Business lines of credit in Canada

If your business operating expenses are increasing faster than your revenue, you may need quick access to cash. A business line of credit could be the answer, giving you access to a revolving line of credit that you can use for ongoing expenses or when business emergencies arise.

In this guide, we’ll compare lines of credit from trusted lenders and show you how to find the best lines of credit for small business.

Compare business lines of credit in Canada

1. Journey Capital (formerly OnDeck Canada)

Journey Capital is an online business lender that was founded in the USA in 2007 and started offering loans in Canada in 2015. You can apply online for a business line of credit within 10 minutes, and once approved the funds will be available to you within 24 hours.

• Loan amount: $5,000 - $300,000
• Interest rate: 8.00% – 29.00%
• Type: Unsecured (no specific collateral, but a general lien and personal guarantee may be required)
• Eligibility requirements: 6 months in business, minimum $100,000 annual gross revenue

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2. Merchant Growth

Merchant Growth specializes in alternative financing solutions for Canadian small businesses. You can apply online and get your funds within 24 hours of being approved, and you’ll only pay interest on the funds you use with this revolving line of credit.

• Loan amount: $7,500 - $125,000
• Interest rate: 12.99% - 39.99%
• Type: Unsecured
• Eligibility requirements: Operating for at least 6 months, Canadian based business, 550+ credit score, $10,000 in monthly sales

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3. Greenbox Capital

Greenbox Capital offers fast and convenient small business funding. You can apply for a business line of credit and get funded in as little as 24 hours, with loan repayments automatically deducted from your business’s debit and credit card sales.

• Loan amount: Up to $500,000
• Interest rate: Not specified
• Type: Unsecured
• Eligibility requirements: Must satisfy business revenue and cash flow requirements and have been in business for at least 6 months.

4. SharpShooter Funding

SharpShooter Funding is an online-only lender that serves businesses across Canada. Founded in 2015, it offers approvals within 24 hours and funding within three business days. Bad credit is accepted, and funds are available in CAD or USD.

• Loan amount: From $10,000
• Interest rate: 5.49% - 22.79%
• Type: Secured or unsecured
• Eligibility requirements: Min. revenue of $4,166 /month, Have a good credit score.

5. Scotiabank

The Scotiabank Credit Line for business offers access to a revolving line of credit. You can access the funds you need through the Scotia OnLine internet banking portal, and you don’t need to provide any collateral to qualify for funding.

• Loan amount: Up to $1,000,000
• Interest rate: Tied to Scotiabank’s prime lending rate of 7.2%
• Type: Unsecured
• Eligibility requirements: Scotiabank may consider your income for the last two tax years, financial statements, business plan, and your personal credit history. A personal guarantee is required if you are a sole proprietorship or a partnership.

6. RBC

If you want an RBC small business line of credit, check out the Royal Business OperatingLine of Credit. You can access funds via online banking, at an ATM or in a branch, and then automatically pay back the money you borrow using supplemental funds from your business’s everyday operating account. It’s also worth mentioning that RBC also offers the Visa CreditLine credit card for small businesses that is designed to function like a line of credit.

• Loan amount: From $10,000
• Interest rate: Not specified for the OperatingLine of Credit, From Prime + 2.9% to 11.9% for the RBC Visa CreditLine
• Type: Secured or unsecured
• Eligibility requirements: Not specified

7. TD

You can apply for a TD business line of credit of up to $25,000 online, while you’ll need to visit a branch to apply for a larger amount. Offering a variable interest rate, this line of credit is usually secured by cash or accounts receivable. Monthly payments towards the amount you borrow are automatically deducted from your chequing account.

• Loan amount: Min. $1,000 (no max.)
• Interest rate: Floating rate based on TD Prime Rate (7.2%)
• Type: Secured
• Eligibility requirements: Not specified

8. BMO

If you’re searching for a BMO business line of credit, there are multiple options to choose from. The BMO Credit Line for Business comes with a credit card you can use to make purchases anywhere Mastercard is accepted. However, BMO also offers secured lines of credit using your home or home equity as collateral, while an Operating Line of Credit ($50,000 or more) and a US Dollar Line of Credit are also available.

