Business Loans

Canada Small Business Loans

Small business loans can be a great way to borrow money when you need to purchase equipment, fund a marketing campaign, perform leasehold improvements, or open a new location. And luckily, small business loans are common across Canada! Here at Smarter Loans, our panel of 50+ industry experts have reviewed and qualified Canada’s most trusted lenders.

We make it easy to find the small business loan or Canada small business financing program that you need, quickly, with the best rates and flexible repayment terms. Pre-apply online (right corner), or check out our roster of reputable Canadian lenders below to find the best rate for you.

Let Smarter Loans connect you with the top business loan providers in Canada.

Get a Business Loan Now!

Top Business Loans Providers in Canada

Company
Amount
Interest Rate
Reviews
Terms
$5,000 - $500k
Varies
6 -12 months
$5,000 - $500,000
Varies
4 - 12 months
$15,000 - $1 Million
Starting at 8%
3 - 24 Months
$5,000 - $300,000
Starting at 7.99%
3 - 12 months
$5,000 - $300,000
Starting at 7.99%
4 - 18 Months
$500 to $300,000
Starting at 8.39%
2, 3, 4, 6, 9, 12, 18 or 24 month terms
$5000 - $800,000
Starting at 7.99%
6 - 24 Months
$10,000 - $250,000
Varies
3 - 12 months
$250 - $1,000,000
Starting at 10%
3 months - 60 months
$5,000 - $250,000
Varies
N/A

Why Get a Small Business Loan?


Financial support is a key to success for small businesses. That’s why business credit has grown in popularity in recent years and the Canada small business financing program was launched.

With a small business loan, you can borrow a fixed amount of money and pay it back in installments over a period of time – no lump sum payments needed. The money you borrow can be used for many different purposes, from protecting intangible assets, to leasehold improvements, to growth.

The structure of a small business loan can vary widely too, allowing for flexibility in repayment options, cost, and so on. And thanks to the Canada Small Business Financing program, small business loans are more widely available than ever.

So whatever your financial need, you should know that a small business loan can help you achieve your goals while protecting your regular business cash flow.

Who Is Eligible for a Small Business Loan?


Your bank – and other lenders – take a variety of factors into account when evaluating whether a company is eligible for a small business loan, including the business’s history, financial stability, cash flow, working capital costs, profitability, and the personal credit histories of its owners.

But there is only one hard and fast rule for accessing financing in Canada: your company must be based in Canada!

To navigate the loan process effectively, it’s crucial to understand the qualification requirements for your desired small business loan, as every lender is slightly different. Below we outline just the most common requirements for business loans.

1. Assets

It’s easier to qualify for a secured loan than an unsecured loan, but for a secured loan, most lenders will request an asset appraisal to ensure your collateral is sufficient. This normally means appraisal of real property, such as equipment, real estate and so on, but it can sometimes also refer to intangible assets – for example if your company owns intellectual property rights. Leased property is not counted as an owned asset.

It’s important (for some types of asset) to take into account the amortization period of the asset, and compare it to the term of the small business loan. You do not want (and won’t be able to) take out a business loan secured against an asset that will depreciate significantly before the loan closes.

2. Financial Statements

Monthly revenue numbers, working capital costs, and cash flow projections go a long way to showing lenders the health of your finances and your ability to repay a small business loan – original borrowing amount plus expenses and interest.

3. Credit History

Personal credit scores range from 300 to 900.

A bank or financing company will usually look at both your personal and business credit scores as part of their small business loan application process.

Personal credit scores run from 300 (very poor) to 900 (excellent). Business credit scores are a little more complicated – for more information on these, read our dedicated article on the topic, here.

If you’re planning to pursue a mortgage this year and are curious about the requirements, explore more information here!

Credit Approval Is Easier at Alternative Lenders

Credit Approval Is Easier at Alternative Lenders

Credit approval is one of the biggest stumbling blocks for newer businesses and start ups as they attempt to access Canada small business financing, as they have simply not had the time to establish a credit history.

This is why many choose to go with an alternative lender, rather than their bank, as this allows them to access a small business loan they are actually eligible for, without sacrificing on repayment options or loan amount, and without jeopardizing profit. More on this below!

4. Business Plan

Some lenders will want to see a detailed business plan outlining your objectives and how you intend to use your small business loan. Whilst there are very few restrictions on what a small business loan can be used for, that doesn’t mean you don’t have to specify your intended purpose to the lender. They’ll want to know if it’s for purchasing leasehold improvements, improvement to owned property, for equipment, to cover running expenses, to grow the business in some way – and so on.

