Bank, BDC or broker: where should a Canadian business borrow?

There is no best lender, only the one your file fits. The cheapest money in Canada is at the banks, and plenty of good businesses cannot get it. The fastest money is in the alternative market, and plenty of businesses pay for speed they did not need.

Here is how the options line up.

The big banks

RBC, TD, BMO, Scotiabank, CIBC, National Bank, and the credit unions and caisses alongside them.

What they look for: usually two or more years of trading, financial statements prepared by an accountant, good personal and business credit, and often security or a personal guarantee. Newer businesses may be asked for a business plan.

What they offer: term loans, lines of credit, equipment finance, commercial mortgages, and loans under the Canada Small Business Financing Program.

Cost: usually the lowest available.

Speed: days to weeks, depending on the size and the relationship.

Start here if you have been trading for a few years, you have clean financials, and you can wait.

BDC

The Business Development Bank of Canada is a federal Crown corporation that lends to businesses, often ones the banks consider too young, too small or too specialised.

What it looks for: a viable business and a sensible use of funds. It will lend to younger companies than the banks will, and it takes a longer view of some industries.

What it offers: term loans, working capital loans, financing for buying a business, commercial real estate, and advisory services.

Cost: generally above the banks and below most alternative lenders.

Speed: faster than a big bank for smaller amounts, slower than alternative lenders.

Start here if the bank said "not yet" rather than "no", or you are buying a business or property.

Alternative lenders

Online and specialist lenders who read your bank statements rather than your financial statements.

What they look for: steady deposits, room in the account for a payment, and not too much already owed. Credit matters less, and time in business can be shorter.

What they offer: term loans, revenue-based lines of credit, merchant cash advances, equipment financing, asset-based lending, and invoice factoring.

Cost: higher than banks and BDC, and the range between the best and worst offers is wide. Ask for the total in dollars — here is how.

Speed: often days, sometimes less.

Start here if the bank has declined you, the timing matters, your financial statements undersell the business, or the paperwork a bank wants does not exist yet.

Where a broker fits

A commercial finance broker takes one application to several lenders. You fill in the form once, the file is presented to the lenders it fits, and you compare what comes back.

That is what we do. We are not the lender, the lender makes the decision, and the lender pays us rather than you. Every offer we pass on shows the total you repay before you decide anything.

A broker is worth using when you would otherwise be applying to several alternative lenders yourself — the same documents, the same questions, and a pile of offers quoted in ways that do not compare. It is not worth using if the bank will lend to you on good terms. Go to the bank.

A simple way to choose

1. Try your own bank first if you have a few years of history and clean financials. Ask whether a CSBFP loan is an option.
2. Try BDC if the bank says not yet, or you are young, specialised or buying a business.
3. Go to the alternative market — directly or through a broker — if you need it quickly, the bank has declined, or the file lives in your bank statements rather than your accounts.

However you borrow, how to get a business loan in Canada covers the steps, and what an underwriter is looking for covers how the file gets read.