One of the most powerful and often underutilized financial tools is the business line of credit in Canada. For entrepreneurs and business owners in Canada, this type of financing provides the agility needed to cover short-term expenses, manage cash flow, and capitalize on new opportunities without incurring long-term debt.
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 provides business owners with access to a predetermined amount of funds that can be drawn upon 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 covering urgent expenses or short-term working capital needs.
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 limits in Canada typically range from $5,000 to $ 500,000 or more, 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 the 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 offer more personalized services and are more flexible than big banks.
3. Online Lenders
- OnDeck Canada
- Thinking Capital
- Lendified
- FundThrough (for invoice-based LOCs)
These platforms are known for their fast approvals and reduced paperwork, although interest rates may be higher.
Business Line of Credit vs. Business Loan
| Feature | Business Line of Credit | Business Loan |
| Access to Funds | As needed (revolving) | One-time lump sum |
| Interest Payment | Only on the borrowed amount | On the full amount |
| Flexibility | High | Moderate |
| Ideal Use | Ongoing cash flow | One-time large expense |
| Repayment | Ongoing or monthly | Fixed schedule |
Both options have value. A business loan is typically better suited for large, one-time purchases, such as real estate or equipment, while a line of credit is more suitable for recurring or unpredictable expenses.
Tips for Managing a Business Line of Credit
To make the most of your LOC:
- Use It Strategically: Don’t treat it like “free money.” Use it for cash flow gaps or opportunities that will yield ROI.
- Stay Organized: Track your draws, payments, and interest accrual.
- Avoid Maxing Out: Keeping a buffer improves your credit score and shows responsible borrowing.
- Pay Promptly: Timely repayment avoids penalties and improves your standing with lenders.
A business line of credit in Canada is a valuable tool for entrepreneurs seeking flexibility and control over their financial resources. 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. Before applying, compare offers from different lenders, understand your credit profile, and choose a solution that aligns with your business goals. With smart usage, a line of credit isn’t just a loan; it’s a long-term growth asset.
