Most business-financing content online is written for American owners — SBA loans, FICO scores, EINs — and quietly assumes everyone reading it is in the United States. If you run a business in Canada, the landscape is genuinely different: a different government guarantee program, different credit bureaus, different rate benchmarks, and a smaller (but growing) alternative-lending market. This guide covers how small business loans actually work in Canada, how the system compares to the US, and what to watch for if you operate on both sides of the border.
The Canadian small business lending landscape
Canada's market has three main layers:
The Big Five banks and credit unions. RBC, TD, Scotiabank, BMO, and CIBC dominate business banking, alongside credit unions and Desjardins in Quebec. They offer the cheapest capital — business term loans, operating lines, and commercial mortgages — but underwriting is conservative. Expect requests for two years of financial statements, a strong personal credit file, and often collateral or a personal guarantee.
BDC (Business Development Bank of Canada). A Crown corporation that lends directly to Canadian businesses — something the US SBA does not do (the SBA mostly guarantees loans made by others). BDC is known for patient terms and financing for projects banks avoid, though pricing is usually somewhat above bank rates and the process is not fast.
Alternative and online lenders. A smaller ecosystem than in the US, but active: online term loans, merchant advances, equipment financing, and invoice factoring are all available to Canadian businesses. Approval is based heavily on business bank statements and monthly revenue, decisions come in days rather than weeks, and pricing reflects the speed.
CSBFP vs. SBA: the government programs compared
The Canada Small Business Financing Program (CSBFP) is the closest analogue to the US SBA 7(a) program, but the two work differently in ways that matter.
| Feature | CSBFP (Canada) | SBA 7(a) (US) |
|---|---|---|
| Structure | Government guarantees most of a loan made by a bank/credit union | Government guarantees most of a loan made by a participating lender |
| Maximum size | Up to about $1.15 million total (term loans up to $1M plus a line of credit up to $150K, per 2022 updates) | Up to $5 million |
| Eligible uses | Real property, equipment, leasehold improvements, intangibles and working-capital costs within limits | Very broad: working capital, equipment, real estate, acquisitions, refinancing |
| Typical rate cap | Often around prime + 3% floating on term loans, set by regulation | Capped at prime plus a margin that varies by loan size |
| Fees | Registration fee (typically 2% of the amount, financeable) | Guaranty fee based on loan size |
| Revenue cap | Generally businesses with under $10 million in annual gross revenue | Size standards vary by industry |
The practical difference: SBA 7(a) money is far more flexible. A US owner can use it for almost anything, including buying a business. CSBFP financing is narrower — it historically excluded general working capital entirely, and even after the 2022 expansion, working-capital and intangible costs are subject to sub-limits. If you need pure working capital in Canada, you're usually looking at a bank operating line, BDC, or an alternative lender rather than CSBFP.
Also like the SBA, the CSBFP doesn't lend directly — you apply at a participating bank or credit union, and that institution makes the credit decision. A government guarantee improves your odds, but it's not automatic approval.
Credit bureaus and scores: how Canada differs
Three differences trip up owners who learned the rules in the US:
Different bureaus, different scale. Canadian personal credit is tracked by Equifax Canada and TransUnion Canada, with scores generally running 300 to 900 — not the 300–850 FICO scale. A "good" Canadian score is typically around 660+, and 725+ opens most doors. Experian doesn't operate a consumer bureau in Canada.
Credit files don't follow you across the border. Your US credit history and your Canadian credit history are separate files. An owner who moves to Canada — or a US owner opening a Canadian entity — effectively starts with a thin file, which is a real underwriting problem. Some lenders will consider foreign credit reports manually, but most won't.
Business credit data is thinner. The US has a dense commercial credit ecosystem (Dun & Bradstreet PAYDEX, Experian Intelliscore, and heavy UCC filing data). Canada has commercial reporting through Equifax and Dun & Bradstreet Canada, but fewer suppliers report tradelines, so business credit files tend to be sparse. The result: Canadian small business underwriting leans harder on the owner's personal credit, business bank statements, and financial statements. Building business credit still helps — see how to build business credit — but expect it to carry less weight than in the US. Instead of UCC-1 filings, Canadian lenders register security under each province's Personal Property Security Act (PPSA) — functionally similar, provincially administered.
What rates and terms look like in Canada
Canadian pricing keys off the Canadian prime rate, which follows the Bank of Canada's policy rate (not the US Federal Reserve). Typical ranges, hedged because credit profiles vary widely:
| Product | Typical pricing | Typical terms |
|---|---|---|
| Bank term loan | Often prime + 1% to 3% | 2–10 years |
| CSBFP loan | Capped around prime + 3% floating, plus 2% registration fee | Up to 10–15 years depending on asset |
| Bank operating line | Prime + 1% to 4% | Revolving, reviewed annually |
| BDC financing | Somewhat above bank rates | Flexible, often longer amortizations |
| Online term loan | Low teens to 30%+ APR | 6–36 months |
| Merchant advance | Factor rates roughly 1.15–1.45 | 3–18 months, repaid from sales |
| Equipment financing/leasing | High single digits to high teens | 2–7 years, equipment as collateral |
A business line of credit from a bank is the workhorse of Canadian small business finance — most established businesses carry an operating line for cash flow smoothing. If your bank declines you, alternative lenders offer revolving and term products with faster approvals at higher cost; comparing them properly means converting everything to APR, as we cover in factor rate vs. APR.
Cross-border gotchas for businesses in both countries
Plenty of businesses sell into both markets or run entities on each side of the border. Common traps:
- Each entity qualifies on its own. Lenders underwrite the entity that's borrowing. Strong US revenue usually can't be counted toward a Canadian entity's application, and vice versa — even with common ownership. Consolidated financials help tell the story, but the borrowing entity's own bank statements drive most decisions.
- Currency mismatch. Borrowing in CAD while earning USD (or the reverse) adds exchange-rate risk to your debt service. Where possible, match the loan currency to the revenue that repays it.
- Personal guarantees across borders. A US resident guaranteeing a Canadian loan (or vice versa) may face extra scrutiny because the lender can't easily pull or enforce against a foreign credit file. Expect requests for additional documentation or collateral.
- Equipment moving across the border. Financed equipment usually can't be relocated to another country without lender consent — the lender's security registration (PPSA in Canada, UCC in the US) is jurisdiction-specific.
- Tax and structure differences. Canadian small businesses are commonly CCPCs (Canadian-controlled private corporations); US pass-through structures like S corps don't exist in Canadian law. Lenders on each side expect the local paperwork.
How to actually get funded in Canada
- Start with your use of funds. Equipment or leaseholds? CSBFP through your bank is often the cheapest path. General working capital? Operating line, BDC, or an online lender.
- Check your Canadian credit file first. Pull Equifax Canada and TransUnion Canada reports before applying so nothing surprises you.
- Get your documents together. Six months of bank statements, recent financials, T2 return, and incorporation documents cover almost every lender.
- Compare multiple offers, always. Canada has fewer small business lenders than the US, which makes shopping around harder — and more valuable. Rate spreads between a first offer and a competitive offer can be enormous.
That last step is where a marketplace earns its keep. EQ Funding serves businesses in both the US and Canada: one application is routed to a network of lenders that compete to fund you — banks won't compete for your file, but a marketplace makes lenders do exactly that. EQ isn't a lender and doesn't approve or fund anyone itself; it matches Canadian businesses with lenders that actually fund Canadian companies, so you can compare real offers side by side instead of applying bank by bank.