What “bad credit” means to Canadian business lenders
Equifax and TransUnion Canada score from 300 to 900; banks and BDC generally want 650 or better, online term and line lenders 600 to 640, working-capital lenders 550 and advance providers 500 or lower when deposits are strong. Below 500, or with an open bankruptcy or consumer proposal, most lenders stop and only asset-backed or invoice-backed products remain. Lenders also read the business’s own record: NSFs and negative-balance days in the bank statements, existing advances, PPSA registrations and any CRA arrears, which some funders treat as seriously as a low score.
Business loans with bad credit in Canada: the products
A merchant cash advance buys a share of future card or deposit revenue for a fixed total — the advance times a factor rate of 1.15 to 1.49 — remitted daily or weekly; it funds in a day or two and reads deposits, not the score. A working-capital loan does the same with a fixed schedule at roughly 15 to 60 percent APR. Invoice factoring advances 70 to 90 percent of invoices owed by other businesses and depends on the customers’ credit, with the owner’s secondary. Equipment financing will finance a new or resalable asset for a weaker owner, sometimes with a larger down payment. Revenue-based financing remits a percentage of revenue until a cap and publishes guidelines around 550.
| Product | Credit guideline | What carries the file | Cost | Time to fund |
|---|---|---|---|---|
| Merchant cash advance | 500+ | Six months of steady deposits | Factor rate 1.15 – 1.49 | Same day to 2 days |
| Working-capital loan | 550+ | Deposits and few negative days | 15 – 60 percent APR | 1 – 2 business days |
| Invoice factoring | Secondary | Customers’ credit, valid B2B invoices | 1 – 5 percent per 30 days | 1 – 3 days after setup |
| Equipment financing | 600+, lower with strong assets | The asset and a down payment | 7 – 30 percent APR | 2 – 5 business days |
| Revenue-based financing | 550+ | Trailing revenue | Cap of 1.1x – 1.5x | 2 – 7 business days |
What it costs and what the law allows
Bad-credit products are priced for risk and duration, so a 1.32 factor rate on a nine-month advance or a 40 percent APR on a working-capital loan is the market, not a scam. What is a scam is an upfront fee for a loan that has not funded, a “guaranteed approval” pitch or a contract without the total repayment amount. No province requires standardised cost disclosure on business credit; the federal criminal interest rate — 35 percent APR since 2025, with commercial loans above $10,000 exempt up to 48 percent and above $500,000 exempt entirely — is the only cap, so ask every provider for the total repayment, an annualised cost, the schedule and the prepayment terms in writing.
Moving from bad-credit products to cheaper funding
Take one product sized to a few months of deposits, remit every payment on time, keep the business account free of NSFs and negative days, clear CRA arrears and dispute errors on the personal credit report. Within six to twelve months the statements show a clean payment history and the score moves; at that point a line of credit or an online term loan at 600 to 640 is realistic, and it should be used to retire the advance rather than to add to it. Two years of returns and a score near 650 reopen the bank and CSBFP doors.
Prepare the file
What to have ready
- Six months of business bank statements with steady deposits
- Business registration, business number and government ID
- Debt schedule listing every advance, lease and loan — undisclosed advances are found
- Invoices and customer list for factoring; quote for equipment
- Personal credit report from Equifax or TransUnion Canada with errors disputed
- CRA account in good standing or a payment arrangement in place
What to avoid
Stacking a second or third advance, paying any fee before funding, signing a contract without the total repayment amount, borrowing from a provider that will not put the prepayment terms in writing, and using an advance to pay the CRA or a landlord month after month instead of fixing the underlying cash flow. A bad-credit product is a bridge; it is a problem when it becomes a habit.