Seven Common Business Loan Requirements in Canada

When it comes to starting or expanding a business, financing is often necessary. Business loans are an excellent way to obtain the necessary funds, but it's not always easy to qualify for one. Lenders have specific requirements that they look for when deciding whether to approve a loan application. Here are the seven common business loan requirements in Canada that you as a small business owner need to know about.

Seven Business Bank Loan Requirements

Whether you’re looking for small business loan requirements in Canada, start-up business loan requirements, or a more traditional loan, here are the top seven things you need to know about Canada small business loan requirements.

1) Business Plan

When you’re pursuing a small or start-up business loan, one of the most important business loan requirements is a business plan. Lenders want to see a detailed plan that outlines the business's goals, strategies, and financial projections. A business plan helps lenders assess the risk involved and determine whether they can expect a return on their investment.

2) Cash Flow

Cash flow is another critical factor that lenders consider when evaluating a loan application. Lenders want to see that your business has enough cash flow to pay back the loan. A positive cash flow indicates that your business is profitable and has the ability to generate enough revenue to pay back the loan.

3) Credit Score

Lenders also look at your credit score when evaluating a loan application. A high credit score indicates that you have a history of paying your bills on time and are less likely to default on the loan. In Canada, a credit score of 650 or higher is generally required to qualify for a business loan.

4) Collateral

Lenders often require collateral as security for the loan. Collateral can be in the form of assets such as real estate, equipment, or inventory. If you should default on your loan, the lender can seize the collateral to recover their investment.

5) Business Financial Statements

Lenders also require financial statements that show your business's revenue, expenses, and net income. These statements help lenders evaluate your business's financial health and determine whether or not the business can afford to repay the loan.

6) Interest Rate

The interest rate is the cost of borrowing money and is another critical factor to consider when evaluating business loan requirements. Interest rates can vary depending on the lender, loan amount, and your credit score. Traditional banks often offer lower interest rates, but online lenders may offer higher interest rates with more flexible qualification requirements. Typically the interest rate will vary depending on the perceived overall risk of the loan to the financing institution.

7) Loan Amounts

The loan amount is the total amount of money that the bank or credit union is willing to lend to you. Loan amounts can vary depending on the lender, the borrower's qualifications, and the available collateral. Start-up businesses may qualify for smaller loan amounts, while established businesses may qualify for larger loan amounts.

Financing Options

In Canada, small business owners have various financing options available to them, including traditional banks or credit unions and online lenders. Business owners applying through a traditional bank or credit union may have the opportunity to apply for government-backed loan programs such as the Canada Small Business Financing Program. Each financing option has its own set of requirements, interest rates, and loan amounts, so it's essential to do your research and compare different options to find the best fit for your business.

Business Credit Cards

Business credit cards are another financing option that small business owners can consider. Business credit cards can help you manage your cash flow and build your credit score while offering convenience of point of sale purchasing. However, they often come with higher interest rates and lower credit limits than traditional loans and should only be used for short term financing with repayment happening within a month coming from the business’ cash flow.

Bad Credit

If you have bad credit, you may still be able to qualify for a business loan. However, you may be required to provide additional collateral, have a supporting individual/company provide a guarantee or pay a higher interest rate. Online lenders may also be more willing to work with you if you have bad credit.

Line of Credit

A line of credit is a revolving credit account that allows you to borrow funds as needed up to a predetermined limit. A line of credit is an excellent financing option for small businesses that need working capital or have unpredictable cash flows. However, they often come with slightly higher interest rates than traditional loans.


Obtaining a business loan can be a challenging process, but understanding the common business loan requirements in Canada can help you prepare and increase your chances of getting approved. A solid business plan, positive cash flow, good credit score, collateral, and financial statements are some of the critical factors that lenders consider when evaluating a loan application.

It's also essential to research different financing options, compare interest rates and loan amounts, and choose the best fit for your business. By doing so, you can access the necessary funds to start or expand your business and achieve your goals.

Apply online for a business loan today!