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With so many small business loans in Canada, who do you go to? As a starting point, check out these lenders in Canada. We researched key features of their business loans, including interest rates, loan amounts and eligibility requirements.
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There are several different types of business loans out there, each offering different terms and benefits. Which one is best for your business depends on its specific situation. For example, if cashflow is an issue, a merchant cash advance or invoice financing might be the way to go.
Loan type | Best for… | How it works | Typical loan amount | Typical cost |
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Term loans | Covering a large, one-time expense | Borrow a lump sum and pay it back plus interest and fees in fixed installments, usually between 5 and 20 years | $5,000 to $5 million | 4-30% APR |
Lines of credit | Working capital | Get access to a specific amount of funds, which your business draws from as needed | $10,000 to $500,000 | 8-15% APR |
Canada Small Business Financing Program (CSBFP) loan | Small businesses and startups | Apply for a term loan, which is partly backed by a government guarantee | Up to $1,000,000 | Varies |
Equipment financing | Buying new equipment | Borrow up to 100% of your equipment cost and pay it back in installments, plus interest and fees. Your equipment is often used as collateral | 85-100% of the equipment’s value | Relatively low APR comparable to secured business loans. |
Vehicle financing | Buying a car, truck or other type of vehicle | Take out a fixed-term loan to cover the cost of new vehicles for business use, usually using the vehicles as collateral. | 80-100% of the vehicle’s value | 8% APR |
Invoice financing | Getting an advance on unpaid invoices | Sell your business’s unpaid invoices to a third party at a discount. | 75-90% of your invoices’ value | Fee of 10-25% of the invoices’ value |
Invoice factoring | Borrowing against unpaid invoices | Take out a term loan backed by your business’s unpaid invoices. | 75-90% of your invoices’ value | Fee of 2-3% of your invoices’ value |
Merchant cash advances | Accessing future revenue from consumer sales | Get an advance on your future sales and pay it back plus a fee with a percentage of your daily revenue. | $5,000 to $100,000 | Fee of 1.2 to 1.5 times your advanced amount |
Business loans provide your company with funding for any business-related expenses – like growth, filling in cash flow gaps and covering other expenses. With a traditional small business loan in Canada, you can typically borrow from $5,000 to $5 million at a fixed or variable interest rate typically starting at around 5%.
You repay the funds, plus interest and fees, in monthly installments, often over 5 to 20 year terms. Some business loan providers require collateral, while others offer approval based on your creditworthiness, revenue and other factors.
There are a number of factors that you should consider when applying for a business loan:
There are generally 3 main options where you could apply for business loans in Canada. Picking the right option for you will depend on your business needs, financial situation and preferences.
Online business loans are easier to get than bank business loans: There’s less paperwork and a shorter application. It’s now also easier to qualify for an online business loan as a small business.
Here’s a few types of loan providers you might find online:
Across the board, online lenders place less emphasis on your personal and business credit score compared to traditional lenders like banks and credit unions. Instead, online lenders focus on your business’s overall financial health, your monthly revenue and projected gains. Their aim is to determine whether you have the funds to keep up with loan repayments. If your business is new and doesn’t have established credit, you’re more likely to successfully secure a business loan via an online lender.
Best online business loan lenders in Canada
Bank loans could be a good option for established businesses pulling in at least $1 million in annual revenue and need large amounts of funding — say, over $100,000. Bank loans are provided by Canada’s Big Five Banks and other major financial institutions. These loans often come with higher interest rates and have strict repayment requirements. In the majority of cases, you will need to apply for a business loan in person at a local branch compared to online applications via online lenders.
Providers include BMO, TD Bank, RBC, CIBC, Scotiabank, HSBC, Canadian Western Bank and National Bank.
Compare banks for small business loans
Credit unions provide small business loans that are a little bit more flexible than big bank loans. You’ll typically need to be signed up with the credit union you want to borrow from and you may need to have an established relationship with them to qualify. Keep in mind that credit union business loan amounts are often capped at $50,000. Credit unions may have more flexible repayment options and other benefits compared to banks.
Providers include Meridian, Servus, Vancity, Connect First, Conexus, First West, Steinbach, Alterna Savings and Coast Capital Savings.
If you’re shopping for a business loan, you may find yourself deciding between an online lender and a bank. While the options are plentiful for either route, bank loans and online loans have some key differences, from the application process to eligibility requirements, interest rates and loan repayment terms.
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Unfortunately, there is no one-size-fits-all solution for business loan interest rates in Canada. Your interest rate will depend on a variety of factors, including your credit score, your loan type, your loan amount and the length of your loan.
Interest rates range from 4.96% right up to 29% with online lenders, while Canada’s major banks don’t disclose their interest rates on their websites. Instead, you’ll need to book an appointment and apply for a business loan in person if you decide to apply for a business loan with any of the big banks. As a general rule of thumb, banks offer lower interest rates compared to online lenders though.
If you want to qualify for a lower interest rate, you’ll need to make sure you have the following:
The candidates that meet these criteria have the highest probability of repaying the loan, which is why they receive the best rates. Read more about how to compare small business loan interest rates.
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Preparation is the key to success if you’re applying for a business loan. Before you make your case to lenders, make sure you have all of your financial ducks in a row to put your best foot forward. It could be your business’s make-or-break moment to secure the funding you need. Here’s what you should keep in mind as you prepare your application:
To help pull your loan together, you’ll typically be asked for some of these common documents:
Here’s what you can expect to happen when you apply for a small business loan in Canada.
The application process for a small business loan can be seamless as long as you have a clean application with all of the relevant information and documentation prepared. If your lender needs to circle back with you to verify information or to ask follow up questions, this could delay progress.
Where you apply for your loan also makes a key difference. Some online and traditional lenders may approve you in a matter of hours or days. Other lenders may need a few weeks to go through your application details and all of your supporting documents. An easy way to find out how long it takes is to contact your lender directly to find out about processing times.
The main reason businesses get rejected for loans is because lenders doubt your ability to be able to repay the loan. Some common factors that might make lenders question your repayment abilities, and consequently reject your business loan application, include:
If you do get rejected, you might want to wait until your business is more established before reapplying. Taking steps to strengthen your credit report could also help your chances of approval. Or, consider applying for a secured rather than an unsecured business loan.
If your personal credit is less-than-perfect, don’t be dissuaded from applying for a business loan. Small business loans in Canada for bad credit are still readily available.
Traditional lenders like banks and credit unions may make it harder to qualify for a business loan, but alternative financial lenders, especially in the online space, tend to have more relaxed criteria. Instead of shining a light on your credit score, they may qualify you based on other criteria, such as your monthly revenue and assets you’re willing to put up as collateral to secure your loan. Ultimately, if you can prove you can manage your loan repayments, these alternative lenders are more likely to grant you a business loan.
Assets, such as business equipment, vehicles, property and funds in savings accounts, can all be used as collateral for a secured business loan. Just be careful: if you can’t make your repayments, your lender can sell your assets to cover what you owe.
If you’re having trouble getting approved for a business loan, or you don’t meet the basic eligibility requirements, consider these alternatives:
Small business loans can offer competitive advantages over personal loans in some cases. Benefits can include lower rates, longer terms, higher financing amounts and less personal liability. Taking out a business loan may be a good fit for you if you have a well-established business that makes a significant amount of revenue. You may want to choose something else if you’re looking to start up a business or you would like to borrow money for personal use.
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