Unsecured business loans in Canada let you borrow money without the need to secure your loan with an asset (such as your home, car or business assets). This means you’ll borrow money based on your credit score or business revenue – and you won’t risk losing your assets if you default on your payments. Just be prepared to pay higher interest than you would with a secured loan.
Merchant Growth is a Vancouver-based lender that offers alternative financing for small businesses. There's no collateral required to apply for a loan and if you're approved, you'll get the funds you need in as little as 24 hours. Full Review
Specializes in alternative small business financing
Fast funding
Flexible loans to suit bad credit borrowers
Designed for small businesses only
Eligibility requirements won't suit all businesses
2M7 Financial offers an alternative to business loans in the form of merchant cash advances. It has a 97% approval rating on all submitted applications. Payment is based on future sales, and you don't need to provide collateral to get funding. Full Review
Same day funding
Easy online application process
Repay based on your cash flow
No collateral needed
Expensive
Short-term financing
Loan amount
$10,000 – $250,000
APR
N/A
Term
3 - 6 months
Interest Rate Type
Fixed
Min. Credit Score
550
Fees
There is a one-time “factor rate” fee that’s between 1.18 and 1.48 and is multiplied by the amount of your cash advance to determine the total amount that must be paid back. This is the only fee you’re charged for your cash advance.
Turnaround Time
A few hours up to two business days, depending on how accurate and complete your application is
Loans Canada is an online broker that lets you fill out a single application and compare business loans from a network of more than 60 lenders. Same-day approval and next-day funding are available, and there are no fees when you use Loans Canada to compare your options. Full Review
SharpShooter Funding is an online business lender that offers alternative financing options to Canadian small businesses. It's quick and easy to apply online, and SharpShooter Funding will consider your business' financial position rather than your credit score when assessing your application. Approvals are provided within 24 hours, with the funds sent to your account within three business days. Full Review
Lenient eligibility criteria compared to banks
Easy to apply online
Bad credit accepted
Get funded within three days
High rates if you have bad credit
No branches if you'd rather deal with your lender in person
Some loans have stricter eligibility criteria than others
Loan amount
$1,000 – $300,000
APR
5.49% – 22.79%
Term
12 - 60 months
Interest Rate Type
Fixed
Fees
$35 NSF fee $45 incoming wire fee
Turnaround Time
48-72 hours
Serviced Provinces
All of Canada
How do unsecured business loans in Canada work?
Unsecured business loans let you borrow money without the need for an asset to secure your monthly repayments. Your credit score is used to determine your eligibility to borrow, so you’ll usually need a good to excellent score (660+) to qualify. You may also be eligible to qualify based on how much business revenue you make.
You can expect the following features with unsecured business loans in Canada:
Interest rates. Usually between 7% and 47% for good and bad credit
Amount. Typically between $10,000 and $100,000
Term. Between 1 and 5 years
Unsecured vs secured business loans
Use this table to compare the main features of secured and unsecured business loans:
Feature
Unsecured loan
Secured loan
Eligibility
You’ll need a high credit score and/or business income to qualify
You’ll require an asset to secure your payments
Interest rates
Expect to pay higher rates due to more risk for the lender
Expect to pay lower rates since payments are secured by your asset
Loan amount
Borrow between $10,000 and $100,000 in most cases
Borrow more than $100,000 if you have high equity in your assets
What can I use unsecured business loans in Canada for?
You can use unsecured business loans to pay for any business-related expenses you may have. For example, you might use your loan to supplement your cash flow, lease business real estate or expand your inventory. You’ll just need to be able to prove that any expenses you use your loan for are directly related to your business.
Where can I get unsecured business loans in Canada?
Unsecured business loans are offered by the following providers in Canada:
Banks. Bank loans are provided by one of Canada’s Big Five banks, smaller independent chains and multinational banks. Borrowing from a bank means getting competitive rates and dealing with a trusted financial institution, but you’ll need to meet strict eligibility criteria to qualify.
Providers include BMO, TD Bank, RBC, CIBC, Scotiabank, Canadian Western Bank and National Bank.
