A small business emergency loan lets you borrow money quickly to deal with urgent expenses. You can usually access an emergency business loan within a few days of applying, and you won’t need to secure funds with collateral in most cases.
In this guide, we explore how and where to get a small business emergency loan and what you can use loan funds for.
What is a small business emergency loan?
Emergency business loans in Canada are designed to let you access funds quickly without the need for collateral. You can use emergency business loans to pay for any business-related expenses you may have due to an unprecedented emergency.
For example, you might use your loan to supplement your cash flow, pay employees, pay your business rent and maintain regular operations. You could also use your loan to replace inventory, repair damaged equipment or pay for business losses related to damage or unexpected closures. You’ll just need to be able to prove that any expenses you use the loan for are business related.
Types of emergency business loans
There are two main loan types to choose from:
Term loans. A term loan provides a lump sum amount that you repay in regular installments over a specified period. Interest rates can be fixed or variable, and there are secured and unsecured loans available.
Lines of credit.A business line of credit provides access to a revolving line of credit that you can access whenever you need up to your pre-approved limit. You only pay interest on the funds you use, and once you repay the money you borrow, it becomes available for you to access again as needed.
There are other loan types available too, so compare business loans to find the right type of funding for your business.
Where can you get an emergency business loan in Canada?
You can qualify for emergency business loans with banks, credit unions, online lenders and even the government. Find out more about each loan type below.
How to get a small business emergency loan from a bank
How it works.Bank business loans often come with competitive interest rates and offer peace of mind from dealing with a major financial institution. But you’ll need to watch out for strict eligibility requirements, and application processing times may be longer than with online lenders.
Loan types. You can get secured or unsecured term loans as well as lines of credit and government loans under the Canada Small Business Financing Program (CSBFP).
Does my business qualify? You’ll typically need to be a Canadian resident, have a good credit score and earn a high annual revenue to qualify.
How to apply. Some banks allow you to submit your application online, but others require you to visit a branch to supply required documents and show that you meet the eligibility criteria.
Pros and cons of bank business loans
Pros
Cons
Deal with an established lender
Large loan amounts available
Competitive interest rates
Access in-branch customer service if needed
Strict eligibility criteria
Long approval times
You may need to visit a branch to complete your application
How to get a small business emergency loan from a credit union
How it works.Credit union business loans are often smaller and a little more flexible than big bank loans, but you’ll need to become a credit union member to qualify.
Loan types. You can get secured or unsecured term loans, lines of credit and government loans under the CSBFP.
Does my business qualify? You’ll typically need to be a Canadian resident, have at least a fair or good credit score and earn a high annual revenue to qualify.
How to apply. Depending on the credit union, you may be able to apply completely online or you may need to visit a branch to finalize your application.
Pros and cons of credit union business loans
Pros
Cons
Deal with an established lender that works in your local community
Competitive rates
Flexible loan terms available
In-branch customer support available
Fewer loan options than banks
Smaller maximum loan amounts
You’ll need to become a member
You may need to visit a branch to complete your application
How to get a small business emergency loan from an online lender
How it works. Online loans usually have more lenient eligibility criteria than banks, so you may not need perfect credit or a long time in business to qualify. However, interest rates may be high and there’s also a high risk of borrowing from a predatory or untrustworthy source.
Loan types. You can get secured or unsecured term loans as well as lines of credit.
Does my business qualify? You’ll typically need to be a Canadian resident, own a business in Canada and meet time-in-business and revenue requirements.
How to apply. Visit the provider’s website and provide your personal/business information and required documents to apply.
Pros and cons of online business loans
Pros
Cons
Lenient eligibility criteria
Fast turnaround times
Convenient online application
Watch out for predatory lenders
Higher rates for bad credit
No branches for in-person service
Can I get a government emergency business loan?
Government-backed funding for small businesses is provided through the Canada Small Business Financing Program (CSBFP). Available through banks and credit unions, the program offers two funding options:
Term loans of up to $1 million to buy or improve land or buildings, buy or improve equipment, pay for leasehold improvements and pay for intangible assets and working capital costs.
Lines of credit of up to $150,000 to cover working capital costs.
Loans are available for small businesses and startups with annual revenues of $10 million or less. CSBFP loans come with low interest rates and flexible repayment terms and are well worth a look if you’re in need of funding. The downside is that you’ll need to meet strict eligibility requirements, and turnaround times can be slow. So this type of loan may not be suitable if you need money fast.
Depending on where you live, you might also be eligible for loans and grants from your provincial government or other regional economic development programs. Check your provincial government’s website for details of any financial assistance available for small businesses in your local area.
CEBA loan
The Canada Emergency Business Account (CEBA) Program was a Government of Canada initiative to help small businesses and not-for-profits navigate the COVID-19 pandemic. It provided financial relief to almost 900,000 businesses in the form of interest-free loans of up to $60,000.
