If you have a small business, a business loan would be a handy financial tool to help fuel business growth, expand your operations or manage your cash flow.
Small business loans are available from various sources, including banks, credit unions and alternative lenders.
Below, we will cover the best business loans in Canada, where to get them and how to apply.
Main Highlights
- Alternative providers of some of the best business loans include Loans Canada, Merchant Growth, Sharpshooter Funding, OnDeck, and Greenbox Capital.
- RBC, Scotiabank, TD, BMO and CIBC are some lenders offering business loan interest rates in Canada that are lower than those offered by alternative lenders.
- Alternative lenders have higher interest rates but offer faster loan application and approval, with fund release in as fast as 24 hours.
Best Business Loans in Canada
In this section, we will enumerate some of the best sources for business loans in Canada, how much funding your business can get, the loan terms, eligibility and the pros and cons of each business loan provider.
1. Loans Canada
Loans Canada is a popular site for individuals looking for financing. If you want to find multiple lending options from just a single application, this online platform would be a good resource to start your search.
The site features a platform of partner lenders offering diverse solutions you can access by submitting an online application form that you can complete in a flash. On its website, go to the Small Business Loans page and fill out the form to get a no-obligation quote.
After submitting the form, Loans Canada will connect you with small business lenders offering loan amounts ranging from $1,000 to $500,000, often requiring no collateral. Eligibility and loan application requirements vary from one lender to another.
While interest rates depend on the lender you choose and your financial health, APRs offered by lenders in the Loans Canada network range from 6.99%–46.96%. Loan terms can range from 3-60 months, depending on the lender you choose.
Pros
- Quick application
- Multiple loan offers from various lenders with one application
- No minimum credit score
- Flexible terms and repayment plan
- Accepts bad credit and low credit scores
Cons
- Interest rates and fees are higher than in traditional financial institutions
- Loan origination fees
- No online quotes
- Most lenders in the network operate online and have no physical branches
Find out more about Loans Canada in this review.
2. Merchant Growth
Merchant Growth is a Vancouver-based online lender that offers various loan options. Whether you are looking for term financing, a line of credit or business financing, Merchant Growth has several solutions you can choose from.
With a term financing, you can borrow anywhere from $5,000-$800,000. The repayment period is from 6-24 months. To qualify for this loan, your business must be in Canada and at least six months old. Plus, your monthly revenue must be $10,000.
Lines of credit and E-Commerce Financing are also available. Amounts range from $7,500 to $125,000 and $5,000 to $800,000, respectively.
To apply for a loan, complete the online application form or provide details to a Merchant Growth representative over the phone, who will help determine the best loan solution. Once the lender approves your application, you can get the funds in 24 hours.
Pros
- Applying does not affect your credit score
- Fund release in 24 hours
- No hidden fees and no collateral
- Various loan options
Cons
- Monthly sales requirements
- Loan costs may be more expensive than banks
- Credit score requirement
3. Sharpshooter Funding
Toronto-based Sharpshooter Funding is an alternative lender providing business funding to startups and small business owners through lending solutions like Start-Up Funding, Unsecured Business Funding, Long Term Funding, and Business Line of Credit.
Your business can take advantage of the different loan options and their loan amounts of up to $300,000, depending on your chosen loan. Loan terms are 6-60 months, with daily, weekly, bi-weekly or monthly repayment schedules.
To apply for a business loan, go to the Sharpshooter Funding website and fill out the online application form. Provide your personal details and information about your business and prepare the required documents. To qualify, you must prove that your business has been operating for at least 100 days.
Pros
- Faster and simpler loan approvals
- Fast funding (within 36-48 hours)
- Same-day approval
- No minimum credit score requirement
- All industries accepted
Cons
- May conduct background checks, credit report inquiries and other investigative reports
- Online only
- Higher interest rates for bad credit
4. OnDeck
Since 2006, OnDeck has offered global small business loans to over 100,000 customers worldwide. It offers financing options with loan amounts from $5,000-$300,000. Loan terms range from 6-18 months.
