Business Lines of Credit in Quebec

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

1. Is pricing fixed, or tied to a published rate?
2. When is the facility reviewed, and on what evidence?
3. Can the limit be reduced, and on what notice?
4. 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.