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Introduction to Business Loans
Canadian businesses of all sizes rely on financing to grow, manage cash flow, or invest in new opportunities. Whether you run a small startup in Toronto, a growing company in Calgary, or an established operation in Vancouver, business loans provide the capital you need to keep moving forward.
Through Smarter Loans, you can compare funding options from over 15 of Canada's top business lenders, all in one place. Our partners provide flexible financing solutions - including term loans, merchant cash advances (MCAs), business lines of credit, equipment financing, and working capital loans - so you can choose the type of funding that works best for your situation.
How to get a business loan in Canada?
Securing a business loan doesn't need to be complicated. To improve your chances of approval, most lenders will expect:
- Proof of business ownership (incorporation documents or registration)
- Financial statements or tax returns showing revenue and expenses
- A business plan or funding request explaining how you'll use the loan
- Details on your monthly revenue, cash flow, and existing debts
With these documents in hand, you can apply through banks, credit unions, or online lenders. Online lenders often provide faster approvals (24-48 hours), while traditional institutions may take longer but offer lower rates.
Eligibility Criteria
While criteria vary by lender, most Canadian business loan providers look for:
- At least 6 months in business
- Minimum monthly revenue of $10,000
- A fair to good credit score
- Evidence of consistent cash flow
Even if you don't meet every requirement, alternative and online lenders often provide options for newer businesses or those with weaker credit.
Where to get business loans in Canada?
Canadian businesses can access financing from:
- Banks & Credit Unions - Competitive rates, but stricter eligibility.
- Alternative Lenders - Flexible terms, higher approval odds, faster funding.
- Online Loan Marketplaces (like Smarter Loans) - Compare multiple lenders in one place.
- Private Lenders - More flexible, but rates can vary significantly.
- Ontario & British Columbia have the highest concentration of alternative and online lenders.
- Alberta & Saskatchewan often see strong demand for equipment and energy-related loans.
- Quebec has unique provincial programs alongside private lenders.
The Government of Canada also plays a significant role in facilitating loans through programs like the Canada Small Business Financing Program. Each type of commercial lender has their own pros and cons, so choosing the best lender for your business will depend on your priorities and situation. For example, a more traditional financial institution (like a bank) may have terms that your small business cannot adhere to, whilst an alternative lender may have more flexible terms. A private financing provider may require more research and time to secure, but can be significantly more lenient in its eligibility criteria. Online funding platforms have fast turnaround times, but vetting for reputability is key. There are options for businesses in all situations.
What are the types of loans you can get in Canada?
Businesses across Canada can qualify for a wide range of financing solutions:
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Term Loans - Fixed amount repaid over a set period. Great for expansion and larger projects.
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Short-Term Loans - Quick cash injections, often for inventory or payroll.
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Merchant Cash Advances (MCA) - Funding based on future sales; fast but higher cost.
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Business Lines of Credit - Flexible borrowing up to a set limit.
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Equipment Loans - For buying or upgrading business equipment.
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Invoice Financing - Unlocks cash tied up in unpaid invoices.
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Working Capital Loans - Cover day-to-day expenses.
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Commercial Mortgages - For buying or refinancing property.
Each loan type has pros and cons, so consider:
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Cost (interest rate/fees)
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Repayment flexibility
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Approval speed
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Collateral requirements
How much money can I get from a business loan in Canada?
Business loans in Canada typically range from $5,000 up to $500,000+, depending on your business size, revenue, and lender type. Online lenders often cap loans at $300,000, while banks may go higher but with stricter criteria. Just bear in mind that larger loan amounts usually require a more in-depth application and qualification process. While small businesses can apply for these loans, the farming industry has specific financial programs tailored to its needs.
What can business loans be used for in Canada?
A business loan can cover nearly any business expense, including:
- Financing a small business purchase
- Working capital & payroll
- Inventory & supplies
- Marketing campaigns
- Equipment purchases & upgrades
- Renovations or leasehold improvements
- Expansion into new locations
- Managing seasonal cash flow gaps
- For product improvement or development
- To cover emergency or short-term expenses
Loans can also be used to pay for everyday operating expenses, ensuring smooth cash flow management.
What is a good interest rate on a business loan in Canada?
Business loans in Canada are available with interest rates as low as 6% and as high as 50%+. The average interest rate on a term loan in Canada is around 7-10% for a standard term loan.
- Banks/Credit Unions: As low as 6%-10% for strong borrowers
- Alternative Lenders: 10%-29%, depending on risk profile
- MCAs & Short-Term Loans: Higher costs (20% - 50%+), but flexible and fast
- Time in business
- Monthly revenue
- Credit score & history
- Collateral availability
- Loan type & term length
How do I find the best business loan rates in Canada?
There are some simple ways to ensure you get the best possible deal on your Canada business loan:
- Consider the loan amount. Larger loan amounts can sometimes secure lower interest rates, due to economies of scale.
- Consider the loan and lender type. Different types of loans, and different business loan lenders, have different rates.
- Offer collateral. You can often get a lower rate by putting up a business asset (like real estate) as security.
- Shop around.
Lastly, don't ignore other loan terms in favor of interest rate considerations. Although interest rates are the primary determinant in your monthly loan cost, repayment terms and fees are just as important when it comes to the loan's overall cost. The best loan deal, for you, may not be the same as the lowest monthly interest rate.
What factors to consider when comparing business loan lenders in Canada?
When looking at different lenders in Canada, it is important to consider a broad list of items before committing to one provider. While it is tempting to simply take the offer with the best interest rate, a financing provider should be viewed through the lens of a business partner. The following should be considered, weighed, and decided upon:
- Each provider's policy frameworks (application processes, information requirements, and ALL fees including registration fee)
- Speed of services (while some lenders will process a business loan application in just a few days, others may take weeks)
- Accessibility of services (e.g. online, in-person, telephone, opening hours, etc.)
- Ancillary services offered (e.g. transaction banking, regular payments solutions, insurance, etc.)
- Business loan lender's reputation (prior customer reviews, length of time in business, transparency of terms, etc.)
- Term of the loans offered
- Availability of variable or fixed interest rates (possibly adjusted to real rates to account for inflation)
- Funding amounts offered and how they match with the capital that is needed
- Types of financing offered and suitability for your business's needs
All of this taken together will allow you to find both the right business loan lender, and the right business loan, for your needs.
How do I qualify for a business loan in Canada?
Traditional small business loans are relatively easy to obtain as long as a business has been operational for at least 6 months and generates at least $10,000 in monthly revenue. To apply for a business loan, business owners need simply to complete an application and provide access to their business's registration details, financial statements, and credit profile. And while size is not a direct consideration, lenders will want to see a consistent history of revenue generation, so they can feel confident in a business's ability to repay the loan. It is worth noting that newer, smaller and other businesses in Canada can still receive funding even if they don't meet the above criteria; alternative business loan lenders, online business loan lenders, and specialized loan types, are very useful for businesses in all manner of situations.
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