How much can my business borrow in Canada?
Fast products size the offer to the bank statements: advances and working-capital loans typically offer one to one and a half months of average deposits, revenue-based financing a share of annual revenue, and online lines a limit that starts small and grows. Banks, BDC and CSBFP lenders size to cash-flow coverage — the business’s cash flow after existing debt should cover the new payment with room to spare, often 1.25 times — and to security. A business depositing $40,000 a month can expect roughly $40,000 to $60,000 from the fast products and, with two years of profitable statements, considerably more from a bank on a longer term.
| Product | Rate or cost | Typical term | What drives the payment |
|---|---|---|---|
| Bank term loan | Prime + 1 – 4 percent | 3 – 10 years | Long term, low rate, monthly |
| CSBFP loan | Capped at prime + 3 percent plus 2 percent fee | Up to 10 – 15 years | Longest terms; fee financed |
| Online term loan | 8 – 45 percent APR | 6 months – 5 years | Credit, revenue and term set the rate |
| Business line of credit | 10 – 60 percent APR on the balance | Revolving | Interest only while drawn |
| Equipment financing | 7 – 30 percent APR | 2 – 7 years | Asset secures it; monthly |
| Merchant cash advance | Factor rate 1.15 – 1.49 | 3 – 12 months | Fixed total; daily or weekly remittance |
Factor rate vs interest rate
A factor rate multiplies the advance to fix the total: $50,000 at 1.30 is $65,000 remitted regardless of how quickly it is paid. An interest rate accrues on the outstanding balance over time, so paying faster costs less. Converting a factor rate to an annual figure requires the term: 30 percent paid over nine months of daily remittances works out near 60 percent annually or more, and over six months higher still. Canadian law does not require the conversion to be shown on business financing, so run it yourself before comparing an advance with a loan or a line.
Canadian specifics
Bank and CSBFP rates float with the Bank of Canada’s policy rate through the lenders’ prime rate, so a floating-rate loan’s payment moves with the economy; fixed-rate loans lock the payment. Interest and most fees on business borrowing are deductible expenses for the CRA, which lowers the after-tax cost by the business’s marginal rate. HST or GST does not apply to interest. Provincial minimum wages and sales taxes shape the margins lenders read, and no province requires standardised cost disclosure on business credit — the federal criminal interest rate is the only cap.
Using the calculator to compare offers
Enter the amount and the term, note the payment and total cost at the low, mid and high points of the range, then switch products. The comparison that matters is total dollars repaid over the time the money is actually needed: a line drawn for three months beats a loan for the same amount over three years; equipment financing over five years beats an advance for the same machine; an advance may still be right for a one-time gap on a thin file. Take the calculator’s figures to every provider and ask for their equivalent numbers in writing.