Finding business startup loans in Canada doesn’t have to be challenging. In fact, there are a variety of startup funding options you can pursue to get the money you need to grow your new business. From government-backed startup loans to private loans, compare your startup business loan options below to find the best fit for your new business.
You can apply for business startup loans in Canada through banks and credit unions. The Canada Small Business Financing Program (CSBFP) loan is a business loan partially backed by the Canadian government. You can borrow up to $1 million for startup funding, and you can apply for it through a participating bank or credit union. Most Canadian startups and small businesses with revenue of $10 million or less are eligible to apply. Farming businesses are not eligible.
You can use the CSBFP loan for many purposes, including buying a commercial vehicle, buying or improving equipment, buying land or buildings for business or taking out a lease. Fees associated with this loan include the registration fee, interest rate and lender fees.
Some examples of banks and credit unions in Canada that offer CSBFP loans include RBC, Scotiabank, BMO, TD, Meridian and ATB.
The CSBFP loan has strict eligibility requirements and an intensive application process. If you’re looking for startup business loans in Canada with more flexible requirements and faster funding, you can apply to alternative lenders. Alternative lenders vary in their requirements, but generally, you need to be in business for at least 3 to 6 months and have at least $10,000 monthly revenue.
If your business can’t qualify for a startup business loan, you can get a personal loan from a bank, credit union or alternative lender. Personal loans don’t rely on your business information to determine your eligibility. Instead, they let you borrow against your personal credit score or assets – and the money you’re approved for can be spent on pretty much anything you want, including your business. You can get a secured personal loan, which involves collateral like your home, or an unsecured personal loan, which doesn’t involve any collateral.
Banks and credit unions have stricter income requirements, so if you don’t qualify, you can apply for startup funding with alternative lenders.
You may be able to apply for business startup grants from the Canadian government and other organizations if you operate a specific type of business. For example, you could qualify for a business grant if you’re a new farmer, operate an export business or want to market an innovative product or service. You can also get grant funding if you’re looking to train and develop your workforce.
A perk of getting a grant for startup funding as opposed to a business startup loan is that you typically won’t have to repay a grant, which saves you a lot of money in the long run.
The BDC is a Crown corporation, and its sole shareholder is the Government of Canada. If your startup has been operating for 12 to 24 months, you can get startup funding of up to $250,000 from BDC with loan terms of up to 12 months. With BDC business loans, you can postpone principal payments so you can focus on growing your business.
If your startup has been operating for less than 12 months, you can apply for a startup funding loan from one of BDC’s partners. Learn more in the non-profit section below.
There are non-profits in Canada that provide startup funding and/or non-financial support.
|Organization||Description||Loan amount||Loan term||Interest rate|
|Futurpreneur Canada (BDC partner)||Up to $60,000||5 years|
|Community Futures (BDC partner)||Varies||Varies||Varies|
|PME MTL (BDC partner)||Around $5,000 to $50,000||Varies|
|Rise||Up to $10,000||Not disclosed||Not disclosed, but they describe it as “low interest”|
If you’re looking for startup funding from less traditional lenders, you can consider these methods:
A business credit card can be a great startup funding option for smaller expenses and to help manage your company’s spending. Some business credit cards come with low annual fees and competitive interest rates and are startup-friendly, making these a viable option for your business if you’re just starting out.
Business incubators are a startup funding option designed to help businesses get off the ground. Offering up a variety of services including free office space, training programs and more, you could potentially take advantage of the many services offered in order to save money in some areas of your business. Not only can you save on office space and training costs, you could potentially benefit from speeding up your business’s growth and success.
An unsecured business loan is a type of startup funding that doesn’t require any collateral. Unsecured loans are issued based on how good your credit score is. You’ll usually need a personal score of at least 650 to qualify for these types of startup business loans.
A secured business loan is a loan backed by collateral, whether it’s a business or personal asset. This startup funding option can be easier to come by as a startup than unsecured loans, since you lower the lender’s risk by using an asset such as your home or equipment to secure your payments. The downside is that your lender can seize this asset to repay your loan if you run into financial trouble.
A merchant cash advance is money you receive in advance from the lender in exchange for a percentage of your daily credit card and debit sales in the future. Merchant cash advance loans can be a suitable option for startups since they get repaid based on a percentage of your sales, which means that you’ll repay more in months where you net a higher revenue and less in months where your business is less busy.
Revolving lines of credit give you more startup funding flexibility in terms of how you can access money. You can dip into these “loans” whenever you need cash and pay them back whenever you have a surplus of revenue. The best part is you’ll only pay interest on the amount you withdraw. Minimum time in business is around 6 to 12 months.
Business startup loans in Canada work just like personal loans, except they’re usually for larger amounts and you can only use them to cover your business expenses. Depending on the lender you go with, startup funding loans can come with fixed rates that stay the same throughout the loan term or variable interest rates that fluctuate with the markets. To get a competitive interest rate, you’ll need a good to excellent credit score, a strong business plan and your business needs to be generating revenue.
You’ll usually repay your startup business loan in installments. You can use your startup funding to pay for any business expenses you may have as you establish and expand your business.
Your ability to qualify for financing will depend on your personal situation and business profile. Factors that your lender may assess include the following:
There are a number of factors that you should consider when applying for startup funding loans:
To qualify for a startup business loan in Canada, you may need to meet the following eligibility requirements:
You may be asked to sign a personal guarantee to assume personal responsibility for your startup loan if you can’t make your repayments.
|Loan terms (in years)|
orCompare business loans
There are many types of startup business loans that you can take advantage of to get your business off the ground. Just make sure that you have a decent credit score and a solid business plan to bolster your application. You can also pursue a personal loan or an alternative method of funding (such as crowdfunding or equity-sharing) to get the startup funding you need.
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