2M7's Forward Thinkers Scholarship Winner

If you have ever sat across from a bank representative, filled out a stack of forms, and walked away empty-handed, you are not alone. Securing small business funding in Canada has become genuinely harder over the past few years. Interest rates have climbed, underwriting standards tightened, and many business owners who would have been approved without question five years ago are now facing rejection letters. That reality is frustrating, and it deserves to be named plainly before we talk about what you can actually do about it.

The good news is that understanding exactly what lenders evaluate changes the entire game. Whether you are pursuing a traditional bank loan, a Merchant Cash Advance, or another form of fast business funding, the criteria lenders use to assess your application are knowable. Here is what goes on behind the scenes.

Credit History vs. Business Health: What Actually Matters More

Personal credit scores get a lot of attention, and they do matter. But for most small business owners seeking funding outside the Big 5 banks, they are rarely the deciding factor. Alternative lenders are far more focused on the operational health of your business than they are on a three-digit number pulled from your credit bureau file.

The reason is simple: a lender who advances capital against your future revenue wants to know whether that revenue is real, consistent, and growing. A credit score tells them about your past borrowing behaviour. Bank statements tell them whether your business can actually repay what it borrows.

That said, a damaged personal credit history can still complicate your application, particularly when it comes to interest rates and loan structures. If you are worried that your credit history might disqualify you, you can read more about how to get a business loan with a bad credit score to see what other options are available.

The Big 5 Banks vs. Alternative Lenders: Understanding the Friction

Canada's major chartered banks operate under regulatory frameworks that require them to be conservative. Their approval processes are designed for businesses with established revenue, years of audited financials, strong personal credit, and collateral. For many small business owners, especially those in their first few years of operation, those requirements create a wall that is genuinely difficult to climb.

Alternative lenders exist precisely because that wall has left a large segment of the Canadian small business market underserved. Products like Merchant Cash Advances, revenue-based financing, and short-term small business loans were built for businesses that have real cash flow but do not fit a bank's rigid profile. The approval timelines are shorter, the documentation requirements are more practical, and the underwriting process is designed to assess your actual business rather than compare you to an institutional checklist.

This does not mean alternative lending is without scrutiny. Reputable alternative lenders still evaluate your application carefully. But the criteria they use tend to be more relevant to where your business actually is today.

Essential Documentation: What to Have Ready

One of the genuine advantages of working with an alternative lender like 2M7 over a traditional bank is how straightforward the documentation requirements actually are. While a bank might ask for years of audited financials, business plans, and tax returns, getting approved for a Merchant Cash Advance requires just three things:

• Three months of business bank statements
• A photo ID
• A void cheque

That is it. The bank statements give lenders a clear picture of your cash flow, the frequency and consistency of deposits, your average balances, and how existing obligations are being managed. The ID and void cheque handle identity verification and ensure funds are deposited directly into the right account. 

Being organized still matters. Having these three documents ready before you apply signals that you run your business with intention, and it keeps the process moving quickly. Approvals can happen in as little as a few hours, with funds deposited within 24 hours of approval. If you want to put your best foot forward before applying, we've put together some effective strategies to help boost your business cash flow.

How Industry Risk Shapes Your Application

Not all businesses are treated equally by underwriters, and that is worth understanding before you apply. Lenders build risk models that factor in historical default rates by sector. Some industries are considered higher risk, not because of anything specific about your business, but because of how that category has performed across thousands of loans.

Restaurants, retail, and construction businesses, for example, often carry more scrutiny than professional services or healthcare businesses. Seasonal businesses face questions about cash flow stability. Newly regulated industries, or those with volatile margins, may trigger additional review.

This does not mean lenders in these sectors cannot get funded. It means the strength of your cash flow documentation, your time in business, and your repayment history need to work harder. Knowing which box your business falls into before you apply lets you structure your application in a way that addresses those concerns proactively. Regardless of your industry, the key is showing the stability of your operations.

Collateral: How It Works in the Canadian Landscape

Collateral requirements vary considerably between lenders. Traditional bank loans often require tangible assets like real property, equipment, or inventory as security. For many small business owners, that requirement alone is enough to end the conversation before it starts.

For 2M7, our Merchant Cash Advance requires no collateral. You are not asked to put your property, personal assets, or business equipment on the line. Funding is extended based on your business's revenue and performance, full stop.

