters in Finance from the University of Edinburgh Business School.

av
writtenReviewed by:

Jenna West

Jenna West is Smarter Loans' in-house financial writer and content director. She has been covering the Canadian FinTech and finance industry since 2017, including financial trends analysis, industry surveys, regulatory updates and changes in Canadian consumer behaviour when it comes to finance.

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