Prepare, Prepare, Prepare

Taking the time to research and thoroughly prepare your business loan application not only increases your chances of securing financing, but also streamlines the request. By aligning your business’s financial health, creditworthiness, and documentation with the lender’s criteria, you can approach the enrollment process with confidence, knowing that you’re well-positioned for success.

Understanding Canadian Small Business Loan Terms


Here are the key factors to consider when comparing the many different business loans that are available:

Loan Amount

The loan amount you can qualify for is largely determined by your income, your business’s gross annual revenues, personal and business credit, debts, and whether or not the funds you borrow are secured against anything – intangible assets or real property.

Repayment Terms

Repayment terms dictate how much your monthly payments will be and how long they’ll continue until you’ve repaid your loan (plus interest rate payments).

Lenders of business loans will take into account your expected cash flow to ensure your repayment amount is reasonably achievable within the loan term. You also need to take into account the effect of repayment on your expected profit – and if necessary request repayment over a period longer than initially discussed if you believe it will improve your repayment likelihood.

Interest Rate

Interest rates determine the cost of borrowing; you can often get a lower rate by putting up a business asset (like real estate) as collateral. It is also true that more established small businesses, and businesses with greater assets and working capital, are more likely to qualify for better interest rates.

It’s absolutely worth shopping around for the best interest rates in Canada, but remember that the loan term will also affect the overall cost of the small business loan. Lower interest rates over a longer period of time may still equal more, over the life of a loan, than a higher interest rate over a shorter period.

Current interest rates for business loans range from about 5% to 10%. A good interest rate, however, is one you can comfortably afford to pay when making your monthly repayments.

Exploring loans for your business? Don’t forget to consider your insurance options for comprehensive protection.

Business loan interest rates have risen sharply in the past year.

Loan Fees

It’s important to find out if the financing you’re considering comes with any upfront or ongoing fees. This can include a registration fee, a loan origination fee, late payment fees, early repayment fees, closing fees and so on.

Calculate Your Monthly Loan Payments


Here’s a simple example of how to calculate your small business loan repayments:

Let’s say you want to borrow $5,000 at an interest rate of 10% over 2 years.

If the repayment frequency is monthly, your payment amount would be $230.72 per month.

Use the calculator below to get an estimate of what your monthly payment will look like when you apply to a lender through Smarter Loans.

Business Loan Calculator

$5k$30,000$500K
$0k$5,000$250K
1%10%50%
1 year2 year term5 years
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Your Payment Details

Your Payment Details

"Below you will find a detailed breakdown of your payments in each month and each year. Find out how much interest, principal and total you'll be paying with the information you entered. Change your term length, interest rate and loan amount to see how it impacts your payment breakdown."

What Can Business Loans Be Used For?


Get established

Get the working capital new small businesses often need to buy inventory, keep employees, execute marketing plans, or finance a small business purchase. New small businesses often require a steady influx of working capital to purchase inventory, retain valuable employees, execute strategic marketing plans, and finance essential purchases. Securing a small business loan can be a critical step in bringing your entrepreneurial vision to life.

Getting established is a group effort.

Gain Loan Approval Even Without a Business History

If you are a new business, getting a small business loan is still possible. Some lenders may request a personal guarantee, while others may offer government-backed programs to assist you in obtaining the necessary capital to ensure your small business thrives, from its inception to the present date.

Growing Your Company

Grow your small business via a small business loan to hire staff, develop new products, or upgrade machinery or tools. Your small business growth plans can also benefit from help with working capital costs to enhance your company’s operational efficiency.

Whether you’re a new business seeking to grow, or an established one looking to borrow to pay for growth initiatives, accessing the right small business loan can be a pivotal step to effectively grow your business.

Growth makes investment.

Managing Cash Flow

A Canada small business financing program can improve cash flow management, which can provide your business with the necessary capital to finance small projects and cover emergency or short-term expenses, such as rent and payroll during seasonal downtimes. Some types of government-backed small business loans are even specially designed to assist companies like yours in maintaining stability and ensuring uninterrupted operations – for example in farming businesses, which may experience unexpected shortfalls due to external factors affecting cash flow.

Cash flow management is crucial.

So whether you’re a new company looking to scale up, or an established business in need of real property improvements, a small business loan can play a crucial role in sustaining and growing your business.

Expanding Your Operation

When you’re considering renovating your premises, funding an acquisition, or purchasing commercial property, Smarter Loans offers valuable assistance by connecting you with business loans of up to $1,000,000+. Our platform simplifies the application process, helping small businesses calculate their borrowing capacity and assessing rates on new business loans, ensuring that you can make informed financial decisions.

