The Small Business Owner's Guide to Business Loans in Canada

Apr 2023

Aug 2026

There is a wide array of services available to businesses in Canada seeking to bolster their cash liquidity. This article will explore some of the most popular options, as well as their best use cases. These financial solutions typically include a combination of bank loans, government business grants, factoring, cash advances, payday loans, and microloans.

Businesses can utilize these financial options to optimize growth, gain liquidity, bridge emergency situations, or capitalize on opportunities.

Let's delve into our options:

1. Traditional bank loans

This is the most conventional form of financing that small businesses can utilize to obtain. Typically, these loans are secured by collateral, and may offer lower interest rates, making them an appealing choice for businesses with strong credit. However, small and medium-sized businesses adhering to conservatism and GAAP principles might have lower perceived financial strength, which can make obtaining traditional financing more challenging, especially if the bank relies on financial statements as part of its due diligence process. This can be particularly problematic for new startups and businesses without a significant financial track record. Furthermore, liquidity provided might be limited if a business is relatively new or experiencing volatility, even with collateral in place.

2. Factoring

Factoring enables businesses to sell their accounts receivable (invoices) to a third-party (a factoring company) at a discount. The factoring company then acts as the agent to collect payments from the invoice customer, providing the business with liquidity (cash) based on a certain percentage of the invoice amount. Factoring can significantly improve cash flow for small and medium-sized businesses by offering liquidity and quick access to funds. It is also helpful that the factoring company will be the one taking care of ensuring invoices are paid, freeing up valuable resources for small businesses.

3. Government business grants

The Canadian government provides an array of business grants designed to help small businesses flourish. These grants typically target specific industries or business activities, such as clean technology, innovation, workforce development, and international trade, among others. A considerable number of grants currently emphasize research, development, and exporting. The application process for these grants can be intricate, requiring well-prepared grant proposals that effectively communicate the business's objectives, anticipated outcomes, and potential impact. This process is often competitive, as numerous businesses vie for the limited funding available. Newer businesses or those without prior grant writing experience may find this process daunting, and may benefit from seeking professional grant writing assistance or collaborating with experienced partners in their industry. Despite the challenges, securing a government grant can be a game-changer for small businesses, providing essential funding without the burden of repayment, and fostering growth, innovation, and competitiveness in the marketplace.

4. Payday loans or Microloans

Payday loans and microloans are small, short-term loans that are typically utilized to address unexpected expenses or navigate temporary cash flow gaps. While these loans may not be suitable for long-term financing needs due to their relatively higher interest rates and fees, they play a vital role in providing financial support during emergencies. By offering quick access to funds, payday loans and microloans help businesses remain afloat and operational during challenging times, allowing them to successfully weather temporary cash flow issues that are anticipated to improve in the near future. This targeted financial assistance can be a lifeline for businesses, enabling them to maintain stability and continue serving their customers as they work towards recovery and growth.

5. Merchant Cash Advance

A cash advance, particularly in the form of a Merchant Cash Advance (MCA), is an innovative financing solution that provides businesses with a lump sum of cash in exchange for a percentage of their future sales (typically credit card sales). Cash advances and MCAs can be exceptional financing options for businesses that need funds swiftly or require increased liquidity to seize opportunities that demand prompt. One of the key advantages of this financing option is its speed and flexibility. Cash advances can be processed more quickly than traditional loans, often within a matter of days, allowing businesses to address their financial needs without delay. Additionally, repayment terms are tailored to the business's sales volume, making it a more manageable solution for businesses with fluctuating revenues. MCAs are particularly valuable for new businesses and small enterprises that may face challenges in obtaining traditional bank loans due to a lack of financial history, inadequate financial book strength, or a dearth of collateral. By offering an alternative financing avenue, cash advances empower these businesses to overcome financial barriers and pursue their growth objectives. Ultimately, the various financing options available to Canadian businesses each have their own strengths and specific use cases. Traditional bank loans can be attractive for businesses with strong credit, while CEBA loans offer interest-free financing for those affected by the COVID-19 pandemic. Factoring provides immediate liquidity to businesses with outstanding invoices, and government grants can support targeted industries and activities. Payday loans or microloans can assist in managing short-term cash flow gaps. And cash advances offer rapid access to funds for businesses lacking financial history or collateral. The choice of financing option will depend on the unique needs and circumstances of each business. By understanding the advantages and limitations of each option, businesses can make informed decisions about the most suitable financing solution to support their growth, liquidity, and success.