• Loan amount: Up to $120,000 (Credit Line for Business)
• Interest rate: From Prime + 2 to 11% (BMO Credit Line for Business)
• Type: Unsecured or secured
• Eligibility requirements: Not specified

9. CIBC

A CIBC business line of credit gives you access to revolving funds to help meet your cash flow needs. Available in CAD or USD, this line of credit features a variable interest rate, and it’s usually possible to get funded within two days.

• Loan amount: From $10,000
• Interest rate: Not specified
• Type: Secured or unsecured
• Eligibility requirements:
  
  
  • Industry experience
  
  
  • Personal financial investments in your company
  
  
  • Your business has generated positive revenue for at least 12 to 24 months
  
  
  • Good credit score
  
  
  • Detailed business plan
  
  

What is a business line of credit?

A business line of credit allows you to borrow funds up to a predefined credit limit, and only pay interest back on the money you borrow. This flexibility means you can draw and repay your loan at a pace that suits your business.

Most lenders allow you to make multiple draws — although there may be a fee for each one — and interest rates tend to be much lower than on business credit cards. This allows you to access the amount your business needs without forcing you to pay interest on the money you don’t use. And since many lines of credit are revolving, you’ll have access to your full line of credit as you repay.

This added flexibility is what makes a business line of credit valuable and practical for business owners. You can use your loan funds for just about any business expense, like buying inventory, covering an unexpected expense, and managing cash flow.

Business lines of credit in Canada are available from $10,000 to $100,000 from a wide range of lenders, but some can be as high as $1 million. The interest and fees you pay will depend on your lender, so compare your options before deciding where to apply.

Features of business lines of credit in Canada

• Interest rates. Make sure you understand whether your lender charges a variable or a fixed interest rate. Also, keep in mind you’ll only be charged interest on the amount you actually borrow, not on the amount you’re approved for. Learn more about business loan interest rates.
• Fees. A business line of credit may have one-off fees such as setup fees. Additional fees that may be ongoing might include annual charges, ATM and transaction fees.
• Monthly repayments. You will usually need to make minimum monthly repayments on the amount you borrow. However, if you can afford to pay off your balance in full, you’ll avoid paying unnecessary interest charges. It’s also worth checking the fine print to find out whether the lender requires you to pay off the outstanding balance in full at some stage to reduce their level of risk.
• Secured vs. unsecured. Some business lines of credit may need to be secured, meaning you will need to put up an asset as collateral.

What are the interest rates of business lines of credit?

Banks currently have a prime rate of (7.2%), which influences business line of credit rates. According to Statistics Canada, the average business loan rate is 7.06%. This includes commercial mortgages, so be prepared to pay a higher rate for a business line of credit.

Here are examples of the latest business line of credit interest rates:

• BMO Credit Line for Business: From Prime + 2 to 11%
• RBC Visa CreditLine for Small Business: From Prime + 2.9% to 11.9%

How to find the best lines of credit for small business

Here are five questions you can ask when you’re trying to compare business lines of credit options in Canada. Answering these questions before signing on the dotted line will help you narrow down your options to find the best business line of credit for your needs.

• Can my business afford it? This should always be the main factor in your decision. Before taking on any type of debt, calculate all associated costs and make sure your business’s cash flow is sufficient to handle the monthly repayments.
• How much can I borrow? Different lenders offer varying minimum and maximum amounts. The particular amount you’re approved for will depend on several factors including your past credit history, requested credit limit, cash flow, assets and liabilities. You won’t automatically be approved for the maximum amount.
• When will I receive my line of credit? Make sure the lender you choose can provide your funds when you need them. If you need money quickly, look for a lender that offers a fast turnaround time.
• How much will it cost me? Aside from the interest rate, check to see what fees you’ll be charged, including setup fees and annual fees.
• How much will my repayments be? Your monthly repayments aren’t fixed and will depend on how much you would like to pay down. As long as you pay interest and other fees for the month, lenders usually provide great flexibility on how much of the balance you want to pay back. Your lender may set a monthly minimum that you’re required to pay back each month, and this will often be automatically deducted from your chequing account.

