Small Business Loans in Canada (2026): CSBFP, BDC, Banks and Startup Financing

Which small business loan a Canadian business can get depends mostly on how long it has been operating, how much it needs and what the money is for. A business with an established revenue history can often borrow from a bank or credit union; a startup with no revenue history leans on programs that weigh the founder and the plan, such as the federal Canada Small Business Financing Program (CSBFP) and Futurpreneur. This page compares the options, explains the CSBFP limits, and covers startup financing and how sole proprietors qualify. It is part of the personal loans, lines of credit and business borrowing hub.

Small Business Loan Options Compared

Canada Small Business Financing Program (CSBFP)

The CSBFP is a federal program that makes it easier for small businesses to get loans by sharing the risk with lenders. Banks, caisses populaires and credit unions deliver it: you apply to your own financial institution, which makes the lending decision and then registers the loan with Innovation, Science and Economic Development Canada (ISED).

Who qualifies: small businesses or start-ups operating in Canada with gross annual revenues of $10 million or less. Farming businesses are not eligible (they have a separate program under the Canadian Agricultural Loans Act).

Loan limits:

• $1.15 million maximum per borrower in total
• Up to $1,000,000 in term loans, which can pay for real property, equipment, leasehold improvements, intangible assets and working capital
• Within that $1,000,000, no more than $500,000 for leasehold improvements and equipment, and within that $500,000, no more than $150,000 for intangible assets and working capital costs
• A separate line of credit of up to $150,000 for day-to-day working capital

Rates and fees:

• Floating-rate term loans: at most the lender’s prime rate + 3%
• Fixed-rate term loans: at most the lender’s single-family residential mortgage rate for the term + 3%
• Lines of credit: at most the lender’s prime rate + 5%
• A 2% registration fee, on the amount lent (term loans) or the amount authorized (lines of credit), which the borrower pays and can finance

Security: for real property and equipment, the lender takes security on the assets financed; for leasehold improvements, intangibles, working capital and lines of credit, it takes security on business assets. The lender can also take an unsecured personal guarantee. Eligible uses include commercial vehicles, restaurant or production equipment, computer equipment and software, and the costs of buying a franchise.

BDC (Business Development Bank of Canada)

BDC is a federal Crown corporation that serves Canadian entrepreneurs and complements the role played by private-sector financial institutions. It offers term loans, working capital loans, equipment and technology financing, and advisory services, and it describes its role as complementing other banks. Its pricing is set loan by loan.

Bank and Credit Union Business Loans

RBC, TD, BMO, Scotiabank, CIBC and the credit unions all lend to small businesses. They usually look for:

• the owner’s personal credit score and credit history
• a track record of operating
• positive cash flow and financial statements
• collateral for larger loans
• a business plan

Approval at a bank usually takes several weeks. Newer businesses or those with little revenue history often turn to the CSBFP (delivered by the same banks) or alternative lenders instead.

Online and Alternative Lenders

Online lenders fill the gap for businesses that need money quickly or don’t meet a bank’s criteria, at a higher cost. Merchant Growth, Driven (formerly Thinking Capital) and Journey Capital offer term loans, and Merchant Growth and Journey Capital also offer lines of credit, to established small businesses, usually approving on bank-account data and revenue.

Comparing the total cost of borrowing (all interest and fees over the term), not just the payment, shows the real price of any loan or advance. For a business owner with weak personal credit, business borrowing with weak personal credit covers revenue-based financing and how lenders weigh sales history against the owner’s score.

Financing a Startup (Under Two Years)

Banks lend mainly on demonstrated cash flow and business history, which a startup doesn’t have. That pushes most new businesses away from conventional bank term loans until they can show one to two years of revenue, and toward programs that judge the founder and the plan.

Futurpreneur charges interest at RBC’s prime rate + 3% on its portion, and BDC charges its floating base rate + 1.65% on its portion. Grants don’t have to be repaid but are competitive and tied to specific purposes; the small business grants guide covers them.

Without a revenue history, startup lenders weigh:

• the business plan, including realistic financial projections and how the money will be used
• the founder’s personal credit score and history, as a stand-in for business risk
• the founder’s own investment, since lenders see a founder who has put in their own money as a lower risk than one asking for 100% outside financing
• industry and market viability
• collateral, such as the equipment being bought, which secures a CSBFP equipment loan

Many startups combine sources: personal investment, a CSBFP-financed equipment purchase and a smaller working capital loan or line of credit.

Sole Proprietors and Incorporated Businesses

A sole proprietorship has no legal separation from its owner, so the owner’s personal finances carry more weight in a loan decision. The programs available are largely the same; what changes is the paperwork and how directly personal credit drives the answer.

Does incorporating help? Incorporating isn’t required for the CSBFP, which is open to sole proprietors, partnerships, cooperatives and corporations. It can help at larger amounts, where lenders prefer a business with its own financial statements and credit history separate from the owner’s. For the smaller amounts most sole proprietors borrow, the difference is usually small, and the CSBFP’s eligibility test (revenue of $10 million or less) is the same for both. The tax side of the choice is covered in business structures in Canada. A self-employed person borrowing for personal rather than business use applies for a personal loan for the self-employed, which is assessed on personal income.

How Lenders Evaluate a Small Business Loan

1. The owner’s personal credit score. It matters even for business loans, and especially for a business without its own credit history. Online lenders also set minimums; two list a score of 600 as a requirement.
2. Time in business. The CSBFP is open to start-ups; BDC’s start-up financing asks for at least 12 months in operation with revenue; some online lenders ask for six months or more.
3. Revenue and cash flow. Lenders check that revenue covers the payments, often with a debt service coverage ratio (cash flow divided by debt payments); the level that counts as healthy varies by lender, and BDC describes a ratio of 2 or higher as healthy.
4. The business plan. It matters most for startups and CSBFP applications.
5. Collateral. A CSBFP equipment or property loan is secured by the asset bought; banks may ask for more.

Documents to Prepare

• Business financial statements (the last two to three years, if available)
• A personal financial statement (assets and liabilities)
• A business plan with financial projections
• Recent business and personal tax returns; for a sole proprietor, two years of Notices of Assessment and Form T2125
• Business bank statements for the last 6 to 12 months
• Articles of incorporation or business registration
• Details of existing business debts
• How the money will be used, and quotes for any equipment
• Invoices or signed contracts, for businesses paid by project or retainer

Common Mistakes

Borrowing more than the purpose needs. Interest runs on every dollar borrowed.

Mismatching the loan and the purpose. A short-term, high-cost loan used for a long-term investment (or the reverse) strains cash flow.

Comparing payments instead of costs. Origination fees, administration fees and prepayment penalties change the total cost; even a one- or two-point rate difference on a $100,000 loan adds up to thousands over the term.

Signing a personal guarantee without reading it. Lenders can ask for one, which puts the owner’s personal assets behind the business debt.