Credit unions.Credit union business loans are often more flexible than big bank loans. Just be aware that you’ll likely only be eligible for smaller amounts and you’ll usually be required to be a member if you want to borrow from certain credit unions.
Providers include Meridian, Servus, Vancity, Connect First, Conexus, First West, Steinbach, Alterna Savings and Coast Capital Savings.
Private lenders. Online loans are usually less expensive and you may be able to qualify with bad credit. The main downside is that you have a higher chance of borrowing from a predatory or untrustworthy lender.
Providers include Loans Canada, SharpShooter and Merchant Growth.
Because you don’t provide any assets as security for your loan, the lender is taking on a higher level of risk. To reduce this risk, the lender may ask you to provide a personal guarantee to qualify for an unsecured business loan.
A personal guarantee is when you promise to repay the loan if your business can’t. The guarantee isn’t tied to any specific personal asset, but you’ll be liable to pay back what you borrow if your business fails.
There are two types of personal guarantees:
Unlimited. If you provide an unlimited personal guarantee, you’ll have to cover the total loan cost (plus any legal fees) if your business can’t pay back the loan. It’s an attractive prospect for the lender, but comes with the highest level of risk for you.
Limited. A limited personal guarantee features a cap on how much you’ll be responsible to repay if the business can’t. If you’re one of multiple business owners, each owner may be responsible for repaying a fixed percentage of the debt.
Providing a personal guarantee increases your chances of getting approved for an unsecured business loan and helps you access better rates. But it’s also a risk that could place a big strain on your personal finances if your business goes under, so make sure you carefully consider your options before guaranteeing a loan.
Before you apply, consider the benefits and drawbacks of getting unsecured business loans in Canada:
Pros
No collateral required. You won’t need to worry about losing your assets if you default on your loan.
Faster turnaround. You can get your loan faster because you won’t need to submit as many supporting documents to verify your assets. Same-day funding is available in some cases, but often takes 1-3 business days.
Options for bad credit. You may still be able to qualify for unsecured business loans with bad credit (but you’ll usually pay much higher interest rates).
Cons
Higher rates and fees. You’ll usually pay higher business loan rates and fees since your lender has to take on more risk to lend you money (without assets to secure your payments). You can also expect lower loan amounts and shorter loan terms.
Personal guarantee may be required. You may need to provide a personal guarantee to qualify for a loan, which will place your personal finances at risk if your business can’t repay the loan.
Hard to qualify with bad credit. While some lenders are willing to work with borrowers who have bad credit, many aren’t. Bad credit borrowers will also need to accept higher interest rates. Learn more about business loans for bad credit.
How to compare unsecured business loans
Consider these factors before you apply for an unsecured business loan to get the right fit:
Loan amount. Look for a lender willing to give you the money you need at a price you can afford. Enlist a cosigner or use collateral to qualify for a higher loan amount.
Interest rates. Compare multiple lenders to find the best interest rates. Low rates usually fall under 12% while high rates range from 15% to 40% on average.
Loan terms. Choose a term that gives you repayments you can afford. Keep in mind that every year you add will make your regular repayment amount more manageable, but it’ll also drive up the amount of interest you’ll pay overall.
Fees. Look at the APR (fees + interest) to determine the total cost of your loan. Keep an eye out for hidden fees, including origination or early repayment fees.
Repayment options. Negotiate the repayment schedule that works best for you. Find out what options are available if you end up struggling to repay your loan.
Restrictions. Find out if there will be restrictions on how you can spend money. Consider a business credit card or line of credit if you need a steady cash flow.
Turnaround time. If you need fast access to funds, check how long it will take for the loan amount to be deposited into your account. Learn more about fast business loans.
How to get an unsecured business loan
You can apply for unsecured business loans in Canada by following the steps below:
Application process
Compare lenders. Compare multiple lenders to find the best fit for your business. Consider getting pre-approved to get a true estimate of the cost.
Apply online or in person. Fill out the application on your lender’s website or visit a branch in person to apply for an unsecured business loan.
