Business Lines of Credit · Canada
Business Lines of Credit in Canada
A business line of credit is a revolving facility that lets a company draw funds up to a set limit and then borrow again as the drawn balance is repaid. It is not the same as a term business loan, which pays out once and is repaid on a fixed schedule. Interest usually applies only to what you have drawn, and the lender reviews the limit periodically.
- Product family Business Lines of Credit
- Availability Canada-wide, licence-dependent
- Cost basis Lender-set, within federal limits
- Where it is regulated Federal ceiling + provincial rules
A business line of credit is a revolving facility: the lender sets a limit, you draw what you need, and you can borrow again as you repay. A term business loan, by contrast, pays out once and is repaid on a fixed schedule.
Revolving versus term debt
With a line, you control the timing and the amount of each draw. Interest is normally charged only on the balance you have actually used, which makes a line cheaper for a need that comes and goes, such as covering a seasonal payroll or a slow-paying customer. With a term loan, interest runs on the full amount from day one.
- Draw, repay, then draw again up to the limit.
- Interest usually applies to the drawn balance.
- The limit is reviewed on a schedule.
- A demand facility can be trimmed or called.
How lenders underwrite a revolving facility
A line is monitored rather than approved once and forgotten. Lenders watch receivables and inventory, because those are the assets that convert back into cash to clear draws. Some set a borrowing base, a formula that ties your available limit to eligible accounts receivable, and ask for regular reporting. Cash flow, margins, seasonality and the quality of your customer list all shape the size of the limit.
Because the balance can sit drawn for a long time, a line rewards discipline. Using it to fund a permanent shortfall turns a short-term tool into long-term debt at a floating rate, which is how small facilities become large problems.
What to ask before you sign
- Is pricing fixed, or tied to a published rate?
- When is the facility reviewed, and on what evidence?
- Can the limit be reduced, and on what notice?
- What security and covenants are required?
Start with the FCAC — debt and borrowing guidance on comparing the cost of credit, then read the facility agreement line by line.
LoanGoose is a matching and comparison service rather than a lender, so limits, pricing and approvals are entirely the lender's call. A licensed professional can help you weigh a facility against your own numbers.
LoanGoose is a loan matching and comparison service, not a lender. The lowest rates are only available to the most qualified applicants.
What it costs
| Rule | Figure | What it means | Publisher |
|---|---|---|---|
| Criminal rate of interest (federal ceiling) | 35% per year | Above this, an agreement is a criminal offence. | Government of Canada (Justice Laws) |
No amount, term or rate is attached to any link on this page. Anything a lender offers you depends on your file and their own criteria.
What you need before you compare
- Your goal in one sentence. The amount, the date you need it, and the date you can repay it.
- Your real monthly surplus. What is genuinely left after every fixed cost — not what you hope is left.
- A current picture of your credit file. You can request a free copy of your report from each national bureau, and correcting an error is free.
- Every existing debt and its rate. Consolidation maths only works when you can see the whole board.
- The total cost of each option. Compare total repayment, not the headline rate.
- A check that the lender is licensed. Federally regulated banks fall under FCAC; provincial regulators license most other lenders.
Rules where you live
| Province or territory | Payday lending status | Local page |
|---|---|---|
| Newfoundland and Labrador | Licensed regime — federal cap applies | Business Lines of Credit in Newfoundland and Labrador |
| Prince Edward Island | Licensed regime — federal cap applies | Business Lines of Credit in Prince Edward Island |
| Nova Scotia | Licensed regime — federal cap applies | Business Lines of Credit in Nova Scotia |
| New Brunswick | Licensed regime — federal cap applies | Business Lines of Credit in New Brunswick |
| Quebec | Payday lending not licensed | Business Lines of Credit in Quebec |
| Ontario | Licensed regime — federal cap applies | Business Lines of Credit in Ontario |
| Manitoba | Licensed regime — federal cap applies | Business Lines of Credit in Manitoba |
| Saskatchewan | Licensed regime — federal cap applies | Business Lines of Credit in Saskatchewan |
| Alberta | Licensed regime — federal cap applies | Business Lines of Credit in Alberta |
| British Columbia | Licensed regime — federal cap applies | Business Lines of Credit in British Columbia |
| Yukon | Province-dependent | Business Lines of Credit in Yukon |
| Northwest Territories | Province-dependent | Business Lines of Credit in Northwest Territories |
| Nunavut | Province-dependent | Business Lines of Credit in Nunavut |
Provincial rules change. Confirm the current position with the regulator before relying on it — see the sourced rules table.
Compare business lines of credit options
This is a matching step, not an application with us — we are not a lender. Checking does not commit you to anything, and no amount, term or rate is promised here.
LoanGoose is a loan matching and comparison service, not a lender. We do not make loans, set rates or make credit decisions. We may earn a commission when you click or apply through our links. The lowest rates are only available to the most qualified applicants.
Questions people actually ask
What is a business line of credit?
It is a revolving facility with a set limit. You draw what you need, repay it, and the available room returns. Interest is normally charged only on the amount drawn. A term loan is different: it pays out once and is repaid on a fixed schedule.
How is a line of credit different from a term loan?
A line is flexible and ongoing, while a term loan is a single advance with a fixed amortization. A line suits gaps that appear and disappear, such as seasonal costs. A term loan suits one large, one-time purchase. The right choice depends on how long you need the money.
What does a lender look at for a small business line of credit?
Receivables, inventory, cash flow, margins and how long you have been trading. Many facilities are monitored, and some use a borrowing base that limits how much you can draw against eligible receivables. Reporting requirements are common, so ask what you will need to submit.
Can the lender reduce my limit?
Often, yes. Many facilities are demand facilities, meaning the lender can review or reduce the limit, and the agreement sets out what notice is required. Read that clause carefully before relying on a line as permanent working capital.
Is a business line of credit secured?
It may be. Some are unsecured, while others take security over receivables, inventory or other business assets. A secured facility can carry a lower cost because the lender's risk is smaller, but it also means the lender has a claim on those assets if you default.
Where can I learn how credit costs are regulated in Canada?
The <a href="https://www.canada.ca/en/financial-consumer-agency/services/debt.html">FCAC — debt and borrowing</a> material covers how borrowing costs work and what to compare. For a facility agreement, a licensed professional can help you read the covenants, security and review clauses before you sign.
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Sources for this page
Every figure on this page is attributed to the publisher above. Where a value could not be verified against the publisher's own publication, it is left out rather than estimated.