Do I need a personal guarantee for business financing in Canada?
Usually yes. Almost every Canadian lender and funder — bank and non-bank alike — requires a personal guarantee from owners holding 20% or more of the business. What varies is whether it is a full guarantee, a limited one, or a validity guarantee covering fraud only.
Start an applicationA personal guarantee makes the owner personally answerable for the obligation if the business cannot meet it. Chartered banks require one on nearly all small-business facilities, typically alongside a general security agreement over business assets. Non-bank funders require one too, though on advances it is often narrower — a performance or validity guarantee that bites on misrepresentation, selling the receivables twice, or shutting the business down deliberately, rather than on ordinary business failure.
Three things are worth negotiating and are frequently negotiable: the number of guarantors (a co-owner at 25% may not need to sign), a cap on the guaranteed amount, and release conditions once a portion is repaid or performance is demonstrated. Ask for the guarantee wording before signing, not after — it is a separate document from the financing agreement.
Equipment financing is the common exception in structure: the asset itself is the security, so a guarantee may be limited or waived on strong files. Invoice factoring often carries a validity guarantee rather than a full one, because the funder is buying a verified receivable from a creditworthy customer.
Baseline eligibility, by product
Figures are typical ranges for a complete file, not guarantees. Final terms depend on revenue, time in business, credit profile and lender review.
| Merchant Cash Advance (MCA) | Business operating in Canada for 4+ months (some lenders 6+ months) |
|---|---|
| Business Line of Credit | 12+ months in business (most non-bank lenders); 24+ months at chartered banks |
| Invoice Factoring | Sell to other businesses or government on terms (net-30/60/90) |
| Equipment Financing | 6+ months in business (12+ for the most competitive pricing) |
| Term Loan | 24+ months in business (some lenders 12+) |