What You Should Know
- A business line of credit provides businesses with quick and easy access to funds without having to go through the lengthy process of applying for a traditional business loan each time.
- To qualify for a business line of credit in Canada, businesses must have a strong credit score, a solid business plan, proof of revenue and profitability, and may require collateral depending on the amount they are looking to borrow.
- When considering the best business lines of credit in Canada, it is important to compare interest rates, credit limits, features, and fees associated with the lender.
A business line of credit is a revolving loan that allows businesses to borrow up to a certain amount of money and then repay it over time. You can borrow, repay, and borrow money as often as you’d like. This makes a business line of credit ideal for businesses that need to frequently borrow money, such as to cover short-term expenses or take advantage of opportunities that require immediate capital.
With a business line of credit, businesses can access funds quickly and easily without having to go through the lengthy process of applying for a traditional business loan each time that they want to borrow money.
To qualify for a business line of credit in Canada, there are certain criteria that businesses must meet. These may vary depending on the lender, but generally include:
- A strong credit score
- A solid business plan
- Proof of revenue and profitability
- Collateral, depending on the amount you are looking to borrow
Businesses must also have a good track record of managing their finances and meeting financial obligations. Lenders want to see that businesses are responsible and capable of repaying the loan.
What We Like:
- ✅ Automatic fund transfers
- ✅ Easy access to funds
The Royal Business OperatingLine of Credit from RBC is an excellent option for businesses looking for a reliable and flexible line of credit. The standout feature of RBC’s business line of credit is its automatic fund transfers with OperatingLine PLUS. Any overdrawn amount in your RBC operating bank account is covered by an automatic transfer from your business line of credit. If you have any surplus money in your bank account, then it’s automatically transferred to pay down your line of credit. This feature ensures that your business always has access to funds when needed, while minimizing interest paid on your outstanding line of credit balance.
Another advantage of RBC’s line of credit is that it offers easy access to funds. Once you have been approved for a line of credit, you can easily make withdrawals through ATMs, online banking, the mobile RBC app, or at any RBC branch. This makes it convenient for businesses to manage their finances and access funds whenever necessary. RBC’s Royal Business OperatingLine of Credit has a credit limit that starts at $10,000.
What We Like:
- ✅ Earn reward points on purchases
- ✅ Convenience of a credit card
RBC markets this as a mix of a line of credit combined with a credit card. The RBC Visa CreditLine for Small Business is one of the few business lines of credit with card access that gives reward points on purchases made using the card. You’ll earn 1 Avion Rewards point for each $2 in purchases. That’s equivalent to around 0.5% cashback on your business purchases.
There’s no annual fee for this card, and the interest rate starts at Prime + 2.9% and goes up to Prime + 11.9%, depending on your credit. You can only get up to two cards per company, as it’s meant for business owners only, not employees. The card also comes with benefits such as purchase insurance and extended warranty.
What We Like:
- ✅ Quick approvals
- ✅ CAD or USD
Things to Consider:
- ❌ Annual fee and setup fee
CIBC’s business line of credit has some flexible options, allowing you to have the account in CAD or USD, and having the line of credit being secured or unsecured. Securing your line of credit with collateral can reduce your interest rate. The line of credit amount starts at $10,000.
Something to consider about CIBC’s business line of credit is that there are plenty of fees. CIBC charges a monthly fee ranging from $25 to $125 per month, with an annual renewal fee ranging from $50 to $150. CIBC also charges a one-time setup fee of $150 to $1,000. Plus, any changes to your credit agreement will come with a $150 amendment fee.
Businesses should carefully consider these fees before choosing CIBC’s business line of credit. Additionally, businesses will need to have a good credit score and positive revenue for the past 12 to 24 months to be approved for this line of credit.
What We Like:
- ✅ Low income requirement
- ✅ Plenty of free additional cards
CIBC’s bizline Visa Card is another line of credit option for businesses that prefer a credit card format. One of the standout features of this card is its low income requirement, making it easier for small businesses and startups to qualify. The minimum income requirement is $15,000, which can include both business and personal sources, verified with your personal Notice of Assessment.
Additionally, businesses can get multiple additional cards for free, up to nine additional cards, allowing them to distribute cards among their employees or team members. Other benefits of the card include up to 25% off car rentals at Avis and Budget, as well as savings on products and services with Visa SavingsEdge, such as 7% off AWS or $100 off your first purchase of $250 or more with Amazon Business. For gas, Journie Rewards with your bizline Visa Card can save you up to 10 cents off per litre.
The interest rate on this card starts at Prime plus 1.5%. Based on your credit, it may be Prime plus 6% or Prime plus 13%.
What We Like:
- ✅ Instant approval up to $120,000
- ✅ Fully digital online application available
BMO is leading the way digitally when it comes to business banking, being the only bank out of the Big Six Banks to offer a digital business bank account with no monthly fee, no minimum balance, and free unlimited transactions with the BMO eBusiness Plan. When it comes to a business line of credit, BMO also steps up their game with the BMO Credit Line for Business. You can apply for the BMO Credit Line for Business online, with no paper documents required, and you can even be approved online instantly! That’s much different than most other banks that require an appointment at a branch or a phone call to apply.
To apply online, you'll just need to provide your business's name, business registration number, registration jurisdiction, and a phone number. This takes a few minutes, and instant approval with no collateral could be had for up to $120,000. You can also apply in-branch by booking an appointment. You'll need to bring paper documents if you do so, such as T4 slips and articles of incorporation, if applicable.
BMO's Credit Line for Business comes with a Mastercard that you can use anywhere that Mastercard is accepted, as well as with Apple Pay and Google Pay on your mobile phone. You'll only get two physical cards, as no employee cards are available. No rewards or cashback are given on purchases made with your Credit Line for Business Mastercard.
