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Business Loans for february 2023

Get a Business Loan at one of the banks verified by our specialists. On 09.02.2023 there are 9 options available to you. Increase your chances of getting a loan — fill out an application with a free credit rating check.

Offers: 9

Updated
30.11.2022
15:18
Borrowell
Business loan
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
$500-$50,000
Rate
i

Effective interest rate on the product

up to 39.99%
Term
i

Loan term for the financial product

up to 84 months
Lending Loop
Business loan
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
$1,000-$500,000
Rate
i

Effective interest rate on the product

up to 24.93%
Term
i

Loan term for the financial product

up to 60 months
Driven
Small business loan
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
$500-$300,000
Rate
i

Effective interest rate on the product

set individually
Term
i

Loan term for the financial product

up to 24 months
Farm Credit Canada
Equipment Financing
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
Spring Financial
The Foundation
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
up to $1,500
Rate
i

Effective interest rate on the product

from 18.99%
Term
i

Loan term for the financial product

up to 12 months
LendCare
Business loan
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
Term
i

Loan term for the financial product

up to 60 months
Clearco
Business loan
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
$10,000-$20,000,000
Rate
i

Effective interest rate on the product

up to 7.5%
Term
i

Loan term for the financial product

up to 180 days
EDC
Direct financing of business
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000
Wajax
Equipment loan
Rating by Finanso®
i

The rating by Finanso® is determined by our editorial team. The scoring formula includes a financial product type as well as tariffs, fees, rewards and other options.

Recommended FinScore™
0
300
650
1000

GoDay
1.6
JUDGEV
JUDGEV
26.05.2022 at 15:46
the application is easy and takes less then 5 mins to fill out. but the funding time is quite long. if looking for instant funding then its not here...
Review
Business Loans for february 2023

What is a business loan in Canada?

Business loans aim to provide entrepreneurs with the working capital for their businesses. With such loans, companies get financial resources to support their business growth, buy new equipment, expand services, acquire new technologies, and ensure positive cash flow. Today, businesses from any industry and at any growth stage can find the right financing option for them.

Let’s look through the key characteristics of business loans in Canada.

Interest rates

Interest rates for business loans can be either fixed or variable. With a fixed rate, your loan payments remain the same throughout the term, making it a good option for borrowers who prefer stability and predictability. A variable rate fluctuates with the Prime Rate, which means the amount you will have to pay monthly is subject to change based on the fluctuations in the Prime Rate.

As of September 2022, the average business loan interest rate was 4.65%, according to the Bank of Canada. The interest rate for each particular loan depends on many factors, including the lender itself, your borrower profile, the purpose of borrowing, assets used to secure the loan, and more.

Loan terms

A business loan repayment term defines how much time you have to get your outstanding loan balance fully repaid. The repayment terms depend on the loan type primarily. With term loans and equipment loans, you can take up to ten years to pay off your debt. Business lines of credit providing funding up to an approved credit limit are typically available for terms of six months to five years. Commercial real estate and construction mortgages may have up to a 25-year repayment term. 

Loan payments

As for repayment schedules, most lenders offer you the flexibility to choose between weekly, bi-weekly, semi-monthly, or monthly loan payments. A business loan calculator will help you get an idea of what your regular payment may look like. To calculate your payments, insert the figures for the key loan details into the designated fields in the calculator — the loan amount, interest rate, term, and repayment schedule.

Collateral requirements 

In terms of collateral requirements, there are secured and unsecured business loans. With a secured loan, you can use your personal or business assets to ensure the guarantee of your debt repayment. If you fail to repay your loan, you may lose the assets used as collateral which places the burden of risk on you. The eligible types of assets that you can use as collateral include homes, offices, land, vehicles, funds deposited in a bank account, and investment securities like stocks, bonds, or mutual funds.

Unsecured loans require no collateral and provide financing based on your creditworthiness only. As it places more risk on a lender, an unsecured loan will typically involve a higher interest rate than a secured one. In addition, such loans rarely provide lump-sum amounts in financing since a lender cannot seize and sell your assets in case you cannot repay your loan. To qualify for an unsecured loan, you must have a high credit score and a steady source of income. A lender may also require you to accept a personal guarantee to ensure the repayment of your loan by you in case your business fails on its financial obligations.

Loan purpose

With business loans, entrepreneurs can get financing for various borrowing needs. Here are the common reasons to apply for a business loan:

  • Financing the purchase of the required inventory

  • Improving the cash flow of your business by getting the working capital for your daily business operations

  • Buying the necessary business equipment

  • Financing leasehold improvements like renovations to a leased property

  • Expanding your business through financing the purchase or construction of a new real property

Applicable fees

Along with interest paid over the term of your business loan, your borrowing costs may include certain fees. The actual fees you may face vary across lenders and specific loan types. Here are the common business loan fees to be aware of:

  • An origination fee charged upon getting a loan approval: a percentage of the loan amount, or a flat fee

  • A referral fee charged when applying for a loan through a lending marketplace

  • Regular or one-time service fees to cover the loan management expenses including annual fees for maintaining your line of credit account

  • Late payment fees charged when you fail to make a loan payment on time

  • Non-sufficient funds (NSF) fees applied when your bank account doesn’t have enough money to make a successful loan payment

  • Prepayment penalties involved in certain loans when paying off your outstanding balance early

Types of business loans in Canada

Based on the borrowing purpose, there are several types of business loans. Let’s look through them.

