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How to Get Approved for a Small Business Loan in Canada

How to Get Approved for a Small Business Loan in Canada

Sometimes, it can be difficult to get approved for a small business loan in Canada. However, it is not impossible. There are a number of steps that you can take to ensure that you have the highest chances of getting approved for a business loan, which we will detail below. 

In this article we will discuss the process of getting this kind of financing, how to improve your odds of success, what you’ll need in order to qualify, and how to choose the best financial institution or online lenders for you. By putting together a business loan application that makes sense and is well-organized, you can create the conditions for success that you need as a business owner in Canada.

What are Business Loans Typically Used For?

Some of the most common uses of business loans include purchasing equipment, expanding your inventory or hiring new employees. But you can also use business credit for other things like launching a new project, making repairs to your business, marketing it online or financing general operations. 

Will I Need Collateral to Get a Business Loan?

Typically, you will need to have some form of collateral for this type of loan. 

That can be business assets like equipment essential to the operation of your company – think heavy machinery or vehicles. Alternatively, it could also include personal or business assets outside of what actually goes on in your business’ day to day.  For example, if you have a side business that is not related to your main work but has its own assets – such as property or investments, they could be included.

In many cases, the lender will consider what they are able to get in return from those assets in order to repay the loan in a worst-case scenario before offering financing. In other words, most lenders will ask for more collateral than just what you need to get the business loan.

All of that being said, it is still possible to get a business loan without collateral – but only in certain situations and with strong financials behind your application.

Lenders will be looking at your personal assets as well as those belonging directly to the company itself. When it comes down to it, your application for business financing is all about ensuring that your business credit profile is attractive enough for a lender to feel secure that you’ll repay what is owed eventually – either through your own assets or those of the company. 

As long as you have shown good faith in making sure this happens then there should be no problem, especially for small business loans of less than $150,000 CAD.

What Will I Need to Get Approved for Small Business Loans?

The first step in getting approved for a small business loan is to have the right documentation. You may need your personal financial documents, which can include things like your tax return and profit-loss statements from previous years. Additionally, you should be prepared to offer up information about your credit card transactions, your business credit score, and be able to provide information about how much money you are looking to borrow, as well as what you plan on doing with it.

Lenders will want to know that a small business owner is using the money for a good purpose, and that there is an end in sight. If your business has been around for more than two years, then lenders can use your prior tax returns as proof of this.

As you go through the process of applying for a loan, small business owners should make sure to ask questions. Knowing what you are getting into is a great way to avoid future problems and issues with your financing terms. It’s always a good idea to consult with an expert.

How Can I Improve My Chances of Being Approved?

Before you even begin looking for a traditional business loan, it is important that you start with some of the basics: how much money do you want to borrow, and why? Having this information will jumpstart the application process, and is really your first step.

Lenders will also want to know that you plan on continuing with business once the loan is repaid, so it is often required to have some sort of exit strategy in place. If your previous returns are not too impressive, then lenders might be more reluctant to give out money. Then again these documents only tell part of the story.

That’s why alternative lenders sometimes act as a good alternative to the big banks. Companies like Lendified have been helping individuals and businesses get the loans they need for years, and they’re often the perfect fit for those that want to avoid the slow and difficult process required to get a traditional bank loan from larger financial institutions.

What Interest Rates Will I Pay on a Small Business Loan?

Interest rates for small business loans vary depending on the lender, but they typically fall between 12% and 15%. As a rule of thumb, you should expect to pay more if your personal credit score is not as high, or if your personal credit history is spotty.

Of course, the higher the interest rate on the business loan, the more money that you will have to pay back in addition to what was borrowed. Competition among lenders can often result in lower interest rates being offered when looking for small business loans in Canada .

Tell Me More About Collateral Required for Business Loans?

In most cases, lenders will want to have collateral from you in order to protect their investment. In other words, the business loan is backed by tangible assets that can be sold if necessary – this includes real estate and vehicles as well.

In other cases, lenders may be willing to accept personal assets as collateral. This can include things like your primary residence or a car that is not rented out by the company – in fact if you have one of these then chances are quite good that they won’t ask for any additional security!

The bottom line here is this: always have an exit strategy. Talk to an expert loan advisor like those at Lendified to learn more about the best ways to get about securing the money you need. 

Is Having a Business Plan Important?

A business plan is an essential part of the application process. Lenders will want to know what you intend on using the money for and how it will benefit your company, and a good business plan should address this directly (and realistically). This document can also be used when looking for other sources of financing in Canada, so making sure that it’s professional is very important.

If you are not sure where to begin, then it might be best to contact a financial company like Lendified who can help connect you with the information you need to get all your plans in order, as well as the business loan that works best for your situation.

Should I Choose a Bank or an Online Lender for My Small Business Loan?

The answer to this question will depend on your specific needs. Larger banks can offer a wider variety of services and products, but they usually take longer to process applications as well.

Instead, you might want to consider working with an online lender that focuses exclusively on small business loans in Canada . These companies are highly specialized in what they do, which means that time to get approved can be much faster.

These lenders also offer a variety of repayment options, and often specialize in working with small businesses – this is why they are usually the best choice when it comes to getting business loans in Canada.

Contact us at Lendified to learn more!

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About the Author



Lendified is Canada's premier online lender for small businesses. The company was founded by former bank executives dedicated to provide businesses with fast, easy, and affordable financing. The Lendified team regularly produces blogs and guides to help small business owners succeed.

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