The interest rate for BMO's Credit Line for Business depends on your personal credit score, ranging from Prime plus 2% to Prime plus 11%.
What We Like:
- ✅ High credit limits, up to $1 million if eligible
- ✅ Attached to your business chequing account, making transfers easy
Scotiabank’s Credit Line for business is tied to your Scotiabank business chequing account, which means that you'll only be borrowing up to the exact dollar that you need to, helping to reduce your interest costs.
The credit limit can go up to $1 million if you are eligible. To apply, you'll need to make an appointment with a Scotiabank Small Business Advisor. You'll need to provide your income for the last two years, your business financial statements, and your business plan. You may need to sign a personal guarantee for sole proprietorships and partnerships.
The Scotiabank Credit Line for business is only available as an unsecured line of credit. An alternative is the Scotia Flex for business, which can have a credit limit of up to $2 million spread across multiple products, such as credit lines, term loans, and business credit cards, while being secured by your home or commercial property.
What We Like:
- ✅ High credit limits, up to $500,000 if eligible
- ✅ Low interest rate if secured
The ScotiaLine for business VISA Credit Card combines a low interest rate of a line of credit with the flexibility of a credit card. For unsecured cards, the credit limit can be up to $150,000 with an interest rate as low as Prime plus 3.49%. For secured cards, the credit limit can be up to $500,000 with a rate as low as Prime plus 1%. The minimum credit limit for this card is $5,000.
One unique feature that Scotiabank offers with the ScotiaLine for business cards is the ability to get free supplementary cards for employees, as well as personalized cheques. You'll be able to track employee spending on your consolidated monthly statement.
Other benefits of the card are a 21-day interest-free grace period, which is similar to other personal and business credit cards, no annual fee, discounts on car rentals with AVIS, extended warranty on purchases, and savings with Visa SavingsEdge.
Things to Consider:
- ❌ Annual fee
- ❌ Low credit limit
While it’s not a particularly strong offering compared to the other major banks, National Bank advertises their Business Line Mastercard as combining the best of both a line of credit with a credit card. With an annual fee of $50, and a low maximum credit limit of $10,000, it's not particularly appealing, unless you have existing banking products with National Bank.
The interest rate is Prime plus 5%, which can be lower than some other business credit cards, but is higher than the best business line of credit interest rates offered by RBC, CIBC, BMO and Scotiabank. The minimum credit limit is $1,000. To apply, you’ll set up an appointment request, which means that there aren’t any instant approvals.
There are online business lines of credit lenders in Canada that may offer quicker and easier approvals compared to the big banks. However, their interest rates may be higher. These lenders include:
When it comes to finding the best business lines of credit in Canada and comparing lenders, it can be difficult to know where to start. The first factor to consider is the interest rate. Business lines of credit have a variable interest rate based on prime, quoted as prime plus or minus a certain percentage. The prime rate changes based on movements in the Bank of Canada interest rate. Different lenders offer different spreads based on the prime rate, so it's important to compare the different options available to you.
It's also important to consider the credit limit available. Even if you are eligible, some lenders may have maximum credit limits that are lower than what you need.
Features are also something to look for. Do you need card access to your funds? Do you need automatic transfers to and from a linked bank account, or online banking options? Think about what features are important for your business and make sure the lender you choose offers them.
Finally, look at any fees associated with the line of credit, such as application fees or annual fees.
In Canada, there are several different types of business lines of credit available. The most common types offered at banks are secured and unsecured lines of credit. A secured line of credit requires collateral, such as a property or other asset, to secure the loan. An unsecured line of credit does not require collateral, but usually has a higher interest rate and a lower credit limit.
Some banks and credit unions may also participate in the Canadian Small Business Financing Program (CSBFP). These are loans that are backed by the government and are designed to help businesses access funds for specific purposes. In the case of a CSBFP credit line, it's meant to help small businesses with financing and working capital costs. Financing can also be in the form of a term loan. There’s a 2% registration fee for the Canadian Small Business Financing Program.
Here are some tips to help you successfully apply for a business line of credit:
- 1. Have a clear understanding of your business's financials: Before applying for any type of financing, it's important to have a clear understanding of your business's financials so that you know what type of financing that you need, such as how much you need to borrow and when.
- 2. Research different lenders: Take the time to research different lenders and compare their rates and features. This will help you find the best deal for your business.
- 3. Prepare necessary documents: Lenders usually require documents such as tax returns, bank statements, and company information when applying. Make sure to have these prepared beforehand to speed up the application process.
- 4. Have a solid business plan: Lenders want to see that you have a clear plan for how you will use the funds and how you will repay the line of credit. Having a solid business plan in place can increase your chances of being approved for a business line of credit.
- 5. Be prepared to negotiate: Don't be afraid to negotiate with lenders to get the best rate for your business line of credit. Remember, they want your business, so don't be afraid to ask for what you need.
A business line of credit is a type of loan that provides businesses with access to a certain amount of credit that can be used for a variety of purposes. The business can borrow and repay the line of credit as they like, and they’re only required to pay interest on the amount of money they use.
When applying for a business line of credit, you will typically need to provide documents such as financial statements, tax returns, and proof of income. You may also need to provide additional documents depending on the lender and your business, such as articles of incorporation or trade name registration documents. Lenders usually require you to have been in business for at least 6 months.
The approval process for a business line of credit can vary depending on the lender and the complexity of the application. Generally, it can take a few days to a few weeks to get approved. Some lenders may even offer instant online approvals.
There are two main types of business lines of credit: secured and unsecured. Secured lines of credit are backed by collateral, such as real estate or equipment, while unsecured lines of credit are not backed by any collateral.