Working capital or term loans? Secured or unsecured? When it comes to financing your business, endless solutions often lead to headaches and confusion.
To mitigate the stress, let’s discuss the best start-up business loans in Canada.
What Are Startup Business Loans?
The primary difference between traditional and startup business loans has to do with your company’s operational history. Lenders prefer to finance firms with steady revenues and reliable track records. These traits reduce the lender’s risk, by increasing the probability of timely repayment.
In contrast, start-up businesses are new, unproven, and have yet to demonstrate their ability to resonate with consumers. As a result, the uncertainty can make lenders nervous and derail your access to capital.
Consequently, while startup loans are no different than other business loans, they typically incur higher interest rates to compensate lenders for the additional risks.
Will Lenders Scrutnize My Credit Score?
Yes. Because financial institutions prefer standardized metrics, your credit score provides them with a one-size-fits-all approach to financing decisions. Therefore, improving your credit score should be the first step in your capital journey.
To begin the process, please see our guide on How to Improve Your Canadian Credit Score. We outline 10 proven strategies to build credit score momentum. The Government of Canada notes that “it takes 30 to 90 days for information to be updated in your credit report,” so you can realize progress rather quickly. But, please understand it’s a long-term journey to experience large increases.
As an additional resource, our Borrowell Credit Report Review highlights the Canadian fintech’s three main advantages:
- Monitor & Track
- Understand & improve
- Find the Right Product
By tracking your success, flagging errors, and spotting fraudulent activity, Borrowell helps eliminate mistakes. Moreover, its AI-powered Credit Coach, Molly, provides personalized tips, articles, and tools to help increase your credit knowledge. Last, Borrowell Canada curates a list of financial products that may fit your needs. Best of all, Borrowell Canada is free, so there are no out-of-pocket costs to raise your credit score.
Similarly, our KOHO Credit Building Review notes how opening a $30 to $500 secured line of credit and borrowing from the account can boost your credit score. KOHO reports your repayment activity to Equifax and TransUnion, which should translate into a better credit reputation. But, KOHO charges a fee for the service, so please read the full review to determine if it works for you.
Finally, a KOHO secured credit card comes free of charge if you set up direct deposits or load $1,000 into your account every month. It was rated one of the “3 Best Prepaid Credit Cards in Canada for 2024” by Nerdwallet, there is no credit check, and approval is guaranteed. There is also cash back for purchases and on-time repayments can bolster your credit score. For a complete breakdown, please see our KOHO Credit Cards Review.
10 Startup Business Loans Available in Canada
While all the companies on our list support ethical lending practices, other solutions may fit your needs. As a result, please view the options below to learn about the services available in the marketplace.
- 16 Things to Know About RBC Business Loans
- Should You Consider a BDC Business Loan?
- Keep Business Credit Card Review
- Zensurance Business Insurance Review
- Should You Incorporate Your Business With Ownr?
- Asset-Backed Financing Guide
1. Journey Capital
Journey Capital is an excellent resource for smaller companies looking for startup loans. It has three products to choose from, filling out an application takes as little as 10 minutes, and you can receive funding within 24 hours in some situations:
- Business Term Loans of $5,000 to $300,000
- FlexFunds Advance of $5,000 to $300,000
- Business Line of Credit up to $300,000
Furthermore, submitting an application won’t affect your credit score, and Journey Capital is a member of the Canadian Lenders Association (CLA).
2. Lending Loop
Lending Loop is a fintech firm that can connect you with a reputable lender. The company has helped facilitate over $90 million in Canadian small business loans since 2015, and the platform is free to use.
In addition, loan amounts range from $1,000 to $500,000, and you can also apply for a no-FX business credit card, a free U.S. bank account, and access to market-leading FX rates.
Likewise, Lending Loop is also a proud member of the CLA.
3. Greenbox Capital
Specializing in small and mid-sized business financing, Greenbox Capital issues business loans of $3,000 to $500,000 across all Canadian industries. You can obtain funding in as little as one business day, and the following products are available:
- Merchant Cash Advances
- Invoice Factoring
- Small Business Lines of Credit
- Asset-Based Loans
- Alternative Small Business Loans
In addition, Greenbox Capital is a CLA member and promotes responsible lending practices in Canada.
