Using Loans to Start a Side Hustle in Canada

If you’ve been tempted to start a side hustle in Canada—maybe because your grocery bill is starting to feel like you’re feeding a family of 10, you’re definitely not alone. The gig economy has exploded here, and Canadians are turning hobbies, passions, and “things I’m surprisingly good at for no reason” into extra income.

But let’s be honest: starting a side hustle often requires a bit of money upfront. And unless you have a magical jar of spare cash hidden somewhere, you might be looking at side hustle loans Canada as a way to kick things off. Just like in the movies where someone builds a business in their garage—except with fewer inspirational montages and more paperwork.

To help you get started, we will go through everything from types of loans for side hustles in Canada to cool repayment tips in this article. Whether your dream is selling handmade candles, launching a small food business, or finally turning your photography hobby into something profitable, this article has got you covered.

Let’s dive in!

Funding Options for Side Hustles

One of the biggest myths about starting a small venture is that it requires massive capital. Sure, if your side hustle involves building a space shuttle, maybe. But for most Canadians, the initial costs are actually manageable—with the right funding strategy.

Here are the most common ways people finance their side hustles:

1. Personal Savings

This is the simplest option. If you’ve been squirrelling away money, using your own savings means no interest fees and no lender breathing down your neck. Of course, the downside is that your emergency fund shouldn’t disappear overnight just because you suddenly decided to start a gourmet dog treat empire.

2. Personal Loans

Personal loans are flexible and widely used for side hustles. They’re great when you need:

• Equipment

• Tools

• Starter inventory

• Marketing funds

• A small boost to get from idea to launch

They’re easy to apply for, and the approval process is much faster than applying for business credit. (No business plan with charts that make you look like you know what you’re doing.)

3. Credit Cards

Using a credit card can work—but only if you’re very disciplined. Missing payments or carrying a large balance will cost you more in interest over time. Treat credit cards like hot sauce: a little is fine, too much burns.

4. Microloans

Some lenders and nonprofit organizations offer small loans for entrepreneurs who don’t need a huge amount of borrowing. These are especially helpful for service-based businesses.

5. Business Loans

If you’re planning something a little more elaborate—like a side hustle that might actually grow into a full business—small business loans can give you the structure and funding you need.

6. Grants and Local Programs

Sometimes your city, province, or even certain organizations have grant programs for new entrepreneurs. Free money is always nice. The catch? You usually have to apply early, clearly, and with a level of organization that may require extra coffee.

Loan Types to Consider

The thing is that not every loan in Canada is the same. When choosing funding for your side hustle, you are definitely looking for something that makes sense for your income, goal, and timeline.

Here are the main side hustle loans Canada borrowers usually consider:

1. Personal Loans (Unsecured)

These are the most popular options for new entrepreneurs who don’t have business documents or collateral. Approval is based mostly on your credit score and income.

Why they work well:

• Fast approval

• Flexible spending

• Fixed monthly payments

Best for: Creators, freelancers, local service businesses, and any hustle that needs $1,000–$20,000 to get rolling.

2. Business Loans

If you’re planning something bigger than a weekend project—like opening a food cart or starting a landscaping company—business loans can be helpful. They usually require more documentation, but they also offer higher borrowing amounts.

Best for: Side hustles expected to scale quickly.

3. Equipment Loans

If your hustle needs machinery, tools, or specialty gear, equipment loans can be a smart fit. These loans use the equipment itself as collateral.

Example:

A photographer financing a new camera or lighting setup.

4. Lines of Credit

A line of credit is like having financial backup always available. You borrow only what you need and pay interest on the amount you use.

Best for: Seasonal side hustles or businesses with unpredictable inventory needs.

5. Microloans

These smaller loans are ideal for Canadians who are starting out with a small idea that doesn’t require huge capital.

Best for: Bakers, artists, crafters, and online sellers in Canada. 

Repayment Tips

Repaying a loan for your side hustle doesn’t have to feel like a weight on your shoulders. With a bit of planning and realistic expectations, your loan can fit comfortably into your budget—even before your side hustle becomes wildly profitable.

Here’s how to stay on track:

1. Set a Realistic Budget

Avoid the trap of assuming your side hustle will explode overnight. (Unless your side hustle is selling fireworks. Then maybe.)

Start by forecasting low and adjusting as you go.

2. Separate Your Business and Personal Money

Keeping everything mixed in one account is a recipe for confusion. Open a separate bank account or digital wallet for your side hustle.

3. Make Payments Automatic

Automation is your friend. Think of it as the grown-up version of tying a string around your finger to remember things.

4. Reinvest Early Profits

In the early stages, it’s smart to use profits to help repay the loan faster or reinvest in the business.

5. Create a “Slow Month” Buffer

Side hustles can be unpredictable. Setting aside money during good months gives you breathing room when sales dip.

Managing Risk

Every business idea, no matter how brilliant or adorable your product is, comes with risk. The key is not to eliminate risk—because that’s impossible—but to manage it so your finances stay steady.

1. Start Small

Your first side hustle gig doesn’t have to be a huge project. I always tell my clients to begin with a manageable plan and build as they go.

2. Keep Your Day Job

Let’s face it, you probably won’t quit your 9 to 5 job because of a side hustle, at least for a while. Think of a side hustle as extra income. If it works out you end up with a pile of cash, that’s great. However, keeping your full-time job is something that will give you stability while you build momentum.

3. Track Your Numbers Religiously

Even if math isn’t your favourite activity, tracking your income and expenses helps you understand whether your hustle is heading in the right direction.

4. Protect Yourself with Insurance

Consider liability insurance in case your side hustle is in some way connected with food, tools, customers visiting your space, or anything risky.

5. Avoid Overspending in the Early Stages

New entrepreneurs often buy every tool or gadget they think they’ll need. Start with essentials and upgrade once you have a consistent income in your pockets.

6. Keep Your Credit in Good Shape

Lenders offering personal loans to small business funding often give better rates to borrowers with stronger credit. Paying bills on time, lowering credit balances, and avoiding too many applications help.

Conclusion

Starting a side hustle in Canada is one of the most rewarding things you can do—financially, creatively, and sometimes emotionally (like when your first customer isn’t your mom). And while funding can feel overwhelming at first, side hustle loans Canada can be an incredibly helpful tool when approached with clarity and caution.

Whether you’re using a personal loan, a small business loan, a line of credit, or a microloan, the key is to borrow intentionally and keep your financial foundation solid. A loan should support your hustle, not stress you out.

Here’s what to remember:

• Start with a realistic budget

• Avoid borrowing more than you need

• Keep your accounts separate

• Reinvest early profits

• Manage risk thoughtfully

If you want to explore borrowing options, check out the Personal Loans and Business Loans sections on Smarter Loans. For extra guidance and business development resources, the BDC Canada website offers great tools for entrepreneurs.

With the right planning, a bit of patience, and a willingness to learn as you go, your side hustle can grow into something steady and profitable. Who knows—maybe this time next year, you’ll look back and laugh about how nervous you were to start.