However, the deadline to apply for a CEBA loan was June 30, 2021, so the program is now closed.
Emergency business loan costs
When you’re comparing emergency business loans in Canada, be sure to check the APR (annual percentage rate). This figure combines the loan’s interest rate and fees to give you a clear idea of how much a loan will cost.
Interest rates. Interest rates for unsecured business loans vary depending on factors like your credit score, financial position, loan amount and term. Expect a higher rate if you have bad credit. You may be able to get lower interest rates with government loans.
Fees. Small business emergency loans can include a variety of fees that will increase your repayments. These fees are summarized in the table below and can add hundreds of dollars to your total loan amount.
Fee type
Typical cost (may vary by lender)
Origination (set-up) fee
1% to 7% of your loan amount
Late payment fee
$5 to $25 or between 3% and 5% of the amount due
Insufficient funds (NSF) fee
Around $50 or between 3% and 5% of the amount due
Prepayment penalty
Varies by lender
How to compare emergency business loans in Canada
Consider these factors before choosing a small business emergency loan.
Loan amount
Search for a lender that will give you the amount you need to pay for emergency expenses.
Interest rates
Compare lenders to find the one with the lowest interest rates. You may be able to find the best rates with loans offered under the Canada Small Business Financing Program.
Loan terms
Choose a short loan term if you want to pay less interest overall, or opt for a long term if you want lower monthly payments that make it easier to manage cash flow.
Fees
Keep an eye out for hidden fees, including origination or late payment fees.
Repayment options
Negotiate the repayment terms that work best for you. Find out what options are available if you end up struggling to repay your loan, and check whether you can pay back your loan early without penalty.
Cash availability
Check if there will be restrictions on how you can spend money. Consider a business credit card or line of credit if you need a steady cash flow.
How to apply for an emergency business loan in Canada
You can apply for a small business emergency loan by following the steps below.
Compare lenders. Compare multiple lenders to find the best fit for your business. Consider getting pre-approved to get a better idea of the loan cost with each lender.
Apply online or in person. Fill out the application on your lender’s website or visit a branch in person to apply for an emergency business loan.
Provide business details. Provide contact information and details about your business, such as years in operation, annual revenue, business assets/debt and financial projections.
Agree to a credit check. Give your lender permission to check your personal and business credit history.
Provide supporting documents. Submit required documents to verify your ID, revenue and other information about your business.
Eligibility requirements
Eligibility criteria varies between lenders, but here’s a general guide on the requirements you’ll need to meet to qualify for an emergency business loan in Canada.
Be the age of majority in your province or territory.
Be a Canadian citizen or permanent resident.
Have a decent credit rating (usually 660 or more) or be willing to accept much higher interest rates to get a small business emergency loan with bad credit.
Supply a registered business number and prove that you’ve been in operation for at least six months (check out startup loans if you don’t meet these criteria).
Show that you can repay your loan by providing monthly or annual revenue statements or other requested documents for your business.
Sign a personal guarantee to assume personal responsibility for your business loan if you can’t make repayments.
Can I get a small business emergency loan with bad credit?
You may be able to qualify for business loans with bad credit if your company has a high annual revenue or you can secure your loan against your business assets. Your lender will typically consider factors such as how established your business is, what type of loan you want and whether you have any other business debts. But be prepared to pay much higher interest rates if you apply with bad credit.
Bottom line
Emergency business loans can help you access funds quickly to deal with unexpected or emergency expenses. You can usually access an emergency business loan within a few days of applying. In most cases, you won’t need to secure funds with collateral. Compare lenders and learn how to apply today.
Frequently asked questions
How much you can borrow will depend on your business's financial situation and the lender you choose. Loan amounts commonly start around $5,000, but businesses with excellent credit and high annual revenue may be able to qualify for much larger amounts. As an example, the maximum loan amount available under the Canada Small Business Financing Program is $1 million. The best way to find out how much you can borrow with a business loan in Canada is to get pre-approved by multiple lenders.
That depends on the priorities of your business. You'll want to focus on interest rates and fees to save money. Also consider repayment flexibility and the length of the loan term if you're worried you'll struggle to make repayments. Think about what's most important for your business, and choose your lender accordingly.
You may be able to get a secured emergency business loan if you have a valuable asset with which to secure your loan. Just be aware that it could take more time and paperwork to establish a secured loan, which may not be ideal if you need money for your business as quickly as possible.
Your application may be rejected because you don't meet the eligibility criteria. For example, you could be denied if you fail to meet residency requirements, have a low credit score and/or don't make enough revenue. It could also be as simple as an incomplete application, so make sure to contact your lender for more information.
No. CEBA was a financial relief program offered by the Government of Canada to small businesses affected by the COVID-19 pandemic. However, the program has now ended, as the final deadline to apply for funding was June 30, 2021.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio
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