Provide personal information. Input information such as your full name, date of birth, address, phone number and email.
Provide business details. Provide details about your business such as your company address, years in operation, annual revenue and business assets/debt.
Supply financial information. Enter your bank account information such as your bank name, transit number and account number.
Agree to a credit check. Give your lender permission to check your credit score as part of the application process.
Provide supporting documents. Upload any required documents with your application to verify your ID, revenue and other information about your business.
Submit your application. Submit your application and wait for approval.
Loan eligibility requirements
To qualify for unsecured business loans in Canada, you may need to meet the following eligibility requirements:
Be a Canadian citizen or a permanent resident with a valid Canadian address and a working bank account.
Have a good credit rating (usually 660 or more) or be willing to accept much higher interest rates to get unsecured business loans with bad credit.
Supply a registered business number and be able to prove that you’ve been in operation for at least six months.
Provide a business plan that shows the projected growth of your business, including forecasts for cash flow and income.
Show you can repay your loan by providing monthly or annual revenue statements or other requested documents for your business.
Sign a personal guarantee to assume personal responsibility for your business loan if you can’t make your repayments for some unsecured business loans.
Can I get unsecured business loans for bad credit?
You may be able to get unsecured business loans with bad credit if your company performs well. Your lender will usually consider factors such as how established your business is, how much revenue you make, how much potential your business has for future growth, and whether you have any other business debts. Just prepare yourself to pay much higher interest rates if you apply with bad credit.
Other types of unsecured business financing
Explore these options if you want a different way to access unsecured cash for your business:
Business credit cards. Apply for a business credit card to fund smaller business expenses but expect to pay higher interest rates if you hold an outstanding balance.
Business lines of credit. Choose a line of credit if you want funds to be available when you need them, but only pay interest on what you actually borrow.
Outside investors. Pitch your business to angel investors, launch a crowdfunding campaign or ask friends or family for a loan to get the capital you need.
Bottom line
You can apply for unsecured business loans in Canada with no need for collateral, but these loans tend to come with higher interest rates than secured loans. You’ll usually need good credit to qualify unless you can prove that your business is well-established and makes a high revenue. Compare lenders and unsecured business loans to find financing that’s right for your business.
Frequently asked questions
An unsecured business loan is a loan that is not backed by any collateral. This means you won't be putting any of your assets at risk if you default on your loan, but it also means you'll need to accept a higher interest rate than a secured loan.
It depends on the lender. The best way to find out how much you borrow with a business loan in Canada is to get pre-approved by multiple lenders. This will also give you a better idea of how much interest you'll need to pay.
While it can help to have a well-established business credit score, you may be able to get by with just your personal score. Just be aware that you could be required to sign a personal guarantee for your business loan if you use your personal credit score to qualify. This will make you personally obligated to repay your loan if you default on payments.
Small business loans can be secured or unsecured. A secured loan lets you put up collateral such as personal or business assets to back your loan. This reduces the risk for the lender and allows you to access a better rate. Meanwhile, unsecured small business loans don't require you to put any of your assets at risk, so the amount you can borrow and the interest rate you get are determined based on your creditworthiness.
Your application may be rejected because you don't meet the eligibility criteria. For example, you could be denied if you fail to meet age or residency requirements or if you have a low credit score and/or don't make enough income. It could also be as simple as an incomplete application, so make sure to contact your lender for more information.
You may have more trouble getting an unsecured business loan to fund a start-up or new company. This is because many lenders will want to see that you have an established business with a regular stream of revenue before they'll provide you with financing. Check out your options for funding a new venture in our guide to start-up loans.
You'll typically be charged a fee if you miss any loan payments. If you default on an unsecured business loan, what happens next depends on the lender and the terms of your loan.
If you provided a personal guarantee, the lender can repossess your personal assets and sell them to cover your debt. If not, the lender or a debt collector may sue you to collect the outstanding loan balance. Your business and personal credit scores will also be negatively affected, which will make it more difficult to get approved for business or personal loans in the future.
Find out more in our guide to what happens if you default on a business loan.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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