Last updated
Written by:
Reviewed by:
Compare Lenders
Business Line of Credit in Canada
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.
Rate and cost
Enter inputs and choose a mode to see monthly interest, total monthly cost, annualized cost, and an effective APR estimate.
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
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 utilization | 50 percent |
| Rate | Prime 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 |
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
- Prepare latest financial statements, AR aging, inventory details, and business bank statements.
- Estimate limit and cost using the calculator on this page.
- Compare lenders and pricing. Review fees, covenants, and renewal terms.
- Submit an application with documents and a brief use of funds summary.
- 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?
Q What rate should I expect on a business line of credit?
Q What fees are common on lines of credit?
Q Will I need a personal guarantee?
Q Can startups qualify?
Q How fast can a business line of credit be approved?
Q Is a business overdraft the same as a line of credit?
Q Does utilization affect my effective APR?
Q What is a borrowing base?
Q Can my limit change after approval?
Q Are interest payments tax deductible?
Q How can I reduce interest costs?
Expert Review & Editorial Standards
This page was researched, written, and reviewed by financial professionals with expertise in Canadian lending regulations. All information is regularly updated to reflect current rates, terms, and regulatory changes.
Jenna West
Financial Writer & Content Director
Jenna has covered the Canadian FinTech and consumer lending industry since 2017. She specializes in regulatory updates, consumer protection, and helping Canadians navigate complex financial products.
- 8+ years analyzing Canadian consumer lending
- Monitors FCAC and provincial regulatory changes
- Specializes in personal loans and alternative lending
Amy Orr
Financial Content Specialist
Amy is a financial writer with 10+ years covering Canadian, U.S., and U.K. financial markets. She holds a Masters in Finance from the University of Edinburgh Business School and formerly worked in the hedge fund sector.
- Masters in Finance, University of Edinburgh
- Former hedge fund professional
- Published in major financial publications
About Smarter Loans
Canada's independent lending comparison platform since 2016. Trusted by over 2 million Canadians and recognized by the Toronto Star as "the GPS of FinTech Lending." Featured in the National Post and major Canadian publications.
Our Editorial Process
Every page undergoes research, expert writing, fact-checking, and review by our Financial Content Director. We verify all rates, terms, and regulatory information against official sources including FCAC guidelines and provincial lending regulations.
Last Updated: September 28, 2025 | Next Review: Ongoing monitoring
Explore more
Similar products
- bad credit business loans
- expansion business loans
- business credit lines
- coffee shop business loans
- auto shop business loans
- gym fitness club business loans
- inventory business loans
- marketing business loans
- merchant cash advance business loans
- ecommerce business loans
- retail store business loans
- working capital loans
Why Choose Smarter Loans?
Access to Over 50 Lenders in One Place
Transparency in Rates & Terms
100% Free to Use
Apply Once & Get Multiple Offers
Save Time & Money
Expert Tips and Advice