Business loans for expansion don’t have to be huge though; those wishing to expand their turnover via leasehold improvements or other, similar efforts, can borrow smaller amounts for this purpose. This can allow Canadian small business owners to increase cash flow without increasing working capital costs over time.

Expanding takes a lot of money.

Unlock your full potential as a business owner by delegating essential tasks to trusted business service professionals. Elevate your success as you regain the time and energy needed to focus on growing your business with Top Solutions and Vendors for Businesses in Canada.

How Do I Choose a Small Business Loan?


Find the Right Lender

When looking at different lenders for small business financing, 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 lender should be viewed through the lens of a business partner. The following should be considered, weighed, and decided upon:

a) Their policy frameworks (application processes, information requirements, and ALL fees including registration fee)

b) Ancillary services they offer (e.g. transaction banking regular payments solutions)

c) Term of the principal loan (measured in years or months)

d) Variable or fixed rates (possibly adjusted to real rates to account for inflation)

e) Funding amount offered and how it matches with the capital that is needed

All of this taken together will allow you to find both the right lender, and the right loan, for your needs.

Traditional Business Loans vs. Alternative Financing

Some lenders may not be an option for you. For example, a more traditional financial institution (like a bank) may have terms that your business cannot adhere to. But luckily there are enough alternative lenders that offer term loans, equipment loans, loans for running expenses, improvement loans, and many other types of small business loan, that finding a lender you can work with is possible.

These alternative lenders have loans that can be secured against assets and working capital, or can be unsecured, and have a huge variety in repayment options, amortization period, loan amount, and interest rate.

All of this means that it’s possible to find a small business loan that suits your exact circumstances and needs, from a lender you can work with.

While alternative lenders grow each year in popularity, the majority of business loans still originate in a traditional bank.

What About Private Business Loans?


Private business loans encompass a broad category of financial arrangements that involve companies in Canada securing funding from non-bank lenders.

These lenders can take various forms, including online moneylenders, private lending companies, family members or friends, venture capitalists, and so on. Regardless of the source, these loans fall under the umbrella of private loans, serving as an alternative financing option for businesses.

Why Use a Private Business Loan?

For many small companies, especially new ventures, the prospect of securing funding can be both essential and challenging. A traditional bank will have strict lending criteria that can be difficult for newer or smaller enterprises to meet.

This is where private loans come into play, offering an attractive alternative to address the financing needs of companies that may not align with a bank’s lending standards.

How Much Does a Private Business Loan Cost?

Interest associated with private loans can vary widely, depending on the lender’s policies and the perceived risk of the borrower. Consequently, it’s crucial for organizations to carefully evaluate their options and assess the terms and conditions, particularly the interest, to ensure they align with their financial capabilities and repayment ability.

Managing interest payments effectively is essential to avoid excessive financial burden and ensure the loan remains a beneficial source of funding.

Benefits of a Private Business Loan

One of the advantages of seeking a private business loan is the flexibility it offers. Businesses can choose from a diverse array of private moneylenders, each with its unique competitive advantages and reputation. This freedom enables small businesses to select a lending partner that they trust and believe can meet their specific financing requirements.

How To Secure a Private Business Loan

Assets, including both real property and intangible assets, often play a significant role in securing private funding. Lending institutions may require collateral, such as equipment, real estate, or intellectual property, to mitigate their risk when extending loans. For new and small businesses, this can be a crucial consideration when exploring private financing options.

Private business loans have emerged as a valuable resource for small and new businesses seeking funding outside of traditional banking channels. These loans offer flexibility and a broader spectrum of financing options.

However, it’s essential for businesses to exercise due diligence in evaluating their options, assessing interest rates, and managing interest payments effectively.

What Types of Business Can Get a Small Business Loan in Canada?


Business Loans for Any Industry

Canada is home to over 1.2 million businesses, and almost all of them are eligible for business loans of one type or another. That includes companies in:

Business Loans for Any Need

Business loans are available for all manner of purpose, including:

  • Working capital costs
  • Improving leased property
  • Investing in innovation
  • Buying new or used equipment
  • Securing real property or intangible assets
  • For renovations
  • For product improvement
  • And for other eligible purchases

Business Loans for Multiple Uses

It’s worth noting that a business in Canada does not have to fall directly into one category or another in order to qualify for business loans. For example, farming businesses may exist in both the agricultural sector and the tourism sector – for example if they welcome visitors to their farms. Farming businesses can also have both tangible and intangible assets.