The minimum requirements to be eligible for OnDeck funding are the following: an annual revenue of $100,000, a business history of at least six months with you as the business owner, a beacon score of 600 and a business bank account.
To apply for a loan, complete the online application form or call an OnDeck representative. A lending advisor will reach out to you to help you choose the best offer. When your loan gets approved, the money will be in your business bank account in 24 hours.
Pros
- Applying will not impact your personal credit score
- A+ rating from the Better Business Bureau
- Fund release in as fast as 24 hours
- Competitive pricing
- No personal collateral requirement
- Flexible repayment plans and adjustable interest rates
- Newer businesses may not qualify
Cons
- Higher cost in return for convenience and flexibility
- Revenue requirements
- Shorter loan terms
- Choosing regular repayments may strain your cash flow
5. Greenbox Capital
Greenbox Capital is a Miami-based lender providing loans to small business owners in Canada through its office in Toronto. Loans are available to businesses operating for at least six months. Funding amounts range from $3,000-$500,000, with terms of 3-12 months.
The lender will require you to submit credit card and bank statements for the previous months and a copy of your driver’s licence. You may also be required to have a monthly revenue of $7,500.
To apply online, go to the Greenbox Capital website and complete the online application form. Funding advisors will reach out to you to help you decide on the right loan. Once you provide all the requirements, the lender will approve your application in one business day.
Pros
- Streamlined online application process
- Faster turnaround
- Approvals are based on the potential of your business
- Same-day approval
- Suitable for businesses with bad credit
- Funds most industries, including high-risk businesses
Cons
- Daily payments may be required
- Short loan terms
- High-interest rates
- Startups are not qualified
6. Canada Small Business Financing Program Loan
If you cannot find financing through traditional methods, ask your bank about the Canadian Small Business Financing Program (CSBFP). If you own a small business or a start-up in Canada with gross annual revenues of not more than $10 million, the CSBFP would be ideal for you.
With the CSBFP, the maximum loan amount is $1.15 million. You can apply for a maximum of $1,000,000 for a term loan or $150,000 for a line of credit. Find a list of CSBFP lenders here.
To apply, submit a business proposal to your bank, caisse populaire, or credit union. Upon approval, your financial institution will disburse the money and register the loan with Innovation, Science and Economic Development Canada (ISED).
Pros
- Maximum amount of $1.15 million
- Up to 85% of the loan amount is guaranteed by the Canadian government
- Available in eligible banks, credit unions, caisses populaires
Cons
- A registration fee of 2% based on the total amount borrowed
- Lender fees, such as setup, renewal and administration fees
- Not all financial institutions offer the program
What Are the Best Banks For a Small Business Loan in Canada?
Below are Canada’s big five banks that offer a wide variety of small business loans for entrepreneurs with diverse business needs.
7. RBC
Royal Bank of Canada (RBC) offers a range of small business loans and business financing options for entrepreneurs and small-scale businesses. The bank also provides short- and long-term loans and government-backed financing options that support small businesses.
Loans offered by RBC start at $5,000 and come with fixed or variable interest rates. Loan terms range from 6 months to 7 years. Loan requirements and interest rates vary from client to client.
To be eligible to apply for a business loan at RBC, you must have a registered business and a business plan. Other conditions may apply before loan approval. RBC also offers the Canada Small Business Financing Program.
Pros
- Multiple financing options that offer flexibility
- Longer loan terms
- Flexible repayment options
- Funding through direct deposit
- No prepayment fees
Cons
- More stringent eligibility criteria than alternative lenders
- No online loan application
- Interest rates are not immediately available
- Bad credit is not accepted
8. Scotiabank
Bank of Nova Scotia offers specialized products and services to small business owners, from short-term and long-term lending solutions to government programs designed to assist existing businesses and startups.
