Startup Business Loans Canada

October 20, 2020 |

Best Startup Business Loans Canada

The early stages of any business can be difficult. Many Canadians struggle to find money to open the doors. One option is to apply for business loans. Fortunately, there are many loan options to help you get started.

For some, it’s not that straight forward. Sometimes it can be difficult to get approved due to an inadequate credit score. Loans for a business startup are always considered a risk by banks. They tend to offer higher rates to offset the risk.

If you decide to apply for a business loan, you’ll need help. You will need to research and find a loan that will give you good enough terms to make the repayments affordable. That’s where we can help. We’ve unearthed some great loan providers.

Some loan options include:

  • Loans Canada
  • Borrowell
  • BDC – Government Funding

Loans Canada and Borrowell are two well-established companies for business loans. Whereas, government funding includes grants and contributions that you may be entitled to. Not to mention, funded programs such as Futurpreneur.

Loans Canada

This is the largest online platform for loan search and loan comparison in Canada. The company aims for all businesses to have access to financial loans, regardless of history.

The company was founded in 2012 and was inspired by Scott Satov who realized there was a gap in the financial market for business loans. Before, there were limited options for Canadians with poor credit history.

Loans Canada works by connecting clients to offers with their online system. As a borrower, you can be matched with lenders across the country. The lender can then help you get the business loan that you need.

Pros

Partnerships with Big Finance Companies. This can provide you with even more lenders and business loan options. The more options a new business has, the more likely it will get approved.

Education. Loans Canada aims to educate Canadians to make smarter financial decisions. So, you will be less likely to end up with large amounts of debt in the first place.

Save time. The online platform researches the best deals for you based on your application. Therefore, you are likely to be matched with lenders that meet your needs.

Community. There is a review feature on the website which allows you to see which lenders provide a good service. Borrowers can publicly write about their experience with a lender. This makes it easier to avoid lenders who may cause unnecessary stress.

Cons

Origination Fees. These are funds you may have to pay to process loans from lenders. If you run a small business, spending extra fees can be unsavoury.

Higher Business Loans Interest Rates. This can be significantly higher with poor personal credit. You may end up with more debt if your business is not successful.

Summary

Loans Canada provides a unique service in helping you have access to a business loan. The online platform allows you to compare different companies and avoid low-quality lenders.

Furthermore, you will have a good chance of securing small business loans. Loans Canada can give you access to the small business loans startup that you need.

But, it is important to check the interest rate of any lenders that you choose to borrow from. Loans Canada can make it easier for you to find suitable business loans. Still, you must identify whether they match your business plan. Some companies will offer a higher interest rate if you have a poor credit score.

So, do not be over-reliant on Loans Canada. Make sure that your new business has the potential to pay back any interest to lenders.

Borrowell

This is another company that can help you get a business loan that matches your needs. The main aim of Borrowell is to make sure you have the right loan for your needs.

Borrowell has partnered with Equifax (credit bureau) to offer free credit scores. This allows small businesses to have an idea of how quickly they can make repayments.

The company’s platform also includes an automated credit coach. This gives you tips on how to boost your credit score so you can meet your business needs.

Pros

Fast Access to Loans. When you have been accepted, it is possible to have the money within 1 or 2 business days. This is perfect for emergencies, such as paying off high-interest debts which are rapidly accumulating.

Flexibility With Repayment. You will experience no penalties for paying loans off early. You can have greater control over your finances and save money.

Lower Interest Rate than Competitors. Borrowell is significantly cheaper than most other companies for business loans for startups. Hence, for a less risky investment in your business, Borrowell might be your best choice.

Cons

Fixed Term Options. Borrowell only offers 3 or 5-year terms. This is very limited and stops you from borrowing short term loans.

Too Much Emphasis on Credit Score. You are unlikely to be accepted for a loan if you don’t have a high level of credit. Borrowell is an online platform that relies heavily on its calculations. No negotiation may otherwise increase your chances of getting a loan.

Summary

In conclusion, Borrowell is a good company do deal with for Canadians.

Having fast access to loans ensures that you will be able to get your business started. Or immediately pay off any debts. This will help your business long-term as you are likely to save money by acting sooner rather than later.

Furthermore, being flexible with repayment options ensures that you have control of your finances.

The real issue of Borrowell is being accepted. Their focus on credit ratings means that it is very difficult if you have a poor credit history.

If you are someone who has a good credit history, you have a great chance of being accepted. This gives you access to a range of loan options.

Borrowell is rated highly rated by the Better Business Bureau. So, this company definitely offers a legitimate and effective service for business loans.

In a nutshell, if you are accepted, you can get the loan that you need for your business.

Business Development Bank of Canada (BDC)

An alternative way of getting a business loan is from government funding. The BDC is an organization that offers grants to small businesses. BDC is a bank in Canada that supports entrepreneurs with their finances. Besides, providing help on how to scale your business.

