Are you a small business owner looking to expand your business, or do you need to cover unexpected expenses?
Small business loans can provide you with the funding to answer various financial needs for your business. The good news is that banks are not your only source of funds.
This article will cover alternative lenders for small businesses, their loan options, and small business loan interest rates.
Best Business Loans in Canada
Find below some of the providers of the best business loans in Canada.
1. Loans Canada
Loans Canada is an online platform that matches borrowers with multiple lenders with a single online application. It offers various financing options for all credit scores.
When you apply for a loan at Loans Canada, the site will use your information to find the best lenders offering loans that match your circumstances.
After you submit your application, the Loans Canada system will automatically sort through its provider network to find the best third-party offers. Loan approval is within 24 to 48 hours.
Business Loan Details
- Loan amount: $500 to $500,000
- Loan terms: 4 months to 60 months or longer
- APR: from 1.99% to 46.96%, depending on the lender’s assessment of your credit profile
Requirements
- Canada-based
- Operational for at least nine months
- An active commercial lease
- Over $10,000 in monthly sales
How to Apply
- Submit a request by filling out an online application form.
- Accept a customized quote detailing the loan terms and a plan tailored to your business.
- Receive the funds deposited into your account.
Pros
- Free quote
- Application takes less than ten minutes
- Same-day approvals
- Flexible terms and repayment plan
- Easy repayments with automated debits
- No collateral required
- Accepts bad credit
Cons
- A missed payment incurs an insufficient funds fee of around $45.
- Interest rates for bad credit are as high as 46.96%.
Here’s a detailed Loans Canada review.
2. Merchant Growth
Merchant Growth is an online lender that has lent $300+ million to Canadian businesses since 2012.
It offers fixed financing options for businesses that prefer a fixed payment or have no debit or credit sales.
Its loan offerings include Merchant Cash Advance, line of credit, and E-Commerce Financing. Repayment plans are flexible, and payments can be daily or weekly.
Business Loan Details
- Loan types and amounts:
- Merchant Cash Advance Financing: $5,000 – $500,000
- Line of credit: $7,500 – $125,000
- E-Commerce Financing: $10,000 – $500,000
- Loan terms:
- Merchant Cash Advance Financing: 6 to 18 months
- Interest rate: 12.99% – 39.99%
Requirements
- Canada-based business
- Monthly revenue of $10,000
- The company has been active for six months
- A minimum credit score of 550
How to Apply
- Complete the application online or over the phone.
- Provide the necessary details and submit.
- Review the customized financing options offered by Merchant Growth.
- Discuss the best solution for your financing needs with a representative.
- Receive your funds within 24 hours after approval.
Pros
- Application takes only 5 minutes
- Funds are available in just 24 hours
- No collateral
- No hidden fees
- Ability to top off when you need extra cash
- Applying does not impact your credit score
Cons
- Interest rates are higher than those of rival lenders.
3. Sharpshooter Funding
Sharpshooter Funding is a lender specializing in approving and structuring loans for Canadian small to medium-sized businesses.
Its loan products include Merchant Cash Advance, working capital loans, and start-up funding. It also offers loan solutions to businesses that have been operational for less than six months.
Upon loan approval, the funds are available to your business within 48 to 72 hours of your funding offer. Repayments are flexible (daily, weekly, bi-weekly or monthly).
Business Loan Details
- Loan amounts: $1,000 – $300,000
- Loan terms: 6 – 60 months
- Interest rate: 5.49% – 22.79%
Requirements
- The business has been in operation for at least 100 days
- Averages at least $10,000 in monthly deposits
- A minimum credit score of 416
How to Apply
- Complete the online application for the pre-qualification process.
- Provide the required personal details and business information.
- After loan approval, wait for the money to be available in at least 24 hours.
Pros
- Easy online application process
- Same-day approval
- Competitive interest rates
- No collateral required
- Accepts bad credit
Cons
- High rates for bad credit
- An NSF fee of $35
4. Canada Small Business Financing Program Loan
The Canada Small Business Financing Program (CSBFP) loan is a government-sponsored financing program for small businesses looking to purchase assets or expand their operation.