Business owners can borrow up to $1,000,000 with competitive fixed or floating interest rates and loan terms of up to ten years. Other offerings include business bank accounts, business credit cards, business lines of credit and small business loan protection.
You can apply for a business loan by setting an appointment with a Small Business Advisor. Once you submit your loan application, bank statements and other documentation, Scotiabank will respond within the week.
Pros
- Long loan terms
- Flexible repayment options
- Funding through direct deposit
- High loan amounts
Cons
- Strict eligibility requirements
- Bad credit not qualified
- Only businesses with annual sales of up to $15,000,000 can apply using the bank’s online application.
9. TD
Toronto-Dominion Bank offers small business loans and lines of credit, for your short-term to medium- and long-term needs. If you need government funding, TD can connect you to relevant government financing in Canada.
Small business financing can be up to $1,000,000, depending on the loan you apply for. Interest rates can be fixed or variable. Loan amortization periods are up to 20 years. Business borrowing solutions for expenses and financing assets are also available.
If you want to apply for a business loan, you need to discuss it with a Small Business Specialist who will let you know the requirements you need to provide based on the loan amount you intend to borrow.
Pros
- Competitive rates
- Flexible repayment options
- Fixed monthly payments
- Interest-only payment option
- Long amortization periods
- A preferred SBA (Small Business Administration) lender
Cons
- A good personal and business credit score may be necessary to qualify for a business loan.
- Financing can only be used for assets
- Collateral may be required
- Interest rates are not available on the website
10. BMO
Bank of Montreal makes available an array of business loans and lines of credit to small business owners who require financing to help them start or grow their businesses or answer short-term financing needs.
The loans offered by BMO come with different terms and payment options. Depending on the loan, you can borrow $250,000-$1,000,000. Interest rates can be fixed or floating, and loan term lengths can be up to 15 years.
To apply for a small business loan at BMO, schedule an appointment with a BMO bank representative at one of its branches. Prepare your business plan, the required paperwork and financial documents. After you submit your application, BMO may contact you within a few days to weeks.
Pros
- Large loan amounts
- Various financing alternatives
- Flexible repayment options
- Long loan terms
- Competitive interest rates
- Applicable for borrowers with a good credit score
Cons
- Long approval process
- Collateral may be required
- Online application not available
- Loan requirements are more stringent
- Interest rates are not available on the bank’s website
11. CIBC
Canadian Imperial Bank of Commerce has a variety of loans available for different business segments, from startups to business professionals. It provides financing to help you grow your business at any stage.
CIBC offers secured and unsecured business loans, lines of credit, business overdraft protection, and CSBFP loans. Loan amounts range from $10,000-$1,000,000. Interest rates can be fixed or variable, and amortization periods can be up to 15 years.
To qualify for a loan, your business should generate positive revenue for at least 12-24 months. You should also have a good credit score and a detailed business plan. To apply for a loan, contact a CIBC Business Advisor. If your application meets CIBC’s requirements, you can get the funds in as little as two days.
Pros
- Flexible loan options
- Large loan amounts
- Long amortization periods
- Competitive interest rates
Cons
- Additional charges (setup, renewal, prepayment, amendment fees)
- Bad credit is not accepted
- Online application not available
- No option for lower loan amounts
How to Apply For a Business Loan in Canada
The process of applying for a business loan varies from lender to lender, but here is a general guide on applying for a business loan.
- Choose a lender. You can get a business loan from traditional lenders, like your bank or alternative lenders. Each has its own capacities. Do research and obtain quotes if possible.
- Submit your loan application. Depending on the type of lender you choose, you can apply online via their website or in person at a branch.
- Provide requested documentation. Supply the documents your lender requires, such as valid identification, business bank statements, financial statements and other documentation the lender needs to approve your loan.
- Select repayment terms. Repayment periods can be daily, weekly, biweekly or monthly. Your lender may give you the option to choose a repayment period. Choose what works best for your business.