One of the key principles of BDC is to have a positive effect on society. Rather than just accumulating profits.

To apply for government funding with BDC, you can go on the website. Then apply for the program that suits your situation.

One option is Futurpreneur Canada. This is for startup businesses that have been running for less than 12 months. The program offers $60,000 business loan and a mentor for 2 years. It is mainly focused on the younger generation as you have to be between the ages of 18-39. So, if you are a young entrepreneur, this is the best program for you.

To be eligible for Futurpreneur Canada, you must have the following:

  • A business idea related to your work experience
  • A thorough business plan
  • A business which is past the development stage
  • Two references

Your finances are funded by both BDC and Futurpreneur. Therefore, you will have to make repayment fees separately.

The bulk of your business loan will come from BDC who can provide $40,000 to your business. Futurpreneur provides the rest of the business loan of $20,000.

Repayment terms for BDC are as follows:

  • A $50 fee for processing the loan
  • Interest repayment (only in the first year)
  • 15% repayment of the loan on the one year anniversary of being funded

Repayment terms for Futurpreneur as follows:

  • Monthly payment of $15 to the program
  • A $50 fee for processing the loan
  • Interest repayment (only in the first year)
  • A term over 5 years for the $20,000

FAQs

Can you Get a Business Start-Up Loan with Bad Credit?

The short answer to this is yes.

Yet, having poor credit does put you in a slightly disadvantaged position. Companies will trust you less with repayments, and you will be offered a higher interest rate. This can lead to large payments down the line, and the initial business loan could lead to more debt.

Loans Canada accepts applications regardless of your credit history. You can have access to a range of business loan options on their system. Furthermore, a principle of Loans Canada is education. This company is specialized for those with bad credit.

Government funding through BDC is another solution. The Futurpreneur program is perfect for younger individuals.

There are examples where poor credit can restrict you from getting a business loan. Borrowell is an agency that places emphasis on the credit history of its applicants. So, they will not accept those with bad credit.

It is possible to get a business loan with bad credit. But, a good credit history will significantly increase your chances.

How do I get a Startup Loan?

There are two main ways to get a business loan: traditional lenders and government funding.

One of the best companies for business loans is Loans Canada. Regardless of your credit history, you can complete an application on their website.

The process with Loans Canada is as follows:

  1. Submit your request
  2. Get matched with a lender and accept a quote
  3. Receive your finances

If you have good credit history, you can get fast access to a business loan with Borrowell. The first step of the application is to check your free credit score on the website. This will show you what loans you qualify for.

The next step is to apply for a loan that best suits your business needs. Before accepting a Borrowell loan agreement, you should ask about all the fees. It is also important to know how frequently this is taken from your bank account.

Finally, you can get a business loan by applying for government funding. On the BDC website, there are many programs that offer loans that are funded by the government.

Fill in the online application for the program that is best suited to your business. Futurpeneur is the perfect choice for new businesses that are still in the early stages.

Can you Start a Business with Poor Credit?

Yes, you can, but, it is more difficult. Most new businesses need a business loan to get up and running. If you have poor credit, you will find it harder to get a large business loan. Not to mention, the higher interest rates that lenders will charge you.

Due to the increasing amount of loan options, it is still possible. If you are able to get a business loan, you will have the finances required to get your business off the ground. Still, it will be a riskier business venture compared to if you had good credit.

Does my Company have a Credit Score?

Yes, your corporation or small business does have a credit score. It can determine the eligibility and interest rates of any future loans you need. Furthermore, your company’s credit history is separate from your personal history. You should always try to improve it.

Credit Reporting Bureaus such as Equifax check the financial actions of your business. These include:

  • Credit card payments
  • Line of credit usage
  • Repaying small business loans.

All this data is used to create a business credit report for your company.

The Bottom Line

Getting a business loan for a start-up has some hurdles but it’s not impossible. You have two paths you can explore, the first is getting quotes from different lenders. Loans Canada is a good resource for doing this because they have a quote engine that provides different options.

Interest rates are always going to be higher for start-up loans especially if they’re unsecured against assets. This is because there is always a risk with a start-up and the lending institution has to factor in that increased risk. But if you don’t have any other options, it’s a good place to start.

If you have good credit, your options improve significantly. However, I don’t want you to lose hope if you have a poor credit score. There are providers who would be interested in lending you money and Loans Canada gives you access to those.

For quick loans, Borrowell is a good place to begin. However, you’ll need good credit. They also have some great rates.

The BDC is another route to explore, they have start-up financing options that you might be eligible for.

Smaller businesses are the backbone of the Canadian economy. But it can be tough to get access to financing. There are options and in this article, we’ve highlighted some great resources for you.