What a commercial lender asks for
A commercial lender starts from a different question than a consumer lender does. Rather than asking only whether you can carry a monthly payment, it asks whether the business itself can generate the cash to service the debt, and then whether your personal finances and credit history support that answer. That is why the same person can be approved for a mortgage and turned down for a business loan, or the reverse.
Most lenders work from a common document set. The depth of each item scales with the size and risk of the request, but the categories are consistent.
- Financial statements. Filed statements for the business plus the most recent interim statements, so the lender can see revenue, margin and trend. How much history a lender wants depends on the lender and the program; a newer business is usually asked for projections instead of history.
- Tax filings. Business returns and, for sole proprietors and partners, personal returns, because the lender reconciles what the business reports to the tax authority against what the statements show.
- Cash flow evidence. Bank statements, payment processor summaries and a debt service calculation. The lender is testing what is left after existing obligations are paid.
- Accounts receivable and payable aging. Who owes you, how old the invoices are, and who you owe. Slow receivables are a common reason a profitable business still cannot carry new debt.
- Contracts, lease and customer concentration. Customer contracts, supplier agreements, the commercial lease, and the share of revenue coming from your largest customer. Heavy concentration in one customer is a risk the lender will price or decline.
- Ownership and structure. Articles, shareholder agreements and confirmation of who controls the business and who can bind it.
- Use of funds. What the money is for and how it produces repayment. This matters most for a loan to buy a business, where the lender wants the valuation logic, the seller's financial history, and how the acquisition will service both the new debt and any debt being assumed.
- Personal net worth statement. Owners are usually asked for this even when the business borrowing is unsecured, because it shows what stands behind the guarantee.
- Consent to pull credit. Personal credit, and business credit data where it exists.
How business credit assessment differs from personal credit
Personal credit assessment is largely automated and backward-looking. A score is built from repayment history, how much of your available revolving credit you are using, how long accounts have been open, and how often you have applied for new credit. Canada has two national credit reporting bureaus, Equifax Canada and TransUnion Canada, and both maintain the consumer files that consumer lenders score.
Business assessment is more manual and more forward-looking. A lender reads the statements, asks the owner questions, considers the industry, and forms a judgement about whether the cash flow projection is realistic. A strong personal score helps your file, but it does not replace weak business cash flow, and a thin personal file does not automatically end the conversation if the business is strong and well secured.
| What the assessment looks at | Personal credit | Business lending |
|---|---|---|
| Central question | Will this person repay? | Will this business generate the cash to repay? |
| Main evidence | Credit report and score | Financial statements, tax filings, banking activity |
| Typical inputs | Payment history, balances, account age, inquiries | Revenue, margin, receivables, contracts, industry outlook |
| Owner's role | The borrower is the subject of the file | The owner is usually a guarantor and a secondary source of repayment |
| Where it lives | Equifax Canada and TransUnion Canada files | The lender's underwriting file, plus business credit data where it exists |
| Usual output | A score and an automated decision | A written decision with conditions and reporting requirements |
Who regulates lending, and why it matters to you
Lending in Canada is licensed provincially, so the regulator and the rules differ depending on where you are and who you are borrowing from. Banks and other federally regulated financial institutions follow federal rules, and consumer complaints about them go to the Financial Consumer Agency of Canada, which publishes plain-language material on your rights and the complaint process. Provinces license and supervise most other lenders, which is why two businesses in different provinces can face different disclosure requirements on the same product.
Before you start approaching lenders, the Government of Canada business financing portal is a useful reference. It sets out the main categories of financing, how to prepare, and where federal programs sit relative to private lending, which helps you tell a program apart from a commercial offer.
A readiness checklist before you apply
- Reconcile your financial statements to your tax filings so the two tell the same story.
- Build a simple repayment model that shows what the new payment does to monthly cash flow in a slow month, not only in a good one.
- Review both personal credit files from Equifax Canada and TransUnion Canada, and dispute anything that is wrong before a lender sees it.
- Prepare an accounts receivable aging report and note any invoice that is materially past due.
- Write down what share of revenue comes from your top customer and what happens to repayment if that contract ends.
- Confirm your corporate documents, ownership records and lease are current and signed.
- Document the use of funds, including the valuation basis for a loan to buy a business.
- Ask what security, covenants and reporting the lender would expect, so there are no surprises at commitment.
- Keep the request sized to what the cash flow supports, rather than to the maximum you could be offered.
This is general information about how lending works, not financial, legal or tax advice. For a significant transaction, work with a regulated professional such as an accountant or a lawyer who can look at your actual numbers.
How pricing and benchmarks work
Business loan pricing is set by the lender and reflects the risk it sees, the security available, the term, and the lender's own cost of funds. The Bank of Canada publishes the policy interest rate, the prime rate, conventional mortgage rates and Government of Canada benchmark bond yields. These are benchmarks, not offers, and no lender is obliged to lend at them.
There is a legal outer limit on the cost of credit. The Criminal Code criminal rate of interest is 35% per year under section 347. Payday-style short-term credit is capped separately: where a province operates a licensed payday lending regime, the federal Payday Lending Regulations cap the cost of borrowing at $14 per $100 advanced, and some provinces set a lower cap that then applies. A payday loan is generally up to $1,500 for a term of 62 days or less, and Quebec does not license payday lending, which effectively prohibits the model there. These rules define the outer boundary of consumer credit pricing; they are not a description of business loan pricing.
The lowest rates are only available to the most qualified applicants.
Secured personal borrowing sometimes enters the picture when an owner raises money for a business. At federally regulated lenders, a home equity line of credit is generally limited to 65% of appraised property value, with total secured lending against the property usually capped at 80%. If you are counting on home equity, those limits shape how much room you have. Federally regulated mortgage lenders also generally work to a total debt service ratio ceiling of about 44%, and qualify an uninsured mortgage at the greater of the contract rate plus 2 percentage points and 5.25% under OSFI Guideline B-20. Canadian fixed-rate mortgages are compounded semi-annually by law, which is one reason a posted rate and the effective rate on a personal mortgage can look different.
If your personal credit history is holding you back
Because owners usually guarantee business debt, your personal file is part of the assessment. A consumer proposal stays on a credit report for three years after completion, or six years from filing, whichever comes first. A first bankruptcy stays on a credit report for six years after discharge. Only a licensed insolvency trustee can administer a consumer proposal or a bankruptcy, so anyone else offering to file one for you is not able to do it.
If your file includes either of those events, how much it matters depends on how long ago it happened, what your file looks like since, what security you can offer, and how strong the business cash flow is. There is no single answer, and any lender that suggests otherwise is oversimplifying.
What loanmoose.ca is and is not
loanmoose.ca is not a lender. It does not make loans, set rates or make credit decisions. It is a matching and comparison service that helps you understand the categories of borrowing available in Canada and connect with lenders who operate in them. Any rate, amount or term you see from a lender comes from that lender, not from loanmoose.ca, and it is subject to that lender's own assessment and approval process.