- Receive the funds. When your lender approves your bank loan, it will send the funds via wire transfer, electronic fund transfer or direct deposit. If you get a loan from an alternative lender, the fund will be available in a few hours or minutes.
Pros and Cons of Business Loans
Pros of Business Loans
- Many lending solutions and options
- Longer loan terms
- Flexible repayment schedules
- Banks often require a good credit score
- Business loans from banks offer competitive rates
- Alternative lenders provide quick application, approval and funding
Cons of Business Loans
- Startups are not always qualified
- Traditional lenders have lengthy approval periods
- Must be able to demonstrate good financial health
- Banks have strict eligibility guidelines
How to Choose the Right Business Loan For You
In choosing a business loan, several points help you select the loan option for your business needs.
- Compare interest rates. Shop around for loan offers before deciding on a lender. Comparing interest rates and fees will help you secure the best offer and could potentially save you thousands of dollars over the life of your loan.
- Check the loan terms. Longer terms are more affordable, but they result in higher borrowing costs. The longer the loan term, the more you will pay interest. Understanding the loan terms helps you decide if the loan is a good fit for you.
- Choose a suitable repayment schedule. Lenders offer different repayment periods, specifically daily, weekly, biweekly and monthly. Some lenders require daily payments, while others allow you to choose your term.
- Inquire about the fees. Loans with lower interest rates may charge additional fees. Ask about application and administrative fees, early repayment charges, late payments, origination fees and other loan costs.
- Review the loan terms and conditions. Check the loan terms, repayment schedules, term flexibility, penalties and fees. Knowing the loan terms and conditions helps you make an informed choice.
Should You Get a Business Loan?
There are several reasons for getting a business loan. But it is wise to be cautious when making major business decisions, particularly if it entails borrowing a huge amount of money. Below are ideal times for your business to consider obtaining a loan.
- Business is booming. Is your business ready to expand to a new location? If so, you may need a business loan to finance your expansion. Making the decision can mean dealing with upfront costs and changes in overhead. Getting a business loan can prepare you for the big move.
- You need to keep up with the demand. If you have a seasonal business, it may be wise to get a business loan. Purchasing more inventory is among the biggest expenses for your business. It may be challenging to purchase large amounts of inventory if you do not have the cash to do so.
- You need new equipment. Are you considering getting new equipment to improve your business processes? Taking out a loan can get you financing for new machinery that can also serve as collateral for your loan.
Before deciding to obtain a business loan, you must be financially responsible and have the capacity and the means to pay off your business loan on time and without missing any payment.
FAQs
What is a reasonable interest rate for a business loan?
Generally, a reasonable rate depends on the type of loan that suits your business needs and the rates your business is eligible for. A good business loan interest rate in Canada is between the prime rate and 17%, which you can get if you use a traditional lender and your credit score is good to excellent. But if you choose an alternative lender, interest rates can go as high as 46% or higher if you have bad credit.
What documents are required for business loans?
When applying for a business loan, lenders usually require a business plan, business financial statements, bank statements, business and personal tax returns, collateral, company details, your personal financial details and your personal credit score.
How long does it take to get a business loan?
Depending on where you take out a business loan, it can take 24 hours to a few weeks. If you borrow from an alternative lender, you can get a loan in one business day. With traditional lenders, it may take several days to a few weeks before you can get loan approval.
Which bank gives lower interest for business loans?
Traditional banks can give you small business loan interest rates as low as 6%, but some alternative lenders offer APRs starting at 6% for business loans. To find the best rates for these loans, research what various lenders offer, obtain online quotes or use loan comparison sites like Loans Canada.
Is 17% a high interest rate for a loan?
A loan with a 17% interest rate is considered average. The rate is typically offered to borrowers with a Fair credit score.
Why do banks reject small business loans?
Undercapitalization and too much debt are two primary reasons banks reject business loans. Cash flow limitations, inadequate time in business, insufficient collateral, poor business performance, and not meeting lender criteria are also grounds for banks to reject a small business loan.
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