How to Start in Canada

How to Get a Business Line of Credit in Canada

How to get a business line of credit in Canada: the CSBFP $150,000 line, bank lines, what lenders check, and how a line differs from a loan.

Written November 6, 2026 · 9 min read

Applies in: CA

The short answer

A business line of credit is a revolving limit you draw on only when you need it, for day-to-day operating costs — not a lump sum for buying things. You pay interest only on what you draw, you repay as money comes in, and you reborrow up to the limit without reapplying. In Canada there are two main routes: your bank or credit union's own line, and the government-backed line of up to $150,000 under the Canada Small Business Financing Program (CSBFP), applied for through the same lender. The lender decides in both cases — the government shares the risk, it does not make the decision.

Step 1: Check the need is short-term

A line of credit fits one shape of problem: timing. Suppliers want paying this week, clients pay next month, payroll lands in between. It is the wrong tool for:

  • Buying equipment or a vehicle — that is a term loan, secured against the asset.
  • Buying or improving real estate — also a term loan.
  • A long growth project — a working capital term loan, with a set rate and a two-to-eight-year repayment period, fits better.
  • Covering steady losses — a line that never gets repaid becomes a demand for repayment at renewal. If the business loses money every month, fix the business, not the credit.

Work out the size of the gap first: the largest shortfall between money in and money out in a normal month, plus a margin. Asking for far more than the gap invites a refusal; asking for far less means you will be back in three months.

Step 2: Pick the route — bank line or CSBFP line

Your bank or credit union's own line. The usual route. The lender sets the limit, the rate and the security, usually against accounts receivable and inventory. Terms vary by lender, so compare more than one institution.

The CSBFP line of credit. Under the Canada Small Business Financing Program, the federal government shares the lender's risk, which can make a lender willing to extend a line it would otherwise refuse. The rules, from Innovation, Science and Economic Development Canada (ISED):

  • Maximum $150,000 for a line of credit, on top of up to $1,000,000 in term loans — $1,150,000 total per borrower.
  • For working capital only: day-to-day operating expenses.
  • Maximum interest rate: the lender's prime rate plus 5%.
  • A 2% registration fee, which may be financed as part of the line provided the maximum authorized amount is not exceeded.
  • Registered for five years, renewable for another five, with an option to convert to a term loan.
  • The government reimburses the lender for up to 85% of eligible losses if the loan defaults — that is the lender's protection, not yours: you still owe the money.

The CSBFP line sits inside the same program as the CSBFP term loan, so a business that has already used its term-loan room can still ask for the line on top. Note the split inside the term loan: within the $1,000,000, no more than $500,000 can go to purposes other than real property, and within that, no more than $150,000 to intangible assets and working capital. The line of credit is separate from those sub-limits.

BDC is not a line-of-credit route. The Business Development Bank of Canada states it does not provide traditional revolving lines of credit, and offers term loans instead, including working capital loans. If a lender points you to BDC for a revolving line, it is pointing you to the wrong product.

Step 3: Prepare what the lender asks for

The lender makes the credit decision, and applies the same credit standards as for a conventional loan. Prepare:

  • Financial statements for the business, and recent tax returns.
  • A business plan that explains what the business does, who pays it, and when.
  • Cash-flow projections showing the gap the line will bridge and how it gets repaid — month by month, not a single annual figure.
  • Your personal credit history. For a small business, the owner's file is part of the decision. Check your reports with Equifax and TransUnion and fix errors first.
  • A list of what secures the line: receivables, inventory, or other business assets the lender will take as security.

If one lender refuses, try another: the decision is the lender's, and lenders differ. For a CSBFP line, the lender must be a participating financial institution — ask whether yours participates before you prepare the full package.

Step 4: Apply at your financial institution

Present the business plan directly to a bank, credit union or caisse populaire. For a CSBFP line, the lender reviews the proposal, decides, and — if it approves — registers the line with ISED. You never deal with the government directly, and ISED does not accept or process borrower applications.

At the offer stage, check the terms line by line:

  • The limit and the rate. Is the rate prime plus a margin, and what is the margin? For a CSBFP line the margin is capped at prime plus 5%.
  • Demand or term. A line of credit is usually a demand loan: the lender can require repayment at any time. Know that before you draw.
  • Renewal. Lines are usually renewed yearly. Ask what the lender reviews at renewal and what would stop a renewal.
  • Fees. The 2% CSBFP registration fee, plus any lender fees for setup, annual review or unused balances.
  • Security. What the lender takes, and what happens to it if the line is called.
  • Reporting. Many lenders require monthly receivables and inventory reports, or a borrowing-base certificate, before you draw.

Do not draw the full limit on day one to "have it there". Drawn money costs interest; undrawn room costs nothing and is there when the gap actually arrives.