Term loans 

Term loans provide businesses with lump-sum financing repaid at a pre-defined interest rate over a set period, also known as the term. Based on the term length, we can outline the three loan types: short-term, medium-term, and long-term loans.

Typically available for terms of up to one year, short-term loans provide resources for the quick cash flow needs of your business. Short terms, as a rule, involve higher monthly payments.

Medium-term loans provide financing for terms of one to three years. These loans are good for business owners who need a compromise between regular loan payments and interest costs paid over the term.

With a long-term loan, you can get the desired financing for your business needs and repay your outstanding balance in up to ten years. While the interest paid over the term will be higher than with a short-term loan, you can still benefit from a lower monthly payment.

Business lines of credit 

Business lines of credit provide access to an approved amount for a company to borrow. Unlike with a term loan, there is no pre-set time frame to repay your loan. You can use funds from your credit limit whenever you need them and in whatever amount you need. Access to a business line of credit is revolving, so you don’t need to re-apply for financing after you have your outstanding balance repaid. In general, business lines of credit are good for covering your short-term cash flow needs and unexpected expenses.

Equipment financing

Equipment financing solutions provide companies with the funds needed to purchase the necessary equipment and machinery. In such a type of loan, the equipment you intend to buy serves as collateral, lowering the interest rate you qualify for. Lenders typically assign the term for an equipment loan based on the potential life span of the equipment, which can be up to ten years or longer in certain circumstances.

Commercial and construction mortgages

Your company can finance its real estate and development projects with commercial and construction mortgages. With a commercial mortgage, you can borrow up to a certain percentage of the property’s value that serves as collateral. The commercial real estate loan amount you can count on differs across lenders and can constitute between 65% and 805% of the value of the financed asset. The amortization terms of such loans can be up to 25 years.

Where can I get a business loan in Canada?

There are three common types of business loan providers in Canada: financial institutions, non-banking or alternative lenders, and brokers. Banks and credit unions fall in the category of financial institutions. While banks may offer competitive business loan conditions to their customers, the eligibility requirements may not be feasible for many business owners. A financial institution may require collateral to grant you the desired financing amount and look at both your personal and business credit score. 

Alternative lenders include online loan providers, peer-to-peer, and crowdfunding lending platforms. With online lenders, getting loan approval is typically easier because they work with borrowers whose credit score isn’t perfect. Still, the interest rates they offer to customers are often higher than in banks.

Brokers are intermediaries who connect you with various business loan solutions offered by different providers (both financial institutions and non-banking lenders) to help you choose the right option for you. If you don’t have time to compare the available lending solutions, working with a business loan broker might be the right option for you. 

Which Canadian bank gives loans easily to businesses?

As a business owner, you can apply for a business loan at any of the Big Six banks in Canada (RBC, BMO, CIBC, TD, National Bank of Canada, or Scotiabank) and smaller banks. But, if you are looking for a financing solution tailored to your business's specific needs and growth stage, consider the Business Development Bank of Canada (BDC), owned by the Government of Canada. This financial institution aims to support Canadian entrepreneurs through a wide range of lending solutions — from short-term financing for small projects to long-term financing for real estate projects and business acquisitions.

Short-term financing in smaller amounts is easier to qualify for. To be eligible for significant amounts in financing, you may need to provide financial projections for the project you need to fund.

How to apply for a business loan in Canada?

Financial institutions like banks and credit unions accept business loan applications online and in person. With alternative lenders and business loan brokers, you can have a fully online application.

When applying, be ready to provide your personal information (your first name, last name, date of birth, address, phone number, and email) and business information (your company name, business type, industry, address, the year of foundation, number of employees, business partners, members, or directors of the business).

Next, provide a business plan outlining the purpose of getting financing and how you will use the funds.

To verify your income, prepare financial statements or income tax returns. When applying for larger business loans, you may need to provide accountant-prepared year-end financial statements as well as cash flow projections for the project you are borrowing money for.

To provide evidence of collateral, prepare information about the assets you own.

How to qualify for a small business loan in Canada?

To qualify for a small business loan in Canada, you must be a Canadian resident at the age of majority in your province or territory. To be eligible, the business you are running must operate in Canada. Select lenders like BDC will take into account your business’s time in operation. 

To qualify for a competitive interest rate, you must have a decent credit score of 660 and higher. Stable cash flow is another factor that matters, so be sure to provide income verification with your bank statements or income tax returns.

Depending on the type of loan, a lender may require you to support your loan with collateral, although you don’t necessarily have to leverage your personal assets. Commercial buildings, offices, land, vehicles, funds in a business account, and investment securities all qualify as eligible assets.

