Small Business Loans in Canada

When it comes to financing your business, you have several options to choose from.

Business Loans

A regular business loan is a term loan that can be secured or unsecured and is only available to businesses or business owners.

How does it work?

Money is borrowed from banks or alternative lenders and then paid back in equal installments over an agreed period of time. The total amount repaid will include the principal amount that you borrow plus interest.

What can you use a business loan for?

A business loan can be used for a wide variety of expenses, including but not limited to:

How much can I borrow?

There is no limit to how much money you can borrow. Rather the limit is dependent on how much the lender can provide, how much you need, and how much you qualify for.


Commercial Mortgages

A commercial mortgage is a loan that a business will take out to buy commercial property or to expand their existing property. The money borrowed will be secured against the property bought. Meaning, the property will be used as collateral if the borrower defaults on their payments.

How does it work?

Typically, a commercial mortgage loan term can range from five to 20 years, but depending on the lender it may even go up to 30 years. Oftentimes though, the term of a loan differs from the amortization period. For example, you may have a loan term of 12 years with an amortization period of twenty-five. This means you’ll make regular payments for 12 years after which you’ll make one last balloon payment with interest of-course, at the end of the term to pay off the rest of the debt.

What can you use a commercial mortgage for?

As mentioned, a commercial mortgage can be used to buy land or property for commercial use. A commercial mortgage is also often more cost-effective than renting a space, especially for business owners who plan to stay for many years.

How much can I borrow?

Typically a lender will finance a certain percentage of the property’s value. On average, ranges can go as low as 65% up to 75% of the property’s value

A Business Line of Credit

A business line of credit is a revolving loan that comes in two forms: secured and unsecured. It works a lot like a credit card but with better features. Business lines of credit typically have lower interest rates and higher credit limits. Moreover, a business line of credit can be used for cash advances.

How does it work?

You can reuse a business line of credit as many times as you like so long as you make payments on time and don’t go over the credit limit. Similar to the credit card, as you pay off the amount used, you regain access to those funds. So, if you have $50,000 and access $20,000. You only have $30,000 left. But if you pay off the $20,000, you’ll have access to the $50,000 again.


What can you use a business line of credit for?

A business line of credit is typically used to finance a business’s short-term needs like day-to-day operations, paying suppliers, or to help with cash flow problems.

How much can I borrow?

The amount you qualify for depends on if you get an unsecured or secured line of credit and how much you can afford. Lenders will typically have a set of requirements that you’ll have to meet to determine the amount.

Equipment Financing

Equipment financing is a loan that is used to acquire the equipment you need to run your business. For the lender’s protection, they may require a lien on the equipment to use as collateral. Meaning, if you default on your payments the lender has the authority to seize your equipment to pay off the loan.

How does it work?

An equipment financing lender will either purchase the equipment for you or provide you with the funds to purchase the equipment. Then you will pay off the loan with interest in equal installments over a predetermined period of time. The equipment is free of lien after you have completely paid back the lender.

What can you do with an equipment financing loan?

The best time to use equipment financing is when:

  • You need equipment to run your business but don’t have the funds to buy it
  • Don’t want to disrupt your cash flow by purchasing a new piece of equipment

Depending on the industry your business is in, you can use an equipment loan to finance:

  • Machinery
  • Computers
  • Furniture
  • Vehicle
  • Construction equipment

How much can I borrow?

The equipment loan amount is dependent on the value of the equipment you’re looking to buy. While there is no limit on the loan amount itself, the lender may have restrictions on what type of equipment you need and how much they themselves can finance. For example, some lenders will finance only 70% of the equipment you need due to its high value. As such, you may need to finance the rest yourself or find a different lender.

Inventory Financing

Inventory financing is a secured loan that comes as a line of credit or a short-term loan and is designed to help businesses purchase inventory from their suppliers. All the inventory you buy using the loan will be held as collateral, so if you default on your payments the lender will have the right to seize your products to pay off the loan.

How does it work?

Once approved the lender will pay your supplier for the inventory you need who will then send you the products. Repayment is expected to start right after the loan terms are agreed upon.

What can you do with inventory financing?

As mentioned, this loan is specifically used to help businesses meet their financial obligations with their suppliers when they need to restock their inventory.

How much can I borrow?

The amount you can borrow is dependent on how much the lender can provide, how much you need, and how much you qualify for.