At 2M7, we prioritize transparency and clarity. That means you will know your complete cost of capital before you sign, with no hidden fees or surprises down the line. If you have questions about how any part of the agreement works, we are always happy to walk you through it.

Ready to See What You Qualify For?

The application process does not need to feel like a black box. 2M7 works with Canadian small business owners every day to find funding structures that fit their actual situation, not just the profile a bank wants to see.

If you would like to talk through your options without any obligation, reach out to us directly. We will take the time to understand your business and connect you with a funding solution that makes sense.

Get Approved Today

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Ontario, Alberta, Saskatchewan and Manitoba all require an owner to pay a contractor's proper invoice within 28 days, or to dispute it in writing within 14 days. Once paid, a contractor has 7 days to pay its subcontractors. The provinces differ on holdback, lien deadlines and which projects are covered: Manitoba's holdback is 7.5% while the others hold back 10%, and Saskatchewan's lien period is still 40 days while the others allow 60.

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These rules are known as prompt payment legislation. They set a clock on construction payments that starts when a contractor delivers a proper invoice, and they give unpaid parties a fast dispute process called adjudication. Each province built its own version, so a contractor working across provincial lines faces different deadlines on each job.

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This guide compares the rules in each province, explains what they mean for a contractor's cash flow, and sets out what to do when a payment is late. It is general information, not legal advice. Check your contract and the current statute, or speak with a construction lawyer, before acting on a specific dispute.

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Prompt payment rules by province at a glance

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Ontario, Saskatchewan and Manitoba apply prompt payment to contracts entered into on or after the in-force date. Alberta also required contracts already in place to comply by August 29, 2024. Alberta's column covers private projects. Contracts with the Government of Alberta follow separate rules, explained below.

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Prompt payment in other jurisdictions

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What these rules mean for a contractor's cash flow

Prompt payment shortens the wait for most of a contractor's money, but it does not remove the wait. Three gaps remain even when every party follows the rules.

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The billing cycle. Proper invoices are usually issued monthly, and Alberta requires one at least every 31 days. Work done early in a billing period is not invoiced until the period ends, and the owner then has 28 days to pay. Materials bought on day one can go unpaid for close to two months.

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The holdback. On a $200,000 contract in Ontario, Alberta or Saskatchewan, the owner retains $20,000. In Manitoba the holdback on the same contract is $15,000. On most projects that money is released only after the lien period expires near completion. Ontario now requires annual release on all contracts, and Alberta requires annual or phased release on contracts over $10 million that run longer than a year.

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Payment down the chain. A subcontractor's 7-day clock starts when the contractor is paid. If the owner pays on day 28, the subcontractor may wait 35 days from the contractor's invoice. In Ontario, Saskatchewan and Manitoba, if the owner does not pay at all, the contractor must still pay its subcontractors by day 35 after it invoiced the owner, unless it gives them a notice of non-payment.

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Meanwhile payroll, equipment rentals and supplier accounts run on their own schedules, often weekly or within 30 days. A busy contractor can be profitable on every job and still be short of cash between invoices. Planning for that gap is part of bidding a job, not an afterthought.

Province-by-province details

Ontario

Ontario's Construction Act introduced prompt payment on October 1, 2019, for public, private and alternative financing and procurement contracts. Amendments in force since January 1, 2026, make an invoice proper unless the owner gives written notice of a deficiency within 7 days.

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The 2026 amendments also require holdback to be released every year. Within 14 days after each contract anniversary, the owner must publish a notice of annual holdback release, then pay the accrued holdback between 60 and 74 days after publication, provided no lien remains undischarged. For contracts entered into before January 1, 2026, annual release begins on the second anniversary after that date. Disputes go to adjudication through the Ontario Dispute Adjudication for Construction Contracts (ODACC), and parties can now also retain private adjudicators qualified by ODACC.

Alberta

Alberta's Prompt Payment and Construction Lien Act has applied to private projects since August 29, 2022. Alberta allows 90 days to register a lien for the supply of ready-mix concrete and for oil or gas well work, longer than the general 60. Late payments carry interest at the contract rate, or the rate in the Judgment Interest Regulation if the contract sets none.