April 7, 2020

September 20, 2026

Tips and Resources for Running Businesses in Ontario

The business landscape is always evolving. In the last few weeks, the situation for many businesses in Ontario has changed drastically. You may be wondering where you can turn to find support in these challenging times.The good news is that there are plenty of supports for business owners operating in Ontario. If you’re looking for answers, try some of these tips and resources.

Federal and Provincial Support for Business Owners

Both the federal and provincial governments have announced funds designed to help business owners keep their doors open and their lights on during this time. If you’ve faced slashed hours or needed to lay employees off, then you may be eligible for business support funds.These funds could help you pay your employees during this time. Other funds are available to help businesses n Ontario manage their day-to-day operating expenses.

Check Government Websites for Resources

You may also want to look at the provincial government’s website, which has lists of programs and services for business owners like you. You can find one-on-one small business consulting and guidance, as well as workshops and more. You may also qualify for consultations with lawyers or accountants. Support is also available if you need grants, permits, or licenses. There are even resources to support mentorship and networking, available through Small Business Enterprise Centres.

Connect with Your Peers

Networking resources may be available through government-run resources. You may also find support through local small business organizations or trade federations. Even social media can help as you connect with your colleagues and peers.

Great Options for Creating Liquidity

In an uncertain market, business owners like you need financial options to help you create liquidity. Check in with your financial institution about measures they can provide to help you. You may also explore other options, like a merchant cash advance. The right funding options will help you create stability and flexibility when your business needs it most. Curious to learn more about your financing options? Get in touch with the experts and discover what a merchant cash advance could do for your business.

December 14, 2020

July 27, 2026

5 Effective Ways to Solve Seasonal Cash Flow Business Challenges

The great majority of small businesses go under because of cash flow issues. You know the importance of cash flow for that reason. That doesn’t mean you don’t face seasonal cash crunches.Seasonal cash flow struggles are quite common, even among established businesses. You can take the strain off by employing these five effective methods of solving cash flow challenges.

Know Your Problem Seasons

The first step in combating cash flow challenges is know your problem seasons. For seasonal businesses, this may be obvious. If you run a golf course, you might find cash flow tightens up during the winter. If, by contrast, you have a ski club, then winter could be boom season for you.Knowing when you’re most likely to run into trouble can help you plan for those dry spells more effectively.

Shift the Timing of Financial Commitments

Once you know when your cash crunches are most likely to happen, you can work on scheduling around them. Try to shift any major financial commitments to other times of the year.This might include adjusting when you order stock or how you organize your tax year. A golf course may not want to make a major tax payment at the end of April, because funds are already tight.You may not be able to move every financial commitment, and that’s fine. By shifting some earlier or later in the year, though, you can make all your obligations easier to manage.

Offer Incentives for Customers to Pay Early

Another tip for meeting seasonal cash flow challenges is to entice customers to pay early. If you invoice your customers, you could offer them a discount if they pay before the indicated due date.You may encourage prepayment or even down payments. For example, if you run a mattress shop, then you could ask people to put a down payment on their purchase.You can make this a seasonal offer and encourage customers to “buy ahead.” With more money flowing in, you’ll have an easier time managing your cash flow.

Get a Merchant Cash Advance

Sometimes, the answer to cash flow challenges is credit. That’s particularly true of seasonal cash crunches since they’re usually temporary in nature.A merchant cash advance is one of the better choices you have to manage seasonal cash flow. With one, you get the cash you need against expected future sales. As sales take place, you’ll pay back the advance.