4. Merchant Growth
Merchant Growth is another go-to source for startup loans, as the firm lets you borrow $5,000 to $800,000 with approvals in as little as 24 hours. Repayment terms range from six to 24 months and funds can be used to increase your company’s cash flow, purchase new equipment, hire staff, or pursue growth initiatives. To qualify, your business must meet the following criteria:
- Be headquartered in Canada
- At least $10,000 in monthly revenue
- At least six months operating as a legal entity
Merchant Growth is also a member of the CLA, which helps bolster its reputation for responsible lending.
5. Business Development Bank of Canada (BDC)
The BDC has several financing options available for small businesses, and you should read our BDC Loan Guide for a deeper understanding of the different products.
However, for startup companies in operations less than 12 months, the BDC’s partner lender Futurpreneur Canada issues loans up to $60,000 to entrepreneurs aged 18 to 39. Moreover, the first year is interest-only, and then it becomes an amortizing loan (principal + interest) in years two through five. Along the way, you get to collaborate with an expert business mentor and access management tools and resources.
Eligibility requirements stipulate:
- You are between 18 and 39
- You are a Canadian citizen or permanent resident
- Your business has been operating for less than one year
- You agree to work with a mentor for 24 months
- The funds will not be used to refinance existing debt
6. Royal Bank of Canada (RBC)
Because RBC is the largest financial institution in Canada, it typically works with big businesses due to the higher profit potential. However, RBC has startup business services, which include loans, grants, and a platform to incorporate your company. Our partner site covers the latter with its Ownr Review.
In addition, RBC also partners with Futurpreneur Canada, so its reach rivals the BDC. Plus, RBC is a CLA member and has a brand you know and can trust. For more information, please see our partner site’s guide about 16 Things to Know About RBC Business Loans.
7. Swoop Canada
Swoop Canada is a multinational credit broker that matches borrowers with lenders. Startup loans range from $500 to $25,000 with repayment terms of one to five years. It only takes a few minutes to apply, and Swoop Canada curates offers from banks and alternative lenders to find you the lowest rate. But, please note that interest charges start at 6%.
To qualify, you must provide the following information:
- A Business Plan
- Realized Revenue
- Business History (some lenders require a minimum of six months to two years)
- Names of Business Founders
- Projected Earnings
Moreover, Swoop Canada is also a CLA member, and you’ll receive an “instant decision” for loan applications of $10,000 or less.
8. Accord Financial
While you have to apply for a detailed breakdown of the terms and conditions, Accord Financial is a CLA member providing small business loans up to $75,000. As a result, solutions should be available for startup companies.
You can apply online, 90% of applicants receive a decision within 24 hours, and all decisions are made within 48 hours.
9. Driven
If your business meets the following criteria, a Driven small business loan may be right for you:
- Headquartered in Canada
- 600+ credit score
- At least six months in operation
- At least $120,000 in annual revenue
- You have a business bank account
To apply, you must show:
- Basic details about you and your business
- Six months of bank connection or bank statements
- That your company is in good standing
If your firm checks off all the boxes, you can borrow $5,000 to $300,000 and repayment terms typically range from three to 18 months. Driven is also a CLA member.
10. Equitable Bank
Because Equitable Bank is a little light on the details, the lender is last on our list. However, its website states, “Calling all start-ups, small-business owners, entrepreneurs, and investors – we’ve got business loans to help take your venture to the next level.”
Consequently, while you need to contact an account manager directly to uncover the specifics, Equitable Bank is a CLA member and should have solutions that fit your needs.
Conclusion
If you’ve ditched the 9-5 to start your own business, there are several Canadian financing solutions to help your company thrive. To find the best product, we recommend submitting several applications and comparing the pros and cons of different offers. The strategy increases the chances of obtaining the best terms, cheapest rates, and ensuring the loan is a good fit for your firm. We highly recommend you check out our regional pages for Alberta, BC and Ontario if you want to see more local options for lenders in your province. More regional options will be added soon to cover all provinces and territories…
Alex Demolitor is a financial writer hailing from Halifax. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators. He has been published on many financial publications, including Investing.com, FXEmpire and others.
