There are several ways you can access financing for your independent contracting business in Canada. Learn more about how business construction loans and business loans for contractors work, and compare lenders to find the best option for your unique set of needs and budget.
What loan options are available for contractors?
You can start or grow your business with the following types of independent contractor financing:
Business loans for contractors
How it works. Business loans for contractors let you borrow a set amount of money that you’ll need to pay back over a set number of years. These loans are good for large, one-off purchases related to your general contracting business.
What you can use it for. You can take out business loans for contractors to pay for all kinds of expenses, from supplies and computer software to employee salaries and home office expenses.
How much you can borrow. You may be able to borrow anywhere from $5,000 to $500,000 depending on personal factors such as your credit score and income.
How to apply. Banks and online lenders tend to offer business loans for contractors in most cases. You just need to fill out an application to get started.
Business construction loans
How it works. Business construction loans are very similar to business loans for contractors, but they’re dedicated to borrowers who own construction businesses.
What you can use it for. You can take out business construction loans to pay for any expenses related to your construction business. This can include payroll, tools, inventory and equipment purchases.
How much you can borrow. You may be able to borrow anywhere from $5,000 to $500,000 depending on personal factors such as your credit score and income.
How to apply. You can sign up for business construction loans through banks or online lenders. You’ll usually need to fill out your personal and financial information to apply.
Canada Small Business Financing Program loans
How it works. You may be able to use a CSBFP to access independent contractor financing. These loans are backed by the Canadian government so they typically come with lower interest rates than regular business loans.
What you can use it for. You can use CSBFP loans to pay for equipment and real estate for your independent contractor or construction business. You won’t be able to use it to pay for day-to-day expenses such as payroll or business supplies.
How much you can borrow. You may be eligible to borrow up to $1 million.
How to apply. You can apply for CSBFP loans through your bank or an online lender. You just need to ask about the CSBFP program and make sure that your project is eligible for this type of government-backed financing.
How it works. Business lines of credit are designed to let you tap into a rotating pool of funds that you can use as needed. This means you’ll have money readily available in an emergency but you’ll only pay interest on the amount you actually spend.
What you can use it for. You can take out a business line of credit to pay for any of your daily operation needs as well as large purchases. This makes it one of the most flexible financing options on the market.
How much you can borrow. You may be able to borrow anywhere from $1,000 to $500,000, with repayment periods that fluctuate based on how much you spend from your line of credit.
How to apply. It’s easy to apply for a business line of credit with most banks and online lenders. You just need to fill out an application to see how much you can borrow.
How it works. Microloans may let you borrow a small amount of money to help grow your independent contractor or construction business.
What you can use it for. You can use a microloan for smaller expenses such as topping up your building supplies or buying a new piece of equipment.
How much you can borrow. Microloans often range between $1,000 and $15,000 and are repaid over a set period of time. They usually come with lower interest rates than business loans for contractors and business construction loans.
How it works. Equipment loans let you borrow money to pay for equipment. The equipment you buy usually secures the loan, which means your lender can repossess it if you default on your payments.
What you can use it for. You’ll only be allowed to use this money to purchase equipment for your construction or independent contractor business.
How much you can borrow. You may be able to borrow up to 80% of your equipment’s value, depending on how expensive it is.
How to apply. Find the piece of equipment you need and look for a lender willing to fund your request.
How it works. Use the business assets you already own to secure business construction loans or business loans for contractors. This will lower your interest rates and let you borrow more than you’d be able to with an unsecured loan.
What you can use it for. You can borrow against your assets for any reason, and there doesn’t seem to be any restrictions for how you can spend the money you borrow.
How much you can borrow. A lender may grant up to 90% of the face value of your assets, though this number can change based on the lender you choose.
How to apply. Find a bank or online lender that’s willing to give you financing based on the value of your current business assets. Fill out an application to see if you qualify.
How it works. Invoice factoring is a way for your independent contractor or construction business to borrow money against the amounts that your customers owe.
What you can use it for. You can use it for anything you need for your business.
How much you can borrow. A lender will buy your invoices for between 70% and 85% of their value. When your client pays the invoice, your lender gets the money you borrowed back plus interest and fees.
How to apply. Look for a lender that’s willing to secure your loan against your invoices. This will often be a lender specialized at working with independent contractors or construction businesses.
You can get business loans for contractors and business construction loans from many different lenders:
Bank financing. You can get bank financing from Canada’s Big Five banks and a handful of other financial institutions. You can expect to pay higher interest rates and go through a longer application process with this option.
Providers include BMO, TD Bank, RBC, CIBC, Scotiabank, Canadian Western Bank and National Bank.
Credit union loans. Credit unions are a good place to look for business construction loans and loans for independent contractors. These loans will often be more flexible and less expensive than those on offer from the big banks.