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Contracts with the Government of Alberta entered into on or after April 1, 2025, follow a separate prompt payment process under the Public Works Act. The Crown must pay an undisputed proper invoice within 28 days. Contractors must pay subcontractors within 35 days of receiving the subcontractor's proper invoice, and subcontractors pay their own subcontractors within 42 days. Payment disputes can go to adjudication up to the Court of Justice's monetary limit, currently $200,000. Capital asset upkeep contracts and special scope contracts, where the contractor provides financing, are excluded.

Saskatchewan

Saskatchewan added prompt payment to The Builders' Lien Act on March 1, 2022, for contracts entered into on or after that date. The Act binds the Crown, with exclusions such as highway work, and mining and certain power contracts are exempt. Saskatchewan's lien period is 40 clear days after the triggering event, such as completion or abandonment, which makes it the shortest of the four provinces. Adjudication runs through the Saskatchewan Construction Dispute Resolution Office (SCDRO).

Manitoba

Manitoba's prompt payment rules took effect April 1, 2025, and apply only to contracts entered into on or after that date. The same amendments raised the lien period from 40 to 60 days. Manitoba's holdback is 7.5%, retained for at least 60 days after substantial performance or completion. The Act binds the Crown but excludes Manitoba Hydro contracts for generating stations and related plant, and work under contracts governed by The Infrastructure Contracts Disbursement Act, which include certain provincial highway contracts. Architects' and engineers' fees are also exempt from prompt payment.

What to do when a payment is late

The prompt payment process gives a contractor several remedies short of court. Work through them in parallel, because the lien deadline keeps running while you pursue the others.

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1. Confirm your invoice was proper. The 28-day clock only starts on a proper invoice, which must include the details the statute lists, such as the invoice date, the work period, the amount and payment terms. In Ontario, an owner who finds a deficiency must now say so within 7 days.
2. Check for a notice of non-payment. If the owner disputes the invoice, it must give written notice within 14 days stating the amount withheld and why. Any undisputed amount is still due within 28 days.
3. Track interest. Unpaid amounts accrue interest in all four provinces. Saskatchewan and Manitoba use the prejudgment rate, or the contract rate if higher. Alberta uses the contract rate, or the Judgment Interest Regulation rate if the contract sets none.
4. Start adjudication. For a disputed amount, a contractor can refer the dispute to the province's adjudication body. Adjudication is designed to resolve payment disputes faster than court, and the decision must be followed unless a court or arbitrator later decides otherwise.
5. Protect your lien rights. Register a lien within the provincial period (60 days in Ontario, Alberta and Manitoba; 40 clear days in Saskatchewan) or lose the right. Ontario extends the lien period in some cases where adjudication has started, but get legal advice before relying on an extension.

Covering costs while you wait to be paid

Prompt payment sets a deadline, but contractors still carry materials, payroll and holdback for weeks on every project. Before bidding, map when each invoice will be paid and when each major cost falls due. Negotiate deposits or mobilization payments where you can, and invoice on the first day the contract allows.

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When the gap is still too wide, working capital can bridge it. A merchant cash advance from 2M7 Financial Solutions provides funding based on a business's revenue, with no collateral required, and repayment can be set as a percentage of sales. 

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See how contractors use it on the construction funding page or see what options fit your project schedule.

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Frequently asked questions

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How long does an owner have to pay a contractor in Ontario?

An Ontario owner must pay a contractor's proper invoice within 28 days of receiving it, unless it gives a notice of non-payment within 14 days. Undisputed amounts are still due within 28 days.

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Does Alberta have prompt payment legislation?

Yes. Alberta's Prompt Payment and Construction Lien Act has applied to private projects since August 29, 2022, and owners have 28 calendar days to pay a proper invoice. Contracts with the Government of Alberta entered into on or after April 1, 2025, follow a separate prompt payment process under the Public Works Act.

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Does British Columbia have prompt payment legislation?

BC's Construction Prompt Payment Act received royal assent on November 27, 2025, but is not yet in force. Once in force, owners will have 28 days to pay a proper invoice.

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What is the holdback percentage in each province?

The holdback is 10% in Ontario, Alberta and Saskatchewan, and 7.5% in Manitoba.

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How long do I have to register a construction lien?

