January 16, 2023
9 mins

Where to Find Small Business Loans in Canada

Small Business Loans in Canada

Small businesses must access capital to thrive, especially during their start-up years. They may need to expand current activities or fund new plans. Small business loans in Canada are pivotal in helping small businesses remain competitive and healthy. These loans provide entrepreneurs with several benefits, including help in refinancing debt, improving cash flow, purchasing equipment, increasing inventories, and more.

According to Statistics Canada, small businesses make up almost 98% of companies in Canada and employ roughly 70% of the Canadian workforce. These statistics show the importance of small business loans in supporting Canadian economic growth.

Despite these businesses' contributions to the country, banks are often reluctant to loan money to small businesses because of their perceived high failure rate. Therefore, finding valuable small business loans in Canada is complicated. This post discusses where you can find small business loans in Canada.

Government-Backed Small Business Loans in Canada

The Canadian government provides some programs to help small businesses obtain the financing to start and maintain their business.

Canada Small Business Financing Loan (CSBFL) Program

The Canadian federal government offers the Canada Small Business Financing Loan (CSBFL) to small businesses, similar to the Small Business Administration in the United States. This program reduces the risk for lenders by guaranteeing up to 85% of the loan. This shared risk makes it easier for small businesses to access financing from financial institutions.

Although small businesses can take out loans up to $1 million through the CSBFL, these loans can only be used for specific purposes, including:

  • Purchasing/improving land/buildings used for commercial purposes (typically up to a 15-year term)
  • Purchasing/improving new/used equipment (typically up to a 10-year term)
  • Purchasing new/existing leasehold improvements such as renovations to a property leased by a tenant (typically up to a 7-year term)

Generally, borrowers cannot spend more than $350,000 to purchase leasehold improvements, improve a leased property, or purchase or improve new or used equipment. Also, borrowers cannot use their loans for goodwill, working capital, franchise fees, inventory, or R&D purposes.

Business Development Bank of Canada (BDC) Loans

Small Business Loans in Canada

The Business Development Bank of Canada (BDC) is owned and managed by the Government of Canada. The BDC provides businesses with several funding options for different stages of growth. For example, the BDC offers loans for companies operating for less than 12 months, between 12 and 24 months, and longer than 24 months.

In some cases, the BDC loans are deposited within 24-48 hours and can be offered for up to $100,000. Depending on how you will use the loan, the BDC provides several funding options. Examples include the following:

  • Supporting small projects
  • Purchasing/transferring a business
  • Buying/renovating facilities or real estate
  • Fulfilling large purchase orders
  • Working capital
  • Investing in new technologies
  • Purchasing equipment

The BDC provides specific loans for tech companies and support for Black, Indigenous, and Minority entrepreneurs. It also provides advisory services, such as coaching, financial management, business strategy, operational efficiency, e-commerce, and tech advice.

Export Development Canada (EDC) Financing

EDC assists businesses of all sizes to source financing options by partnering with the private sector to mitigate risk.

EDC is a Canadian export credit agency owned by the Government of Canada, which provides financial products to support Canadian exports and investments. These include insurance and guarantees, bonding products, securing financing, and increasing working capital.

EDC assists businesses of all sizes to source financing options by partnering with the private sector to mitigate risk. It offers services to facilitate international growth, secure financing, and make investments.

The list of financial solution that EDC offers include the following:

  • Buyer Financing. EDC extends loans to your customers to cover their purchases from you, lowering excessive risk.
  • Direct Lending. EDC provides financing to go after and deliver on international opportunities, expand your global footprint, take on more international projects, and cover your work-in-progress (WIP) costs.
  • Structured and Project Finance. EDC offers professional advice and financing arrangements to help you find success in long-term, capital-intensive international projects.
  • Investment Matching Program: EDC works with venture capital and private equity investors under their commercial terms to match investments of up to $5 million.
  • Inclusive Trade Investment Program: EDC offers financial backing to businesses run or headed by diverse groups, such as women, Indigenous people, and people of colour.

Alternative Lending Options

Alternative lenders usually base approvals on more than just your credit score, making it easier for start-ups and small businesses to get financing. They also offer applications with fewer administrative requirements, delivered in the simplest ways possible. As a result, alternative lending is ideal for business owners who do not have time to prepare an extensive application or need funding immediately.