Providing a business plan and financial projections for the project you are going to finance can increase your chances of getting business loan approval.

What is the Canada Small Business Financing Program?

Designed specifically for small businesses, the Canada Small Business Financing Program aims to support entrepreneurs by granting them access to the funds they need. Under the program, the government can guarantee up to 90% of your loan. 

This government-sponsored Canada Small Business Financing Program enables business owners to get up to $1,150,000 for one borrower in financing — up to $1,000,000 for term loans and up to $150,000 for lines of credit. With this financing amount, up to $350,000 can go toward equipment and leasehold improvements. Financing under the Canada Small Business Financing Program can be available at a fixed or a variable rate determined by a financial institution approving a loan.

Small businesses can apply for the Canada Small Business Financing Program at a financial institution of their choice. You can find government-guaranteed small business loans at banks like RBC, BMO, TD Bank, National Bank of Canada, Scotiabank, and many more.

To qualify for the program, you must meet the following criteria set by the government:

  • You must run either a start-up or an established for-profit small business operating in Canada

  • The gross annual revenue of your business shouldn’t exceed $10 million 

  • Farming businesses, non-profits, religious, and charitable organizations don’t qualify for the program

The activities eligible for funding under the Canada Small Business Financing Program include buying or improving the land, buildings, or equipment and purchasing leasehold improvements. Previous purchases made before the loan approval date may also count as eligible purchases under this program. Such activities as paying franchise fees, executing R&D programs, staking working capital, growing inventory, and performing goodwill are not eligible for financing.

Applying for the government-sponsored Canada Small Business Financing Program involves a registration fee equal to 2% of the loan amount. There is an option to include this fee in the amount borrowed and pay it through the scheduled loan payments.

Pros and cons

Just like other lending solutions, small business loans in Canada have both benefits and drawbacks. Since there is no one-size-fits-all-solution, a particular loan may have advantages and disadvantages for the specifics of your business.

Pros

Let’s look through the advantages of business loans:

  • A wide range of lending solutions for businesses of different sizes and growth stages

  • Different repayment terms to fit the cash flow cycle of your business

  • Access to significant financing amounts

  • Competitive interest rates for reliable borrowers

  • No need to leverage personal assets to secure a loan

  • An opportunity to get a loan, even with a far-from-perfect credit score, through non-banking lenders

  • The ease of a loan application 

  • An opportunity to apply for the government-sponsored Canada Small Business Financing Program

  • Interest payments on your business loan can count as tax-deductible expenses

  • Building a credit rating for your business through timely repayment of your loan

Cons

Now, let’s outline the potential drawbacks of getting a business loan:

  • Banks may have strict eligibility criteria to qualify for funding

  • Most lenders require proof of revenue 

  • Select loans may require a personal guarantee 

  • You need to prepare extensive documentation to apply

  • Poor credit history and the lack of collateral may result in unfavorable loan conditions

  • For sole proprietors and start-ups, it might be challenging to get the desired financing

FAQ

How much can you get for a business loan in Canada?

Business loan amounts in Canada vary across lenders. Generally, you can get between $5,000 and $1 million in financing. The following criteria define the actual amount of financing you can count on:

  • The type of loan and your business purposes

  • Your personal and business credit score

  • Your debt-to-income ratio 

  • The revenue of your business

  • Assets leveraged as collateral

Can I get a business loan if I have just started a business?

When reviewing business loan applications, lenders look at the time a company has been in business. In general, businesses must have been operating for at least three to six months to get loan approval.

BDC, a government-owned financial institution, offers start-up loans of up to $250,000 for small businesses operating for at least 12 months already. To increase the likelihood of getting approval, it is worth preparing extensive documentation, including a business plan, financial projections, and information about the intended use of a loan.

Alternative lenders like Loans Canada provide loans of up to $500,000 for companies that have been in business for nine months or more.

Another way to get the desired funding for a small business is to apply for the Canada Small Business Financing Program. To be eligible for financing, your business must have $10 million or less in gross annual revenue.

Do Canadian banks give loans to finance start-ups?

While it is often a challenging task for startup founders to get the necessary funding, select lenders offer financing solutions tailored specifically to their needs. BDC offers start-up loans of up to $250,000 for companies that have been in business for 12 months and more. 

The government-sponsored Canada Small Business Financing Program also provides financing for eligible start-ups and small businesses whose gross annual revenue doesn’t exceed $10 million. The loans under this program are available through many Canadian banks, including RBC, BMO, TD Bank, National Bank of Canada, and Scotiabank.

Will they check my credit score for a small business loan?

Along with business credit score, Canadian lenders look at your personal credit score when reviewing your loan application. Having a good or excellent credit score (starting from 660 and above) increases your chances of getting a loan with favorable conditions.

Borrowers with a less-than-perfect credit score can still get the required funding from alternative lenders and qualify for a loan based on the following criteria (other than credit score): monthly revenue, steady cash flow, and assets used as collateral. You should also be comfortable with a higher interest rate for funding.