Diversify Your Business

One of the best ways to solve seasonal cash flow issues is to diversify the business. If you run a golf course, you might also operate a banquet hall. Acting as a wedding venue can keep cash flowing, even during the winter season.If you face seasonal challenges, think about the ways in which you can diversify and offer more to your clients all year long.

Get a Helping Hand with an MCA

If you’re feeling pinched, it might be time to get a merchant cash advance. Get in touch with the experts and discover what the right financing option can do for your business.

April 4, 2022

September 27, 2026

Merchant Cash Advance vs. Cheques Factoring

Managing a small business is challenging. One of the common challenges for business owners is financing. Your company might not have a lengthy credit history or collateral to apply for a bank loan. Whether you want to grow your business or cover unforeseen expenses, you have come across other financing options. Merchant cash advance and cheques factoring are some of the available options for small businesses.

What Is Merchant Cash Advance?

A merchant cash advance is an alternative financing option for small businesses. You can take the funds upfront and pay them off with a percentage of future sales. The MCA is an ideal solution for businesses that need fast funding and might not be eligible to take a bank loan. The availability of funds is another excellent advantage. If your business needs the funds fast to proceed with the operations, the cash advance will be approved within a day or two.

PROS

Fast access to funds

When timing is crucial and you can't go through the lengthy bank approval process, the MCA is your solution. Small businesses can get funds within a day or two from submission. Unlike the traditional bank process, the financial institutions that issue MCAs don't do rigorous checks. They will check the business's past sales to determine whether they qualify for a cash advance.

Ideal for businesses that work with cash and credit cards

Retail and restaurant businesses rely on a high volume of credit card sales, making them ideal for obtaining MCA. If your business depends on cash or credit cards, a cash advance is the ideal financing method. This opportunity is perfect for the ones that don't rely on invoices. Instead, they take a percentage of the credit card sales to repay the loan.

CONS

High-interest rates

Merchant cash advance comes with higher interest rates than traditional bank loans. The convenience of having the funds fast will cost more. However, the price is worth paying when you need urgent funds to proceed with the business operations.

What Is Cheques Factoring?

A post-dated cheque is a cheque that can be cashed on the indicated date on the document's face. It is a form of advance payment and can be cashed on a specific date. According to Canadian laws, a cheque can't be cleared before this date. If you still need cash to keep your business's liquidity, you can sell the cheque to a factoring company.

PROS

Fast approval

Depending on the date indicated on the check face, you might have to wait long to receive the payment. If you need to meet your business needs urgently, factoring your cheques will provide you with funds quickly. They will pay off a particular value of the face value while keeping a specific percentage as a fee.

No credit score checks

When applying for a traditional bank loan, they will do a rigorous check on your financial history. When your small business is relatively new and doesn't have a credit history, you might be restricted from obtaining such loans. Your ability for cheque factoring isn't assessed with credit history, and you aren't required to disclose collateral. This is very important, as you don't need to put your property or equipment at risk. The factoring company will check the check for authenticity.

Not deal with cheques

Having to deal with cheques is a tedious job. Passing this responsibility to a third party means less time spent sorting out cheques so that you can focus on the more important aspects of your business.

CONS

Higher cost

The factoring company will charge fees to provide you with the cash in advance. They will usually pay 80% of the amount indicated on the face. However, the high cost might pay off if you need money urgently.

Requirements

Cheques factoring companies might have specific requirements for cashing out your document. For example, the check drawer should be a reputable entity. Also, the factoring company might have particular requirements on the cheque's active time.

Merchant Cash Advance vs. Cheques Factoring

For cheques factoring, you will pay a fee to the factoring company expressed as a percentage of the total amount. On the other hand, you will pay off your MCA as a percentage of your future sales. When choosing the suitable financing method for your company, select the one that is a better fit for your needs. We at 2M7 are dedicated to providing the needed funds to enhance your business's liquidity without restrictions on how to use them. Get in touch with us, and we will answer your specific needs! For a broader look at how merchant cash advances can support business growth, read merchant cash advance benefits for business growth.