Online Lenders

Online lenders offer an intelligent alternative to traditional bank loans. Technology is used throughout the process, and a different model is utilized to assess creditworthiness. Various loan choices and separate lenders can be compared with their associated fees and rates.

Peer-to-Peer (P2P) Lending

P2P lending is a way to finance that lets anyone be a lender to someone needing a loan. They usually connect via an online platform, which is beneficial because it sidesteps the conventional banking system and simplifies the funding of small businesses.

Credit Unions

According to Investopedia, credit unions are financial cooperatives that provide traditional banking services to their members. They sometimes offer better rates on loans than conventional banks. They work as local, community-based financial institutions that support small- and medium-sized businesses. Unlike for-profit banks, credit unions are not-for-profit and distribute their profits among their members.

Traditional Bank Loans

In Canada, financing from traditional banks is more complex than other lenders.

Five major banks in Canada — RBC, Scotiabank, CIBC, TD, and BMO — offer financing programs for small businesses. In addition, some banks provide CSBFL funding and other financing options, including lines of credit, term loans, asset-based financing, operating credit, equipment financing, commercial mortgages, and more.

Traditional banks' small business loans in Canada differ in amounts, terms, and fee structures. Loan amounts typically start at $10,000. These loans are offered on short-term, mid-term, and long-term agreements. Although some terms may run up to thirty years, they are mostly provided with seven- to ten-year repayment terms.

In Canada, financing from traditional banks is more complex than other lenders. Most small businesses lack the credit history and collateral usually needed for such loans, particularly those in the beginning stages. Thus, alternative lenders might be a better option for small businesses.

Not all banks require the same information to qualify for small business loans in Canada. But the basic information required includes the following:

  • A detailed business plan
  • Your capital business assets
  • Cash flow projections and financial statements
  • Your personal credit score and business credit profile
  • Details of your personal income, tax returns, and insurance policies
  • Evidence of collateral
  • Professional resume of all principal owners

To increase the chances of being approved for a traditional bank loan, small business owners should create a business plan, have a solid personal credit score, prepare business documentation, use assets as collateral, and reduce debts.

Other Financing Options

In addition to the abovementioned approaches to getting small business loans in Canada, other options are also available.


Crowdfunding is a way for small businesses and start-ups to raise money by asking many people for small amounts, usually in exchange for a stake in the company. Thus, lots of people invest a bit in return for ownership.

The most common types of crowdfunding plans are:

  • Equity Crowdfunding. Investors receive shares in a company or the right to a part of revenues and profits from a specific product in exchange for their money.
  • Debt Crowdfunding. Investors lend money to businesses at a relatively high-interest rate.
  • Donation/Rewards-Based Crowdfunding. The BDC notes that a company can set up a fundraising target and ask for donations in exchange for a token or receipt. If the target is not met, the funds are returned.

Grants and Funding for Non-Profit Organizations

In Canada, NPOs can seek funding from governmental departments, local groups, foundations, and businesses. Such grants are generally categorized by the source, such as:

  • Government grants (federal, provincial, or municipal)
  • Foundation grants
  • Corporate grants

NPOs can fund their next initiative using these grants. But they should keep in mind that this type of funding is restricted to certain activities. Therefore, ensuring their application is specific and focused on a particular task is critical to obtaining financing in this way.

Invoice Financing

Small businesses can utilize invoice financing to get paid faster. This program allows them to receive up to 95% of their invoices immediately after they are issued. It is a type of loan that utilizes unpaid invoices as collateral.

Invoice financing is suitable for businesses that bill many thousands each month with longer invoice payment terms. This financing is also great for those without assets to use as loan security.

In Closing

If you need a small business loan in Canada, there are various options for getting your financing. The first option is taking advantage of traditional bank loans or government-backed small business loans in Canada, including the CSBFL program, BDC loans, and EDC financing.

Since not all small businesses and start-ups have the credit required to get bank and government-backed loans, alternative lenders such as online lenders, P2P lenders, and credit unions also provide great options. If none of these options work, small businesses can get financing through other methods, such as crowdfunding, grants for NPOs, and invoice financing.

Regardless of where you choose to finance your small business in Canada, it would help to compare different loan options to find out which is best for your business. In addition, seeking professional advice and assistance when applying for small business loans in Canada can help ensure you are on the right track to fund your business.

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