Canada has more than 1.2 million small businesses, and roughly one in four that apply for bank financing gets declined. That number climbs higher for businesses under three years old, self-employed owners, or anyone with a credit score that tells an incomplete story. If you have ever sat across from a bank and heard "not at this time," this guide is written for you.
Getting a business loan in Canada comes down to one question: which type of lender is reading your file? Banks and alternative lenders are looking at fundamentally different things. Knowing the difference changes what you prepare, where you apply, and how long the whole process takes.
What banks look at when you apply for a business loan
Canadian banks (the Big Six and credit unions) use a standardized underwriting model built around three things: your personal credit score, your business credit history, and audited or tax-filed financial statements. If any one of those three is weak, the application typically stalls.
Personal credit score
Most major Canadian banks require a minimum score of 650 to 700 for a small business loan. Some set the floor higher. A single missed payment from three years ago can push you below that threshold, even if your business is profitable today.
Time in business
Banks generally want to see two or more years of operating history. A business in its first year is usually directed to the Business Development Bank of Canada or told to come back later.
Audited financials or tax returns
Banks underwrite on declared income, which creates a structural problem for self-employed Canadians and small business owners who minimize taxable income through legitimate deductions. A business generating $600,000 in revenue but showing $80,000 in net income after deductions will often not qualify for the loan that revenue would suggest it should.
Collateral
For larger business loans, banks typically require assets to secure the loan: real estate, equipment, or accounts receivable. Without collateral, approval for unsecured amounts above $50,000 becomes very difficult.
Debt service coverage ratio
Banks calculate whether your declared income can service the proposed loan payment. Under OSFI guidelines, lenders must assess repayment capacity. If the ratio does not clear the bank threshold, the file is declined regardless of revenue.
The result is a system built for established, well-documented, asset-backed businesses. Which describes a lot of Canadian companies. And leaves out a lot of others.
What alternative lenders look at
Alternative lenders use a different model. Instead of declared income on a tax return, they read operating revenue. Instead of a credit score as a filter, they use it as one data point among several.
The primary document in an alternative lending application is your business bank statement, typically 3 to 6 months. From that, a lender derives four things.
Gross monthly deposits
This is the revenue number that matters. Not what you declared, not what your accountant smoothed. What actually landed in the account.
Deposit consistency
A business depositing $30,000 to $40,000 every month for six months demonstrates operating capacity. A business with one large deposit and five quiet months tells a different story.
Existing debt obligations
Any MCA repayments, loan payments, or lease charges visible in the statements tell the lender what your current debt load is. This shapes the offer.
Average daily balance
This indicates how much breathing room the business operates with month to month. A business that consistently runs near zero is a different conversation than one maintaining a healthy buffer.
Most alternative lenders do a soft credit pull when you apply, which has no impact on your score. A score below 650 does not automatically close the file the way it would at a bank. The Financial Consumer Agency of Canada recommends that borrowers understand the full cost of any financing product before signing.
The real differences: a side-by-side comparison
Here is how the two models compare across the criteria that matter most to Canadian business owners.
| Canadian Banks | Alternative Lenders | |
|---|---|---|
| Primary underwriting | Tax returns, credit score | Bank statements, deposit volume |
| Min. credit score | 650-700 (typical) | 550+ (varies by product) |
| Time in business | 2+ years | 6-12 months (varies) |
| Collateral required | Often yes | Often no |
| Application time | Days to weeks | Hours to days |
| Funding speed | 1-4 weeks | 24-48 hours (in many cases) |
| Loan amounts | $10,000-$5M+ | $5,000-$500,000 (typical) |
| Cost | Lower (prime-based) | Higher (factor rates or fixed fees) |
| Best for | Established, well-documented businesses | Growing, declined, or non-traditional businesses |
The cost difference is real. Bank loans are typically cheaper. But the question for most applicants is not what is cheaper. It is what is available to me right now.
Which type of lender should you approach?
The answer depends on where you are, not where you want to be.
Start with a bank if
Your credit score is above 680, your business has been operating for more than two years, your financials are clean and professionally filed, and you can wait 3 to 6 weeks for a decision. If all four of those are true, a bank is your cheapest option.
Start with an alternative lender if
You have been declined by a bank, your business is newer than two years, you are self-employed with low declared income despite strong revenue, you need capital in days rather than weeks, or your credit score is below 650. Any one of these makes alternative lending worth exploring.
Using alternative lending as a bridge
There is no shame in either path. Many strong, profitable Canadian businesses use alternative lenders as a bridge while they rebuild credit or document their revenue track record. A well-structured MCA or short-term business loan, repaid cleanly, can open the door to bank financing 12 to 24 months later.
If your business is generating consistent revenue and you have been declined by a bank, that is exactly the situation Solid Capital was built for. Start an application at solidcapital.ca. It takes about five minutes, there is no impact to your credit to apply, and a Canadian advisor reviews every file personally. You can also read about how the process works before you apply.
Frequently Asked Questions
What credit score do you need for a business loan in Canada?
Most Canadian banks require a minimum personal credit score of 650 to 700. Alternative lenders are more flexible, with some approving files at 550 or higher depending on the product and the strength of your bank statements.
How long does it take to get a business loan in Canada?
Bank loans typically take 2 to 6 weeks from application to funding. Alternative lenders can fund in 24 to 48 hours in many cases for approved files.
Can I get a business loan if my company is less than one year old?
Banks rarely lend to businesses under two years old. Alternative lenders, including merchant cash advance providers, will often work with businesses that have 6 to 12 months of operating history and consistent deposits.
Does applying for a business loan hurt my credit?
A bank application typically triggers a hard credit inquiry. Alternative lenders like Solid Capital use a soft credit pull for the initial application, which has no impact on your credit score.
What documents do I need to apply for a business loan in Canada?
Banks typically require 2 to 3 years of tax returns, financial statements, and business registration documents. Alternative lenders primarily need 3 to 6 months of business bank statements. Some also request a driver's licence and a voided cheque.