Providers include Meridian, Servus, Vancity, Connect First, Conexus, First West, Steinbach, Alterna Savings and Coast Capital Savings.
Online loans. Online loans come from online banks and other alternative lenders. They usually have fewer eligibility requirements than bank financing, and you may even be able to qualify with poor credit if your business makes enough revenue.
Providers include Loans Canada, SharpShooter, Journey Capital, Merchant Growth and Driven.
Business loans from banks vs online lenders
The main difference between banks and online lenders boils down to how long it takes to apply and what terms you’ll get for your loan.
Business loans from banks. It can take several weeks to apply and get approved for a bank loan. You’ll typically need to meet strict eligibility requirements and you may need to be a client with the bank. Your interest rates will usually be higher and you may need to secure your loan with collateral, especially if your credit score is below 700.
Loans from online lenders. You can usually apply for an online loan in a couple of minutes and get approved in less than a week. These loans tend to come with more competitive rates and flexible terms than the big banks. The main downside is that it can be riskier to borrow from an online lender due to the potential for fraud.
How to decide which loan is best for my independent contractor business
Your independent contractor or construction business can use specific types of financing to cover the following expenses:
Business supplies
Line of credit, business loans, microloans, asset-based loans or invoice financing
Equipment or vehicles
Equipment loans, business loans, CSBFP loans, microloans, asset-based loans or invoice financing
Real estate
CSBFP loans
Utilities
Line of credit
Administrative and legal costs
Line of credit, business loans, microloans, asset-based loans or invoice financing
Payroll
Line of credit, business loans, microloans, asset-based loans or invoice financing
Representative example: Steven needs a new forklift
Steven owns a roofing business and a deck building business. He needs to purchase a new forklift to carry supplies for both operations. The cost of a used forklift is $25,000 and Steven will need a loan for approximately $20,000. He plans to apply for a secured equipment loan and use the forklift as collateral. Below is a snapshot of what his roofing business and deck building business loan will look like:
Cost of used forklift
$25,000.00
Loan type
Equipment loan
Loan amount
$20,000.00
Interest rate (APR)
8.00%
Loan term
2 years
Additional fees
Origination fee of 1.00% ($200.00)
Monthly payment
$904.55
Total loan cost
$21,909.10
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specifications and other factors.
What will I need to apply?
The documents and information you need to apply for business loans for contractors and business construction loans may include the following:
Business bank statements. Lenders will want an overall snapshot of your business’s general cash flow, often spanning at least three months to a year.
Tax returns. You’ll likely need to produce your recent business and personal tax returns to verify your income and revenue.
Credit history. You may need to submit your personal or business credit score to get approved for a business loan for contractors.
Age of business. Your business may need to be at least a year old in order to qualify for financing. Otherwise, you may need to look into a startup loan.
Collateral. You could be required to secure your loan with collateral in some cases. This will depend on your lender and what type of loan you get.
What challenges might I face as a contractor applying for a loan?
More difficult to get financing. Some lenders may not be willing to give you a loan if you have a less predictable stream of revenue.
Unreliable revenue. It can be difficult to budget for repayments if your clients have a history of not meeting invoicing deadlines.
Down seasons in some industries. You could end up with lower revenue in some months which means you’ll need to have savings put away to cover your loan repayments.
Strict eligibility criteria. You may be expected to meet more strict eligibility criteria than other small businesses, especially if your work is seasonal.
6 tips for running a sustainable contracting company
Follow these tips to grow your business and maintain operations in the long-term:
Find a mentor. Getting some coaching to help you create a solid business plan and navigate the ins and outs of your industry can help you set yourself up for long-term financial success.
Make a budget. Think about how much money you owe and make sure you set a budget that lets you save up to cover your payments and expenses in months where your revenue might not be as high.
Join an industry association. Go to networking events and join an association to get industry news and meet contacts who can help you further establish your business.
Invest in marketing. Invest in marketing to spread the word about your business. This will make sure you have a steady stream of clients lined up when your current jobs finish.
Bottom line
There are many different types of construction business loans and business loans for contractors. Find out more about the types of financing available and learn when you might want to tap into each one for specific expenses.
Frequently asked questions
You could, although it definitely helps to have a credit score of 650 or higher. While you might be approved for a loan with a lower score, you’ll likely get a much more competitive interest rate if you have good personal credit.
It depends on the lender. With some lenders, you may need to meet a minimum threshold while others may be more lenient. For example, some lenders will expect you to make $100,000 per year in revenue while others may accept $50,000.
That depends on what you need the money for. You may want a line of credit if you need to cover day-to-day operating expenses such as paying for supplies or managing payroll. You’ll typically want to take out a business loan to manage larger purchases such as a new piece of equipment.
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee.
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