Business Loans in Canada: Best Rates for 2024

More About Getting a Business Loan in Canada

• How to get a business loan in Canada?
• Where to get business loans in Canada?
• What are the types of business loans you can get in Canada?
• How much money can I get from a business loan in Canada?
• What can business loans be used for in Canada?
• What is a good interest rate on a business loan in Canada?
• What factors affect business loan interest rates in Canada?
• How do I find the best business loan rates in Canada?
• What factors to consider when comparing business loan lenders in Canada?
• How do I qualify for a business loan in Canada?

How to get a business loan in Canada?

Getting a business loan in Canada requires a little bit of preparation, and a lot of careful thought. But before you can start worrying about business loan rates or the different types of Canada small business loans, you need to gather together some paperwork. This includes:

• Proof of business ownership/incorporation documents, which crucially must show the company is based in Canada
• Financial documents, such as financial statements, cash flow statements and/or tax returns
• A well-drafted business plan that shows the intended usage of the loan funds

Once you have these items in hand, you will be prepared for the application process, and you will have a better understanding of what type of business loan will best suit your business’s needs. You can then choose a business loan lender that offers this type of business loan, at a competitive rate, and can complete an application form.

Where to get business loans in Canada?

There are a great many business loan lenders in Canada, including:

• Banks and credit unions
• Alternative financing companies
• Online business loan lenders
• Private business loan lenders

Each type of business loan 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 business loan lender may require more research and time to secure, but can be significantly more lenient in its eligibility criteria. Online business loan lenders have fast turnaround times, but vetting for reputability is key. There are options for businesses in all situations.

What are the types of business loans you can get in Canada?

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

• Term loans
• Short term loans
• Online loans
• Equipment loans
• Invoice financing loans
• Bad credit business loans
• Home business loans
• Merchant cash advance loans
• Working capital loans
• Mortgages
• Business lines of credit
• Business credit cards
• Government loans

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 business loan in Canada for you.

Government Assistance for Small Businesses

Some small business loans in Canada come from the government. This is mainly run through the Canada Small Business Financing Program. This program does not mean the government itself is the entity offering the loan; rather, it helps other business loan lenders, such as your bank, provide business loans to those it might not otherwise be able to, by sharing the risk with them. 

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.

How much money can I get from a business loan in Canada?

Businesses come in all shapes and sizes, and as a result, business loans in Canada do too. Whether you’re looking to secure a few hundred dollars or aiming for a more substantial business loan of $500,000 or beyond, you will have multiple Canada business loans to choose from. Just bear in mind that larger loan amounts usually require a more in-depth application and qualification process.

What can business loans be used for in Canada?

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

• Financing a small business purchase
• Working capital costs
• Buying inventory
• Buying new or used equipment
• Hiring employees
• Executing marketing plans
• Improving leased property
• For renovations
• Securing real property or intangible assets
• Investing in innovation
• For product improvement or development
• For expansion purposes
• To cover emergency or short-term expenses, such as rent and payroll during seasonal downtimes

Use-Specific and Flexible Business Loans

It’s worth noting that most Canada small business loans can be used for a variety of purposes. Here’s an example: let’s say a farming business is looking for a small business loan. The business may have a multitude of financial needs, such as employee-related expenses, machinery upgrades, working capital needs, and so on. Many of the business loans available in Canada can be used for all of these purposes; in order to be eligible for a small business loan, the applicant simply has to specify how the funds will be used. In this way, installment loans, term loans, short term loans, working capital loans and business lines of credit are all multi-purpose.

There are however some business loans that are use-specific; for example, a commercial mortgage must be used for real estate costs. An equipment loan must be used for the equipment in question. A vehicle loan must be used for a business vehicle – and so on. 

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 business loan in Canada is around 7-10% for a standard term loan. The business loan interest rate you qualify for depends on a number of factors, as discussed below. To make sure your Canada small business loan is as affordable as possible, it’s best to shop around to find both the best type of loan and the best business loan rate for your situation. Don’t be discouraged if you’re struggling to find a competitive rate, as there are options (discussed below) to help bring rates down.

What factors affect business loan interest rates in Canada?

There are a variety of factors that affect business loan interest rates in Canada; they fall into three categories, relating to: the borrower, the lender, and the loan type.

Borrower-Specific Factors Affecting Business Loan Interest Rates

• Availability and value of assets that can be used as collateral
• Monthly revenue
• Working capital costs
• Cash flow projections
• Credit history
• Length of time in business
• Amount of existing business debts
• Intended use of funds and how they will impact the business

Lender-Specific Factors Affecting Business Loan Interest Rates

• Type of lender (e.g. alternative, online, traditional)
• Eligibility criteria
• Level of service provided

Loan-Specific Factors Affecting Business Loan Interest Rates

• Loan type
• Loan amount
• Loan term
• Repayment schedule
• Loan fees 

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 business 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 favour 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 business loan 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 business loan lender should be viewed through the lens of a business partner. The following should be considered, weighed, and decided upon:

• Each business loan lender’s policy frameworks (application processes, information requirements, and ALL fees including registration fee)
• Speed of services (while some business loan 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 business loan 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 a year 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.