How a business line of credit works in Canada
The lender approves a limit — published ranges run $10,000 to $250,000 online and higher at the banks — and the business draws against it by transfer to its account. Interest accrues daily on the outstanding balance at a rate tied to prime for bank and CSBFP lines or set by the lender for online lines, and repayments restore the capacity. Bank lines are usually secured by a general security agreement over the business’s assets under the provincial PPSA and guaranteed by the owners; online lines take the same guarantee and registration but underwrite the bank statements rather than the financial statements.
| Type | Who qualifies | Rate | Limit | Time to open |
|---|---|---|---|---|
| Bank or credit union line | Two years of statements, profit, credit 650+ | Prime + 1 – 4 percent | Sized to receivables and inventory | 2 – 6 weeks |
| CSBFP line of credit | For-profit business under $10 million revenue; lender’s criteria | Capped at prime + 3 percent plus 2 percent fee | Up to $150,000 | 2 – 6 weeks |
| Online line of credit | 6 – 12 months of deposits, $10,000+/month, credit 600+ | 10 – 60 percent APR or a weekly fee on the balance | $10,000 – $250,000 | 1 – 3 business days |
Business line of credit rates in Canada
Bank lines for established businesses price a few points above prime; the CSBFP line is capped at prime plus 3 percent with a 2 percent registration fee; online lines run roughly 10 to 60 percent APR, and some lenders price them as a weekly fee on the drawn balance — for example 1 to 2 percent a week — which converts to a much higher annual figure and should be compared on that basis. Fees matter as much as the rate on a line that is drawn briefly: draw fees, monthly or annual maintenance fees and inactivity provisions vary by lender, and no province requires them to be disclosed in a standard form for business credit.
How to get a business line of credit in Canada
For a bank line, bring two years of financial statements or T2 returns, a debt schedule, a personal net-worth statement and receivables and inventory reports; expect security over the business and a guarantee. For a CSBFP line, the same package through a participating lender, with the program’s 2 percent fee. For an online line, three to twelve months of bank statements showing consistent deposits of roughly $10,000 or more a month and few negative days, business registration, ID and a debt schedule; lines often open at $10,000 to $25,000 for a first-time borrower and grow after several months of clean use. A history of stacked advances in the statements is the most common reason an online line is declined.
Prepare the file
What to have ready
- Three to twelve months of business bank statements (two years of financial statements for a bank line)
- Business registration, business number and government ID
- Debt schedule including any advances, leases and loans
- Receivables and inventory reports for bank lines
- A clear reason for the line: seasonal inventory, payroll timing, receivables gaps
Using a line without turning it into a loan
Draw for a defined need and repay when the cash arrives — an inventory buy repaid from the season’s sales, payroll repaid when the invoice clears. Keep the balance moving so the lender sees revolving use and raises the limit; a line that sits fully drawn for a year is a term loan at line pricing and reads badly at renewal. Draw and repay small amounts periodically even in quiet months, because inactive lines get reduced or closed, and never use the line to make payments on an advance.