Access to capital is one of the most critical factors in small business success. Whether you're starting out, buying equipment, expanding your location, or bridging a cash flow gap, understanding the Canadian small business lending landscape helps you find the right financing at the best terms. This guide covers every major loan type available to Canadian small businesses in 2025.
Standard term loans from chartered banks (RBC, TD, BMO, Scotiabank, CIBC) are the most common form of small business financing. You borrow a lump sum and repay it over a fixed term with scheduled payments. Terms typically range from 1–10 years depending on what you're financing. Interest rates are based on the bank's prime rate plus a spread determined by your credit risk.
Typical requirements for a conventional bank loan:
The CSBFP is a federal government program that helps small businesses obtain financing by having the government guarantee 85% of the loan. This dramatically reduces lender risk and makes financing accessible to businesses that might not qualify for conventional loans.
Key CSBFP details:
The CSBFP is one of the best financing programs available to Canadian small businesses. If you're buying equipment or making significant leasehold improvements and don't have perfect credit or a long business history, this is often the first place to look.
The Business Development Bank of Canada (BDC) is a Crown corporation that specifically focuses on lending to small and medium-sized businesses that are underserved by conventional banks. BDC offers term loans, working capital loans, technology loans, and venture financing. Unlike commercial banks, BDC's mandate is explicitly to support Canadian entrepreneurs — they're more likely to approve loans for startups, businesses with limited collateral, and companies in growth phases that look risky on paper.
A revolving line of credit allows you to borrow up to a set limit, repay, and borrow again. Lines of credit are ideal for managing cash flow fluctuations, covering operating expenses between receivables, or funding short-term inventory purchases. Interest is charged only on the outstanding balance. Available secured (backed by assets) or unsecured.
Loans or leases specifically for purchasing business equipment. Often the equipment itself serves as collateral, making approval easier. Common for manufacturing, construction, restaurant, and transportation businesses. Equipment financing typically requires 10–30% down payment with terms matching the useful life of the equipment.
For businesses purchasing their own premises. Commercial mortgages typically require 20–35% down, have shorter amortization periods than residential mortgages (15–25 years), and are subject to renewal every 3–10 years. Owning your business premises can be a significant wealth-building strategy for established business owners.
Canada doesn't have an exact equivalent to the US Small Business Administration, but the combination of CSBFP (loan guarantees), BDC (direct lending), and EDC (Export Development Canada, for exporters) serves a similar role. See our dedicated guide to government small business financing in Canada.
Interest rates on small business loans in Canada are typically expressed as a spread over the bank's prime rate or the Bank of Canada's overnight rate. As of early 2025:
Always calculate the effective annual rate (EAR) when comparing loan products — some lenders quote rates in ways that make them appear cheaper than they are.
Lenders evaluate small business loan applications on several dimensions:
Beyond traditional banks and government programs, a growing number of alternative lenders serve Canadian small businesses:
Alternative lenders typically charge higher interest rates than banks but offer faster approval, less documentation, and more flexible criteria. They're worth considering if you've been declined by traditional banks or need capital quickly.
Before taking on debt, explore whether your business qualifies for government grants or subsidized programs. The Canada Business Network (canada.ca/en/services/business) maintains a database of federal and provincial grant programs. Common sources include:
While you sort out your business banking, keep your personal finances fee-free. KOHO offers free personal banking with no monthly fees. Use code 45ET55JSYA for a bonus.
Open KOHO Free — Code 45ET55JSYA