The lien period is 60 days in Ontario, Alberta and Manitoba, and 40 clear days in Saskatchewan. Alberta allows 90 days for the supply of ready-mix concrete and for oil or gas well work.

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How fast must a contractor pay its subcontractors?

In Ontario, Alberta, Saskatchewan and Manitoba, a contractor must pay its subcontractors within 7 days of receiving payment from the owner, unless it gives a notice of non-payment. In Ontario, Saskatchewan and Manitoba, a contractor that has not been paid must still pay its subcontractors by day 35 after invoicing the owner, unless it gives a notice of non-payment.

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What is construction adjudication?

Adjudication is a fast dispute process for construction payment disputes, run by a provincial body such as ODACC in Ontario. The adjudicator's decision is binding on an interim basis, which means it must be followed unless a court or arbitrator later decides otherwise.

Sources

Checked October 13, 2026.

• Ontario Construction Act, R.S.O. 1990, c. C.30
• Ontario Ministry of Transportation: Prompt Payment Administration Manual
• Ontario Bar Association: Key 2026 amendments (January 15, 2026)
• Osler: Ontario Construction Act amendments now in effect (March 2, 2026)
• Canadian Bar Association: Changes to the Ontario Construction Act
• Ontario Dispute Adjudication for Construction Contracts (ODACC)
• Government of Alberta: Prompt payment rules for the construction industry
• Government of Alberta: Extending prompt payment to the Public Works Act (May 15, 2025)
• Alberta Land Titles: Construction lien checklist
• Bennett Jones: Prompt payment legislation in Alberta
• McMillan: Alberta's Prompt Payment and Construction Lien Act (August 30, 2022)
• Saskatchewan: The Builders' Lien Act (consolidated)
• Saskatchewan: The Builders' Lien (Prompt Payment) Amendment Act, 2019
• Manitoba: The Builders' Liens Act, C.C.S.M. c. B91
• Manitoba Prompt Payment Adjudication Authority
• Federal Prompt Payment for Construction Work Act, S.C. 2019, c. 29, s. 387
• Order Designating Provinces Under Subsection 6(1) of the Federal Prompt Payment for Construction Work Act
• Government of British Columbia: Prompt payment legislation (updated August 20, 2026)
• McCarthy Tétrault: Québec adopts prompt payment regulation (September 8, 2025)
• Osler: Canadian prompt payment and construction law reforms (updated March 30, 2026)

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Merchant Cash Advance vs. Business Loan: Which One Is Right for Your Business?

Most Canadian small business owners will need outside capital at some point. The question is rarely whether to get it, but which type actually makes sense for where the business is right now.

The Traditional Route: Business Loans 

A business loan gives you a fixed amount of capital repaid in monthly installments over an agreed term. The schedule is set from day one and you always know exactly what you owe, which makes it a solid fit for longer-term investments with predictable returns.

Canada also has a government-backed option worth knowing about. Canada's Small Business Financing Program, administered by ISED, partners with banks and credit unions to make loans available to businesses that might not otherwise qualify for conventional financing. In 2024-25, the program supported over 6,400 loans totalling close to $1.9 billion.

The tradeoff is access. Banks want clean financials, strong credit, and often collateral. For many small business owners, those requirements are the whole problem.

How a Merchant Cash Advance Is Different

A merchant cash advance advances you a lump sum against your future revenue. Repayment comes as a fixed percentage of your daily or weekly sales, drawn automatically until the balance is paid off. Slow week, less comes out. Strong week, you pay it down faster.

The cost is structured through a factor rate rather than an interest rate, making an MCA a higher-cost product than a bank loan in most cases. What it offers in return is speed, flexibility, and a qualification process built around your sales history rather than your credit score. Businesses turned down by banks due to credit history or limited operating time often qualify here, and funding can land in your account within a day or two.

Picking the Right Tool

A business loan makes sense when you have the credentials to qualify, the investment is long-term, and you have time for the application process. A merchant cash advance makes sense when you need capital fast, your revenue is the stronger part of your financial picture, or you need repayment that moves with your business. This holds true across industries whether you are in retail, restaurants, construction and trades, or trucking. The right product depends less on what you do and more on what you need the money for and how fast you need it.

If you want a straight conversation about which option fits your situation, feel free to reach out to us.

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