Businesses can choose from term loans and lines of credit, small business loan interest rates, and various repayment options are available.
Financial institutions are in charge of delivering the program and approving the loan. Applications for this loan program go through financial institutions.
Business Loan Details
- Loan amount: Up to $1,000,000
- Loan terms: Up to 15 years
- Interest rates:
- Term loans:
- Floating – The lender’s prime lending rate plus 3% (maximum)
- Fixed – The lender’s single-family residential mortgage rate for the term of the loan plus 3%
- Lines of credit – The lender’s prime lending rate plus 5%
- Term loans:
- Fees:
- 2% of the loan amount
- Lenders fees (includes setup fees, loan renewal fees, etc.)
Requirements
- Gross annual revenue of $10 million or less
- A for-profit business
- The loan purpose should only be to purchase and improve eligible business assets.
How to Apply
- Visit any bank, caisse populaire, or credit union and submit a business proposal.
- A financial officer will review your application and make the lending decision.
- Once the application is approved, the financial institution will disburse the funds and deposit them into your account.
Pros
- Business start-ups can apply for this program.
- The government may guarantee up to 90% of your loan.
- Previous purchases made within 365 days before loan approval are eligible for this loan.
- Multiple repayment options
Cons
- More paperwork and eligibility criteria
- Not for emergency funding nor to cover day-to-day expenses
- Not for businesses with bad credit
5. OnDeck
OnDeck is a small business lending company with over 100,000 customers worldwide, connecting small businesses with loan advisors to consider their loan options.
The lender evaluates a borrower’s business financing needs using not just the credit score but also the health of the business.
Available loan options are term loans, lines of credit, Merchant Cash Advance, equipment loans, and small business loans. Repayments can be daily or weekly based on what works best for your business.
Business Loan Details
- Loan amounts:
- Term Loans: $5,000 – $300,000
- Lines of Credit: $6,000 – $50,000
- Loan terms:
- Term loans: 6 to 18 months
- Lines of credit: 6 to 12 months
- APR for term loans: 62.1%
- Small business loan interest rates in Canada for OnDeck short-term loans start at a 29.9% annual percentage rate (APR).
Requirements
- The business must be Canada-based
- Annual revenue of $100,000
- Minimum six months in business
- Beacon score of 600
How to Apply
- Complete the loan application online or on the phone.
- Provide your basic business information and prepare three months of business bank statements.
- Submit your application and expect a call from an OnDeck representative within one day to discuss your options.
- Once approved, choose your term, amount, and payback schedules, and complete an online checkout.
- Receive your funds as soon as the same day.
Pros
- Fast application process
- Same-day funding
- A variety of loan amounts and lengths
- No collateral
- Prepayment option and benefits
- Payback flexibility with daily or weekly payments
- Builds business credit
Cons
- High sales requirements
- Start-ups are not qualified to apply
- Credit score requirements
6. Greenbox Capital
Greenbox Capital is an alternative lender that provides small businesses with fast and easy access to working capital through short-term financing options.
Its funding options include Merchant Cash Advance, small business loans, business lines of credit, collateral loans, and invoice factoring.
Application is quick and easy, and funding time is as little as 24 hours. Payment schedules can be fixed or flexible (daily or weekly).
Business Loan Details
- Loan amounts: $3,000 – $500,000
- Loan terms: 3 to 12 months
- Rates: Between 1.1 and 1.5% (for Merchant Cash Advance)
Requirements
- The business has been in operation for at least six months
- Minimum monthly receipts of $7,500
- Credit score requirement of around 550
How to Apply
- Fill out the online application on the website.
- Provide the required information about yourself and your business.
- Prepare three months of bank statements and other records.
- Discuss your loan options with a funding advisor within one hour of your application.
- Finalize your request and provide additional information if necessary.