Can you get a business line of credit with bad credit?

You may get approved for a business line of credit with bad credit if you apply to an alternative lender like SharpShooter or Greenbox Capital. Alternative lenders have more flexible eligibility requirements than banks and credit unions. Rather than fixating on your credit score, they will look at the overall health of your business. However, be prepared for higher interest rates.

You can also apply to a business loan broker like Loans Canada to get matched with a lender that can provide you with a business line of credit for bad credit.

Business line of credit risks

While a business line of credit can be flexible and convenient, you should still be cautious before applying for credit. Here are some easy mistakes to make with business lines of credit — avoiding them can save you a lot of money in the long run.

• Requesting more than you need. Think twice before requesting a credit limit more than what your business actually needs. You don’t want to take on too much debt that could put your business in financial distress.
• Borrowing more than you can afford. It’s easy to borrow more than your business can afford, especially if you borrow the maximum amount allowed by your credit limit. Only borrow the amount you need, and if you can, pay more than the minimum each month to reduce the amount you owe.
• Taking too long to repay. Because business lines of credit are like credit cards, interest and charges will continue to accrue when a balance is left unpaid. This means the longer you wait to pay back your unpaid balance, the more expensive it gets.

How to get a business line of credit in Canada

Here’s what you need to do to apply for a business line of credit in Canada:

1. Compare lenders. Compare business lines of credit from a range of lenders. Research how much you can borrow, the interest rate and fees that apply, and how you can access the funds.
2. Read the fine print. Check the lender’s eligibility criteria to make sure your business qualifies.
3. Prepare documents. Gather documents like your profit and loss statements, your tax numbers and accounting records.
4. Fill out the lender’s application. This usually will include both personal and business information.
5. Submit your application and wait for a response. Depending on the lender, it may take a few minutes to a few days.

Most business line of credit lenders require you to have been in business for at least a year and meet certain revenue criteria. If you have a newly established business, check out our guide on startup loans.

Bottom line

While a business line of credit can be convenient in its flexibility, it can be tempting to make a large draw that adds more debt than your business can afford. Carefully compare lenders, and be sure to consider all your business loan options before making a final decision.

Frequently asked questions about business lines of credit in Canada

• What documents do I need to apply?

  You will usually need the following:

  • Your identification
  • Proof of income
  • Business financial statements, including income, expenses, assets and liabilities
  • Other personal- and business-specific information such as address, licence number (if applicable) and how long you've been in business

• How long does a business line of credit last?

  There's usually no time limit on a line of credit. Most business lines of credit remain valid as long as you hold the original credit account.

• Can I get a line of credit for a startup business?

  Yes, it is possible for startups to access lines of credit. However, many lenders will require you to have been in business for a specified period (such as 6 or 12 months) before considering your credit application. There are online lenders who are willing to work with new businesses, but be aware that high interest rates typically apply.

• Can I get a secured or unsecured business line of credit?

  Yes, both secured and unsecured lines of credit are available to businesses. Some lenders offer either secured or unsecured options, while other lenders offer both. Talk to your lender to find out what they provide, and if they offer secured loans, check what assets they accept as collateral.

• Can I increase the limit of my business line of credit?

  Yes, unless you've already been approved for the lender's maximum credit limit, you can apply to increase your limit. You will typically need to provide proof that your revenue has increased, and if you have a secured line of credit, you may have to provide additional collateral to secure the increased credit amount.