How do I get a business line of credit in Canada?
Apply to a chartered bank, a credit union or a non-bank lender with six to twelve months of business bank statements, recent financial statements and ID for each owner. Banks usually want two years in business and set the limit from your receivables; non-bank lenders accept about twelve months and set it from monthly deposits.
Start an applicationChoose the channel first, because it decides which test the file has to pass. A chartered bank, or a credit union such as Desjardins, offers the lowest pricing and the strictest test: filed financial statements, two years of history, the owners' personal credit, and usually a general security agreement over the business's assets plus a personal guarantee. A non-bank lender reads the last six to twelve months of bank statements instead, accepts younger businesses and lower credit scores, and decides faster at a higher price.
Know how the limit is set before asking for a number. A bank operating line is usually margined: the limit follows a share of eligible receivables, commonly 75% of invoices under 90 days old, plus a smaller share of inventory, and on larger lines it is recalculated each month from the reports you file. BDC notes that these lines are generally demand loans, which means the bank can reduce or call them. A non-bank line is usually sized on deposits instead, commonly 50% to 100% of average monthly deposits.
Prepare the file the lender will build anyway: six to twelve months of business bank statements, the latest year-end or interim financial statements, articles of incorporation or business registration, ID for every owner who will sign a guarantee, and a list of existing debts and their payments. Search the PPSA registry in your province, or the RDPRM in Quebec, before applying. An old blanket registration from a facility you already paid off is a common reason a new line stalls, and it is easier to clear before the application than in the middle of it.
Once the line is open, draw what the gap needs and repay it as cash comes in, because interest runs on the drawn balance, not on the limit. A line that stays fully drawn month after month is funding something permanent; lenders notice that at renewal, and a term loan is usually the better fit for that need.
What happens, in order
- Application — under ten minutes, no fee, no credit impact
- Documents — six months of business bank statements is the standard request
- Lender review — the file is matched to the products it actually qualifies for
- Funding — 24 to 72 hours for working capital once a structure is signed