What are the best business line of credit in Canada?

In today’s fast-moving economy, access to flexible funding can make all the difference between success and struggle for small and medium-sized businesses. One of the most powerful and often underutilized financial tools is the business line of credit. For entrepreneurs and business owners in Canada, this type of financing offers the agility needed to cover short-term expenses, manage cash flow, and seize new opportunities without taking on long-term debt.

This guide explores Business Lines of Credit in Canada—what they are, how they work, their pros and cons, eligibility criteria, and where to find the best options.

What Is a Business Line of Credit?

A business line of credit (LOC) is a revolving loan that gives business owners access to a predetermined amount of funds that can be drawn as needed. Unlike a traditional term loan, where you receive a lump sum and repay it over time, a line of credit works more like a credit card—you only pay interest on the amount you borrow.

Once you repay the amount, your credit limit is replenished, allowing you to borrow again as needed.

Key Features:

• Flexible borrowing: Use funds for any business-related purpose.
• Revolving access: Reuse available credit after repayment.
• Interest-only payments: Often, only interest is required during the draw period.
• Quick access: Ideal for urgent expenses or short-term working capital.
  

Why Consider a Business Line of Credit in Canada?

Business environments are often unpredictable. Delayed client payments, seasonal sales fluctuations, equipment repair needs, or rapid growth opportunities require immediate funds. A business line of credit in Canada allows business owners to navigate these challenges with confidence.

Top Benefits:

• Cash Flow Management: Smooth over cash gaps, pay suppliers, or manage payroll.
• Emergency Preparedness: Quickly access funds for unforeseen expenses.
• Growth & Expansion: Take on larger orders, invest in marketing, or add inventory.
• Cost Efficiency: Only pay interest on the amount used—not the full credit limit.
  

Types of Business Lines of Credit

1. Secured Line of Credit

A secured business line of credit is backed by collateral such as business assets, real estate, or equipment. Since it’s less risky for lenders, it typically comes with lower interest rates and higher credit limits.

2. Unsecured Line of Credit

This option does not require collateral but may come with higher interest rates. It’s ideal for businesses with a solid credit history and steady revenue.

3. Traditional Bank LOC

Canadian banks such as RBC, TD, Scotiabank, and BMO offer traditional lines of credit with competitive rates. These usually require more documentation and a longer approval process.

4. Online Business LOC

Fintech companies and online lenders such as OnDeck, Lending Loop, and Thinking Capital offer faster approval with flexible requirements—ideal for startups or businesses with less traditional financials.

How to Qualify for a Business Line of Credit in Canada

Qualifying for a business LOC depends on several factors. While requirements vary by lender, most financial institutions will assess the following:

Common Requirements:

• Business age: Typically at least 6 months to 1 year in operation
• Revenue: Demonstrated consistent monthly or annual revenue
• Credit score: Both business and personal credit scores are evaluated
• Financial statements: Profit & loss statements, balance sheets, and tax returns
• Business plan: Sometimes required to understand the purpose of funding

For secured credit, you’ll also need collateral documentation.

How Much Can You Borrow? 

Business line of credit in Canada typically range from $5,000 to $500,000+, depending on the size of the business, annual revenue, and creditworthiness. Banks often offer larger credit limits but require more stringent qualifications.

Example:

• Small Business Startup: $10,000 – $50,000
• Established SME: $50,000 – $250,000+
• High-revenue business: $250,000 – $1 million+
  

Interest Rates and Fees

Interest rates vary based on lender, credit score, and whether the line is secured or unsecured. As of 2025, typical interest rates in Canada for business LOCs range from 7% to 15%, though online lenders may charge higher due to greater risk.

Common Fees:

• Origination fee
  Maintenance or annual fee
• Late payment fee
  Over-limit fee
  

Always review the full loan agreement to understand the fee structure.

Where to get a business line of credit in Canada

1. Major Banks

• RBC (Royal Bank of Canada): Offers both secured and unsecured business LOCs with flexible repayment.
• TD Bank: Provides lines of credit up to $500,000 with competitive rates.
• Scotiabank: Has business credit lines tailored for startups and expanding companies.
• BMO: Offers customized credit solutions for businesses of all sizes.
  

2. Credit Unions

Local credit unions often provide more personalized services and can be more flexible than big banks.

3. Online Lenders

• OnDeck Canada
• Thinking Capital
• Lendified
• FundThrough (for invoice-based LOCs)
  

These platforms are known for fast approvals and less paperwork, though interest rates may be higher.

Business Line of Credit vs. Business Loan

Both options have value. A business loan is better for large, one-time purchases like real estate or equipment, while a line of credit is best for recurring or unpredictable expenses.

Tips for Managing a Business Line of Credit in Canada

To make the most of your LOC:

1. Use It Strategically: Don’t treat it like “free money.” Use it for cash flow gaps or opportunities that will yield ROI.
   
2. Stay Organized: Track your draws, payments, and interest accrual.
   
3. Avoid Maxing Out: Keeping a buffer improves your credit score and shows responsible borrowing.
   
4. Pay Promptly: Timely repayment avoids penalties and improves your standing with lenders.
   

Final Thoughts

A business line of credit in Canada is a powerful tool for entrepreneurs seeking flexibility and control over their finances. Whether you’re launching a startup, managing seasonal cash flow, or scaling operations, this financing solution can provide the safety net and working capital you need—when you need it.