The four ways Canadian businesses borrow
The chartered banks and credit unions are the cheapest door and the slowest. They lend to established businesses with two years of financial statements, profit and owner credit around 650 or better, and for smaller or younger businesses they use the Canada Small Business Financing Program, which guarantees 85 percent of the loan and caps the rate at prime plus 3 percent. Expect two to six weeks and a full package.
The Business Development Bank of Canada is the federal Crown lender. It lends to businesses the banks find too young or too thin, at rates somewhat above the banks, with longer terms and advisory services, and it takes weeks rather than days. Online lenders and financing companies are the fast door: term loans, lines of credit and working-capital loans in one to five business days for businesses with six to twelve months of deposits, priced from roughly 8 percent to 45 percent APR depending on the file. The specialised door — equipment financing, invoice factoring, merchant cash advances and revenue-based financing — underwrites the asset, the invoice or the revenue and is often the only door open to a young business or a weak credit file.
What Canadian lenders check
Every lender reads the same three things first: time in business measured from the first deposits into the business account, monthly revenue in the bank statements and the owners’ personal credit with Equifax or TransUnion Canada. Banks and BDC add two years of financial statements or T2 returns, a debt schedule and often a business plan; online lenders add three to six months of bank statements and a void cheque; equipment lenders add the quote; factors add the invoices and the customers’ credit. A registered business — corporation, partnership or sole proprietorship with a business number — a dedicated business account and government ID complete every file.
| Product | Time in business | Monthly revenue | Owner credit | Time to fund |
|---|---|---|---|---|
| Bank term loan / CSBFP | 2 years (CSBFP can be younger) | Profitable statements | 650+ | 2 – 6 weeks |
| BDC loan | 1 – 2 years | Statements or strong plan | 600+ | 2 – 4 weeks |
| Online term loan / line of credit | 6 – 24 months | $10,000 – $15,000+ | 600+ | 1 – 3 business days |
| Working capital loan / merchant cash advance | 6 months | $10,000+ | 500 – 550+ | 1 – 2 business days |
| Equipment financing | 6 months – 2 years | Any (asset secures it) | 600+ | 2 – 5 business days |
| Invoice factoring | None in many cases | B2B invoices | Customers’ credit matters most | 1 – 3 days after setup |
Business loan interest rates in Canada in 2026
Bank rates for established businesses sit a few points above prime; CSBFP loans are capped at prime plus 3 percent floating or the lender’s residential mortgage rate plus 3 percent fixed, plus a 2 percent registration fee. BDC prices above the banks by a few points. Online term loans and lines run roughly 8 to 45 percent APR and 10 to 60 percent respectively depending on credit, revenue and term; working-capital loans roughly 15 to 60 percent; equipment financing roughly 7 to 30 percent; merchant cash advances are priced as a factor rate of 1.15 to 1.49 rather than an interest rate. No province requires a standardised cost disclosure on business financing, and the only hard limit is 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 — so ask every provider for the total repayment amount and an annualised cost in writing.
Which product fits a Canadian business
Match the product to the use and the timeline. A building, an acquisition or major equipment that will earn for years belongs on a bank or CSBFP loan or with BDC, even if it takes six weeks. A seasonal gap, a payroll timing problem or an inventory buy belongs on a line of credit or a working-capital loan. A specific machine or vehicle belongs on equipment financing. Invoices owed by other businesses belong with a factor. A young business with strong daily deposits and a thin file may find that a merchant cash advance or revenue-based financing is the only fast option — take one, size it to a few months of deposits and use the time to build the file for a cheaper door.
Prepare the file
What to have ready
- Twelve months of business bank statements (six for fast products)
- Most recent T2 or T1 with financial statements for bank, BDC or CSBFP loans
- Business registration, business number and government ID for each owner
- Debt schedule listing every loan, lease and advance
- Quote or invoice for equipment; invoices and customer list for factoring
- A one-page use of funds and, for banks and BDC, a short plan
Mistakes that get Canadian applications declined
Applying to a bank at six months in business, mixing personal and business deposits in one account, stacking two merchant cash advances, leaving an undisclosed advance for the next lender to find in the statements, quoting a factor rate as if it were an APR, and assuming a provincial consumer-protection law covers a business loan — it does not. The fix for most of them is the same: one clean business account, one application with a complete file and a comparison of every offer on total dollars repaid.