Such a business may need a term loan supported by the government in Canada to purchase new equipment, or to finance property improvement, or simply to cover expenses. Or all of the above! Luckily, Canada small business financing does not require a loan to have just a single use; in order to be eligible for a small business loan, the applicant simply has to specify how the funds will be used.

What Loan Amount Should You Apply For?


Businesses come in all shapes and sizes, and as a result, the financial needs of entrepreneurs can vary significantly. Whether you’re looking to secure a modest sum of a few hundred dollars or aiming for a more substantial small business loan of $500,000 or beyond, the key to making the right decision lies in having a well-thought-out plan for the utilization of those funds.

What’s Your Business Goal?

Choosing the correct small business loan is not merely about acquiring the maximum possible sum, but rather about aligning your financing with the specific goals and needs of your business. It’s essential to carefully assess what your business requires to thrive and grow. By doing so, you can ensure that the funds you secure are put to the most productive use – and that you are comfortably able to repay the borrowed amount within the agreed-upon terms.

Bankruptcies are consistent over time.

Other Financing Options for Canadian Small Businesses


Many businesses rely on short term financing options to get by.

We’ve talked mostly about term loans in the above, but there are other options for those seeking Canada small business financing. That’s because both the provincial and federal government in Canada wants to encourage start ups and to help small businesses grow. Let’s take a quick look at the other options:

Other Available Financing

The right type of financing for you depends on what you need it for and your business circumstances. Commonly used loan types are:

Each one of these business loans can differ in terms of registration fee, who is eligible for loan approval, repayment options, term, source, and so on. So it’s important to compare each to find the right loan for you.

Government Assistance for Small Businesses

We mentioned above that some Canada small business financing comes from the government in Canada. This is mainly run through the Canada Small Business Financing Program offered by the federal government in Canada.

This program does not mean the government itself is the entity offering the loan; rather, it helps other lenders, such as your bank, provide loans to those it might not otherwise be able to, by sharing the risk with them. The intent is for the government to support small enterprises and make it more likely they can get a loan from their bank rather than a predatory lender.

Types of Financing Available via the Canada Small Business Financing Program

Both term loans and lines of credit are available through the Canada Small Business Financing Program, and most small businesses in Canada are eligible for funding, for a variety of purposes, including equipment purchase, existing leasehold improvements, moving from leased property to purchasing property, securing intangible assets, to cover working expenses, and so on.

For more information on the Canada Small Business Financing Program, see here.

Comparing Your Options to Find the Right Financing For You

The type of financing chosen varies by industry.

As with a term loan, it’s up to you, the borrower, to determine if any one type of financing is right for you. Many people find it helpful to talk to their bank, the government, and alternative lenders, in an effort to find the exact right loan and to secure loan approval.

You can save time though by working with a broker, who understands Canada small business financing and can provide expertise in loan options you are eligible for.

Access the Right Financing for Your Business Needs


Most small businesses fail due to a lack of cash.

Here are just some of the financial solutions that Smarter Loans can help you access when you connect with one of our partner lenders or pre-apply online:

  • Merchant cash advance
  • Mortgage loan
  • Business credit card

How To Apply for a Loan in 3 Easy Steps

Step One

Take 30 seconds to complete our application online. Simply fill in the form by choosing the options that apply to you.

Step Two

We find you a lender. We’ll find the most suitable loan provider for your situation.

Step Three

You get your loan. One of our partner lenders will get in touch to process your application and get you the funds you need (often in just a few days).

Other Popular Business Services


Frequently Asked Questions About Business Loans


1. What credit score is needed for a business loan?

While there is no one magic number that enables small companies to receive the financial resources they need, a higher credit score works to the benefit of the borrower. As a general rule, higher credit rating (either the business, or the business owner) will increase the chances of getting approved for a business loan.

2. How important is cash flow in receiving business financing?

This depends on the type of business loan being obtained. For unsecured loans, cash flow is very important, because that’s how the lender evaluates the business’s ability to repay the loan. Daily and monthly sales numbers, especially through debit and credit cards, are a critical factor for business loan approval. For secured loans, where business assets such as equipment or real estate is used, the cash flow may be slightly less important.

3. Can I secure a business loan against intangible assets?

Yes. Intangible assets come in many forms – from intellectual property rights to accounts receivable – and it’s worth discussing with your chosen lender whether you have any that can act as collateral against your business loans. Collateral can significantly reduce the cost of borrowing.