- Receive the funds in your account within 24 hours.
Pros
- Quick turnaround on applications
- Fund release is within 24 hours of approval
- No minimum credit score requirement
- Businesses with bad credits can apply
- Multiple business loan options
Cons
- Rates can be high
- Only offers short-term financing
- Requires frequent repayments
- Does not fund businesses in all sectors
7. Lending Loop
Lending Loop is a peer-to-peer lending platform for small businesses with a network of 11,000+ active lenders who have lent over $70 million to Canadian small businesses.
The platform uses intelligent software to screen loan applications and provide credit decisions in seconds.
Lending Loop then approves a loan and publishes it on its marketplace, where lenders commit to providing the needed funds.
Business Loan Details
- Loan amount: $5,000 to $500,000
- Payback options of 3 to 5 years
- Loan terms: 3 to 60 months
- Rates: From 4.96% per year
- Origination fees ranging from 3% to 9.99% of the total loan amount
Requirements
- One year in the business
- $100,000 in annual revenue
- 640+ personal credit score
How to Apply
- Create a Lending Loop account and click “Apply Now.”
- Fill out the online loan application form and provide the required details:
- Funding amount
- Time in business
- Sales in the last 12 months
- Business type
- Complete the form and submit it for review.
- Accept the terms and electronically sign the agreement.
- Lending Loop will list your loan in its marketplace for 30 days. Lenders will review your application and provide the funding.
- Receive the funds deposited into your account.
Pros
- Fast and easy online application
- No penalties and no hidden fees
- Zero costs to apply
- No penalties or fees for early repayment
Cons
- High rates
- Fees apply to businesses with finances that are not in good shape
What Are the Best Banks For a Small Business Loan in Canada?
Small businesses can also rely on these top five biggest banks in Canada for various business financing options to cover their varied financial needs.
8. RBC
The Royal Bank of Canada (RBC) is one of the biggest banks in the world, serving 17 million clients in Canada, the U.S. and 27 other countries.
The bank offers short-term and operating loans for temporary business needs and mid-term and long-term business loans for business purchases and improvements.
RBC’s business loan calculator in Canada helps determine the best loan option for your needs. Loan amounts range from $1,000 to $5,000,000, while repayment periods range from 1 to 20 years.
9. Scotiabank
Scotiabank, or the Bank of Nova Scotia, offers financing options for small businesses, such as term loans and lines of credit with fixed and floating rates. Limits are up to $1,000,000.
Term Loans for business offer access to cash for purchasing fixed assets, with competitive fixed or floating interest rates, and up to a five-year term with amortization for real estate up to 20 years.
Lines of credit also offer limits of up to $1,000,000, with a competitive floating interest rate. Interest is payable monthly, with no set pre-payment schedule for the principal.
10. TD
Small business loans are also available at TD to help businesses purchase assets or fund expansion plans.
TD offers short-term loans (such as business lines of credit), medium to long-term loans, like business loans with amortizations of up to 30 years and CSBF loans.
The loans come with fixed or floating TD business loan interest rates, flexible payment options (a choice of 1 to 5-year fixed-rate terms), and floating interest rate options with no prepayment penalties.
11. BMO
Small businesses can take advantage of small business loans and lines of credit at the Bank of Montreal.
Business owners can choose from varied credit options that accommodate diverse credit needs, with loan limits of up to $1,000,000.
Terms and amortization periods of up to 5 years and 15 years, respectively, and flexible repayment options, are likewise available.
12. CIBC
At CIBC, small business owners can choose from loans, lines of credit, overdraft protection, and CSBF for various business needs.
CIBC provides solutions whether you need to cover huge costs and day-to-day operating expenses, protect your business from unexpected costs, or obtain business support.
Loan amounts start from $10,000. Fixed and variable interest rates are available. Short and long-repayment terms are offered, including amortizations of up to 15 years.
How to Apply For a Business Loan in Canada
Applying for a business loan in Canada is the first step to getting access to funds to help cover your operating expenses or grow your company.
