Should You Consider a BDC Business Loan?

You may have heard of the Business Development Bank of Canada (BDC). It’s a popular funding option for entrepreneurs and business owners all over Canada. Whether it’s loans, consulting, or advisory services, the group prides itself on providing Canadian businesses with the resources they need to succeed. However, do they live up to the expectations? Do they offer good rates? Should you apply for a BDC business loan and shun the “Big 5″banks? In this review, we’ll help you decide for yourself…

What Is the BDC?

For over 75 years, the BDC has worked with Canadian entrepreneurs to foster innovation and help them at every stage of their growth cycle. Supporting over 100,000 clients and committing more than $52 billion in capital to small and medium-sized businesses, the BDC has roughly 2,900 employees with expertise across all industries.

The BDC is a Crown Corporation funded by the Government of Canada. The firm complements the private sector — which consists of traditional banks and alternative lenders — by making it easier for growing businesses to access capital.

What Services Does the BDC Offer?

Offering solutions similar to an investment bank, the BDC provides the following business services:

• Financing
• Consulting
• Corporate Financing
• Wholesale Financing
• Cleantech Financing
• Venture Capital
• Growth & Transition Capital
• Growth Equity Investments

What Types of BDC Loans Are Available?

Determining the right BDC loan for your company depends on how long you’ve been in business.

Businesses Operating For Less Than 12 Months

If your firm has been operating for less than 12 months, the BDC has a partner lender that may work with you.

Futurpreneur Canada

To assist startups and new businesses, Futurpreneur Canada provides up to $60,000 in financing for entrepreneurs aged 18 to 39. For the first year, you only have to pay interest on the loan. Then, in years two to five, the structure shifts to an amortizing loan where you repay principal and interest. You also have access to an expert business mentor, tools, and other resources to help you along the way.

To be eligible, you must:

• Be between 18 and 39
• Be a Canadian citizen or permanent resident
• Been operating for less than 12 months
• Work with a mentor for two years
• Not use the proceeds to refinance existing debt

Businesses Operating For 12-24 Months

If you’re an early-stage business needing capital, the BDC provides loans up to $250,000 with repayment terms of up to 12 months. You only pay interest at the start of the loan, and then it transitions to an amortizing loan with principal and interest payments.

To qualify, you must meet the following requirements:

• Have verifiable revenues generated over a 12-month period
• Have a company based in Canada
• Have a realistic market share and sales potential
• Have a good credit history
• Have reached the age of an adult in your province

As a secondary option, the Royal Bank of Canada (RBC) issues several types of loans to small, medium, and large-sized businesses. To learn more, please see our partner site’s RBC Business Loans Review.

Businesses Operating For Over 24 Months

With several options to choose from, the majority of the BDC’s products are available to businesses with longer track records. If your company has been operating for more than two years, you can apply for:

• Small Business Loans
• Commercial Real Estate Loans
• Equipment Loans
• Purchase Order Financing
• Working Capital Loans
• Technology Equipment Loans
• Technology Company Loans
• Business Acquisition or Transfer Loans

BDC Small Business Loans

Through a simple online application, you can borrow up to $100,000, with no application fees, and flexible repayment terms. You can use the funds to:

• Increase your cash flow
• Develop an online sales strategy
• Purchase inventory or run marketing campaigns
• Pay suppliers, employees, and other stakeholders

To qualify, you must:

• Operate in Canada
• Have a good credit history
• Been operating and generating revenue for two years or more

As a reminder, you can see that the BDC requires borrowers to have “good” credit histories to be eligible. And since most lenders heavily emphasize your credit score, borrowers with lower metrics should read our guide on How to Improve Your Canadian Credit Score. We cover 10 proven strategies to increase your credit score, and practicing better habits can help you obtain better rates and terms in the future.

BDC Commercial Real Estate Loans

With the potential to receive financing up to 100% of the property value, the BDC allows up to 25 years to repay the loan and you can pause principal repayments for up to 36 months. You can use the funds to:

• Buy land, buildings, and finance new construction
• Expand or renovate existing properties
• Increase your working capital

BDC Equipment Loans

If you want to expand, modernize, or replace outdated equipment, a BDC equipment loan can reach upwards of 125% of the asset’s costs. The excess funds cover shipping, installation, and other related expenses. Repayment terms reach up to 12 years, and you can postpone principal repayments for up to 24 months.

BDC equipment loans are typically used to:

• Purchase machinery, hardware, and specialized equipment
• Purchase commercial vehicles and transport infrastructure
• Compliment your line of credit by increasing working capital

BDC Purchase Order Financing

As a short-term solution that rivals a business cash advance, purchase order financing from the BDC can reach upwards of 90% of the invoice and you have up to 18 months to repay the loan.

The product is often used for:

• Complimenting your line of credit and increasing liquidity
• Pay suppliers upfront to improve profitability
• Purchase inventory or fulfill orders faster

As an additional resource, our Keep Business Credit Card Review highlights how you can borrow up to $400,000 and earn cash back on your purchases. You may find it preferable if you value revolving credit products.

BDC Working Capital Loans

As another liquidity solution, BDC working capital loans are great for mitigating seasonal fluctuations in cash flow. You can obtain preferred terms and conditions for loans in excess of $350,000, and you have up to eight years to repay the balance. Moreover, you can postpone principal payments for up to 24 months.

Working capital loans are often used to:

• Pay suppliers, hire employees, train staff, and meet other short-term obligations
• Purchase inventory and help fulfill orders
• Launch marketing campaigns or streamline sales practices

BDC Technology Equipment Loans

If you want to drive growth, trim costs, and boost productivity, technology investments are essential to modernizing your business. The BDC may finance up to 100% of the costs, and you can postpone principal repayments at the beginning.

BDC technology loans can help you:

• Purchase hardware like servers, adaptors, and network devices
• Purchase software like HR systems, accounting, and analytics tools
• Boost your social media presence through marketing, media, and e-commerce initiatives

BDC Technology Company Loans

If you have a disruptive idea and want to avoid the dilution impact of issuing equity, a BDC technology loan is a worthwhile alternative. With over $3 billion lent to innovative firms, a flexible repayment schedule can be tailored to your company’s needs.

The product is best for:

• Growth companies in need of resources for product development
• Customer acquisition campaigns through advertising and digital marketing strategies
• Acquisitive companies that want to enhance their market share

BDC Business Acquisition or Transfer Loans

If you want to make an acquisition, the BDC can help finance the purchase. Flexible loan amounts are available, and repayment terms can be structured to match your cash flow. Preferred terms and conditions are also available for loans in excess of $350,000, and the following transactions are applicable:

• Management buyouts, vendor take-backs, and succession plans
• Minority stakes in existing businesses
• Acquire intellectual property, goodwill, or client lists

Conclusion  – Good or Bad Option for Business Funding?

The BDC is certainly a reputable Crown Corporation with financing solutions for nearly any type of business.

That said, the BDC may not necessarily have the best rates for business loans. Based on multiple reviews we foud online, may entrepreneurs are complaining about their high rates. They also typically do SECURED loans, which means they require the company’s owners to put their assets up agains the loan, which can be risky.

We highly recommend comparing the BDC’s offering with the big five banks, credit unions and also with alternative lenders in Canada. Also, you need to shop around to make sure you are getting the best rate and terms for your business loan. Don’t just accept the first offer you receive, whether it’s from the BDC or any other institution.

As a result, we recommend inquiring about products that fit your needs to see what the BDC offers. Moreover, consider the BDC, traditional banks, and alternative lenders to see which proposes the best terms and the lowest rates. Following this approach lets lenders compete for your business and saves money.