4. How do I apply for a small business loan?

Having a well-drafted plan, clear financial goals, and the necessary documentation, such as financial statements and tax returns, is essential for instilling confidence in moneylenders and streamlining the application process. Being well-informed and adequately prepared not only increases your chances of securing financing but also ensures that your application aligns with the lender’s requirements, ultimately increasing the likelihood of approval for your business loan.

5. What is an SBA loan?

For organizations that have a track record of operations in Ontario and across Canada, the Small Business Administration (SBA) provides government funding programs through SBA-approved lenders in Canada. While the lender (usually a bank or other financial institution) provides the capital, the SBA guarantees up to 85% of the loan amount, which helps the business owner obtain a lower interest rate.

Depending on each individual business profile, the owner can gain up to $5 million of SBA-backed financing with loan terms from 5 to 25 years. However, an emphasis is placed upon credit scores and established histories when evaluating companies for qualification.

6. Can business loans be used for refinancing other debts?

When a business seeks financing from a bank, it’s essential to specify how they plan to use the funds they borrow, whether for marketing, technology upgrades, or debt refinancing. Transparency ensures alignment between the bank funds and the company’s financial objectives.

Refinancing with a business loan from a bank can offer several benefits. First, you can take advantage of reduced interest rates, leading to savings, capital gains, less profit eaten by debt payments, and a more manageable repayment process.

Additionally, you can consolidate multiple debts with varying interest rates into one loan, simplifying their payment schedule.

Lastly, by borrowing from a bank to refinance, companies can ensure their assets remain unencumbered, promoting financial stability.

7. When should business loans NOT be used?

While it is ultimately the owner’s discretion and/or company policy that determines how the capital structure is formed, best practices for debt management include being vigilant with it, particularly in cases where the business is in trouble.

For example, it is not advisable to use a business loan to pay overdue bills and employee salaries when the business is not making a profit. Business loans should be used to increase revenue and grow a business, so that there is a positive return on investment after the funds are used up. A great example of this is purchasing inventory that is expected to sell during a busy season, or investing to open a patio for a restaurant, which will bring in extra revenue.

8. Who is eligible for a small business loan?

Small business loans are relatively easy to obtain as long as a business has been operational for at least a year and generates at least $10,000 in monthly revenue.

To qualify to apply for business loan and receive funding, business owners need simply to complete an application (online or at specialist lenders) and provide access to their business’s registration details and financial statements, as well as credit profile.

While size is not a direct consideration, lenders will want to look at 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 small business ventures in Canada can still receive funding, though it may not be with their usual bank. The government in Canada offers several programs aimed at helping start ups find funding; some of these are run through high street banks via the Canada Small Business Financing Program.

9. Is a personal credit score and business credit profile the same thing?

No, the personal credit score in Canada is a number between 300 and 900, with 300 being the lowest and 900 representing excellent creditworthiness. This score is a crucial factor in many financial transactions, including personal loans, mortgages, and credit cards. However, when it comes to businesses, there isn’t a direct equivalent to a personal credit score. Instead, credit bureaus in Canada have developed specialized scoring systems tailored to assess the creditworthiness of businesses.

10. Is a business plan necessary to obtain business financing?

This depends on the type of new or existing business loan being obtained. While most small business lending companies in Canada will want to see how the small business will deploy the funds, a well-formulated business plan may not be a requirement. In the case that it is necessary though, it is important to answer the bank the following questions:

a) What the small business loan will be used for (additional funding “cushions”, expansion, growth, equipment/technology purchase inventory purchases, working capital, funds for supplier/employee payments, capital expenditures, cash flow purposes etc.)

b) Expected business and economic conditions over the next 2-5 years

c) How they will impact profitability and financial strength

11. What’s the effect of loan applications on my credit?

Each loan application, whether approved or declined, affects your credit score. This is because each application involves the lender checking your credit profile, which causes a temporary dip in your score. This is why it is imperative to target your credit applications wisely.

12. Can a business based out of a home qualify for a business loan?

Absolutely, if the business meets the necessary qualifications set by the government, bank or the lender, it can indeed be operated from a residential living arrangement. This flexibility is especially valuable for small business owners and entrepreneurs who may not have access to a traditional commercial space or prefer to run their operations from the comfort of their homes.

13. Can I use a business loan for leasehold improvements?

Yes. There’s even a specific government program for this purpose! The Canada Small Business Financing Act (CSBF) offers financing to help with the expansion and modernization of Canadian small enterprises.

14. Can I apply for a small business loan online and use a business loan calculator for assistance?

Applying for small business loans online is extremely common, and is streamlined and convenient thanks to the many lenders who offer a business loan calculator online with their application process. Most lending institutions now have an online loan application option.

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