Follow these general steps to obtain a business loan that answers your financial need.
- Determine the purpose of your loan to help you identify the type of loan to get.
- Choose a financial institution and find the loan option that matches your needs.
- Write a loan application using the required documents.
- Set up a meeting with a financial or business advisor at a banking centre who will take you through the application process.
- Discuss your loan application with the advisor to determine the best loan product based on your borrowing needs.
- If your application meets lender criteria, you will get approval for a specific amount, interest rate, and repayment term.
- If the offer is acceptable, sign the loan agreement and other documents.
- Depending on your agreement, the lender will deposit the funds directly to your business bank account in as little as 48 hours (for most applications).
If you use an online lender to obtain a business loan, the approval and fund-releasing process can take a much shorter time than when using a traditional financial institution.
Pros and Cons of Business Loans
While business loans are a valuable source of business funding, small business owners must thoroughly consider the advantages and potential drawbacks of getting a business loan before applying.
Pros
- Available funding for unexpected expenses and business expansion
- Ability to capitalize on growth opportunities
- Longer loan terms
- Attractive interest rates
- A solution to cash flow issues
- A variety of lending products for small businesses
Cons
- High-interest rates on business loans and fees
- Missed payments can result in hefty penalties and can harm your credit score
- Strict eligibility requirements
- Not ideal for start-ups
How to Choose the Right Business Loan For You
When choosing a business loan, it is essential to consider factors that can impact your business.
- Shop around for the best interest rates. Some lenders charge a high-interest rate, which results in the borrowers paying back a lot more than they borrowed. Find the lowest interest rate possible by comparing the rates offered by various lenders.
- Choose the best repayment terms. Lenders offer daily, weekly, biweekly, and monthly options. Pick the repayment terms your business can handle to avoid costly missed payment fees, considering that the interest is higher for a longer loan term.
- Obtain offers from different lenders. Compare offers and negotiate for the best one. Avoid making a rushed choice since taking out a loan is a commitment that takes several years to fulfill and complete.
Should You Get a Business Loan?
There are different reasons to get a business loan, and these include the following:
- Cash flow. Taking out a loan can be a life-saver for your business, especially when you meet challenges regarding your inflows and outflows. A loan can help you get through a dry spell.
- Expansion. Expansion is necessary for business growth and, sometimes, survival. As a major undertaking, it calls for additional funding, which a business loan can provide.
- Unexpected expenses. Unanticipated expenditures, such as equipment breakdowns or replacements, can turn your budget upside down. Taking out a loan and paying it over time with flexible terms can help protect your business.
FAQs
Many alternative small business loan lenders have interest rates of up to 39.99%. In comparison, the maximum required by law is 60%. Generally, a reasonable interest rate for a business loan depends on the type of financing you need and the interest rate your business is eligible for.
Lenders may ask business loan borrowers to provide company information, a detailed business plan with financial projections, business cash flow and income, time in business, annual revenue of the business, and potential collateral. Your personal credit report and bank statements may also be required.
Depending on where you apply for a business loan, it can take as little as 24 hours to a few weeks. In general, the time you obtain your funds depends on your lender and the type of loan you apply for. It takes longer if more documentation is needed.
A bank often gives lower interest rates for business loans if you (as the business owner) have an excellent credit score, the company is financially stable and has a positive credit rating. If you can offer valuable collateral to secure your loan and are a good client, the bank will also consider giving you lower interest rates.
An interest rate of 17% is considered average for a personal loan. For car loans, the rate falls under the interest rate range for borrowers with a Fair credit ranking (or a score range of 560 to 599). The maximum interest rate that lenders can charge is 60% interest annually (not including Payday loans).
Banks reject them due to a poor credit score and credit rating, lack of credit history, high (or too low) credit utilization, weak cash flow, insufficient time in business, and lack of collateral. Other reasons for the denial are incomplete requirements and data falsification.
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