Step 5: Use it, repay it, renew it

  • Draw only what the gap needs, and repay as receivables arrive. The discipline is the point: a line that stays drawn is a loan with a worse rate.
  • Pay interest only on what you borrow. That is the line's advantage over a term loan — but it only helps if the balance actually comes down.
  • Keep the reporting current. Late receivables reports are the most common reason a lender freezes a line.
  • Prepare for renewal early. A line renewed without drama is one where the lender has seen clean monthly reports and a balance that moves up and down, not one that sits at the limit.

What not to do

  • Do not fund a long project with a line. A demand loan can be called in the middle of the project.
  • Do not draw the line to pay the term loan, or the term loan to pay the line. That is a circle, and lenders see it.
  • Do not skip the CSBFP question. If your bank offers a line, ask whether it can be a CSBFP line: the rate cap and the government backing can matter, and not every lender volunteers it.
  • Do not confuse the BDC working capital loan with a line. It is a term loan with a set repayment schedule — useful, but it does not revolve.

Figures we did not include, and why

No bank's own line-of-credit rates, limits or fees appear in this guide: they are set by each lender, change with prime, and cannot be verified on an official page for every lender. The CSBFP figures are given because ISED publishes them. BDC's own loan thresholds are not included because they apply to BDC term loans, not to lines of credit, and would confuse the comparison. Confirm the current prime rate and your lender's margin at the time you apply.

Figures are current as of November 2026. Confirm the CSBFP figures on ISED's program pages and your lender's terms before applying — rate caps are set by regulation, but your rate is set by your lender.

Related guides

Getting a business line of credit in Canada, in five steps

  1. Check the need is short-termA line of credit covers day-to-day operating costs and short cash-flow gaps — not equipment or real estate, which belong on a term loan.
  2. Pick the route: bank line or CSBFP lineA bank's own line is the usual route; the Canada Small Business Financing Program adds a government-backed line of up to $150,000 through your lender.
  3. Prepare what the lender asks forFinancial statements, a business plan, cash-flow projections and your credit history — the lender decides, not the government.
  4. Apply at your financial institutionPresent the plan to a bank, credit union or caisse populaire. For a CSBFP line, the lender registers it with Innovation, Science and Economic Development Canada.
  5. Use it, repay it, renew itDraw only what you need, pay interest only on what you draw, repay as receivables arrive, and expect an annual review and renewal.

Canada Small Business Financing Program line of credit, at a glance

Maximum line of credit per borrower$150,000
Maximum total CSBFP borrowing (term loans plus line of credit)$1,150,000
Maximum interest rate on a CSBFP line of creditLender's prime rate plus 5%
Registration fee on a CSBFP line of credit2% of the line amount
CSBFP line of credit registration period5 years, renewable
Eligible business revenue ceiling$10 million gross annual revenue or less

Figures are from Innovation, Science and Economic Development Canada's CSBFP pages. The registration fee may be financed as part of the line, provided the maximum authorized amount is not exceeded.

Questions people ask

What is a business line of credit, and how is it different from a term loan?

A line of credit is revolving short-term financing linked to your business deposit account: you draw up to a set maximum, repay some or all of it whenever you can, and reborrow up to the limit without reapplying. A term loan is a lump sum with a set interest rate and repayment schedule. Use a line for day-to-day operating costs and short cash-flow gaps; use a term loan for equipment, leaseholds or real estate.

How much can I borrow on a CSBFP line of credit?

Up to $150,000, on top of up to $1,000,000 in CSBFP term loans — $1,150,000 in total per borrower. The line is for working capital: day-to-day operating expenses. The maximum interest rate is the lender's prime rate plus 5%, and a 2% registration fee applies. The line is registered for five years and can be renewed.

Who is eligible for the Canada Small Business Financing Program?

Small businesses and start-ups operating in Canada with gross annual revenues of $10 million or less — sole proprietors, partnerships, corporations and cooperatives. Farming businesses are not eligible; Agriculture and Agri-Food Canada runs a similar program for farms under the Canadian Agricultural Loans Act.

Do I apply to the government for a CSBFP line of credit?

No. You present your business plan directly to a bank, credit union or caisse populaire. Your financial institution is responsible for deciding whether to approve the loan, and it registers the loan with Innovation, Science and Economic Development Canada. ISED does not accept or process applications from borrowers.

Is a business line of credit secured?

Usually, yes — a line of credit is typically secured against the company's accounts receivable and inventory. A common structure is a limit set against a share of receivables plus a share of inventory value. It is also usually a demand loan, which means the lender can require it to be repaid at any time, and it is usually renewed every year.

Does BDC offer a business line of credit?

No. The Business Development Bank of Canada states that it does not provide traditional revolving lines of credit; it offers term loans instead, including working capital loans. For a revolving line, the routes are your bank or credit union, or the CSBFP line of credit through a participating lender.

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