Canada's 35% criminal interest rate and business loans: the 2025 rules explained

Since 1 January 2025, section 347 of the Criminal Code makes it an offence to enter into an agreement for, or receive, interest at more than 35% APR. Before that date the limit was 60% expressed as an effective annual rate. For business borrowing, the Criminal Interest Rate Regulations carve out commercial loans: if the borrower is not a natural person and the loan is for business purposes, a loan of more than $10,000 up to $500,000 is exempt from the 35% cap but must not exceed 48% APR, and a loan of more than $500,000 has no criminal rate cap at all. Loans of $10,000 or less, and loans to individuals, including sole proprietors, stay under the 35% limit.

This guide is part of the small business loan requirements and rates overview. It is general information, not legal advice.

The rules in one table

Whether a particular partnership, trust or co-operative counts as a natural person, and whether a loan is "for business purposes", can be technical questions. If your loan is near a threshold, ask a lawyer.

What counts as "interest"

The Criminal Code defines interest broadly: it includes fees, fines, penalties, commissions and similar charges paid for advancing the credit, with limited exceptions such as some insurance charges and official registration fees. A loan can therefore look legal on its stated rate and still break the limit once the fees are counted. The regulations say the APR is calculated using generally accepted actuarial practices and principles.

The old 60% limit was an effective annual rate, which compounds; the new 35% is an APR. The federal government's regulatory analysis noted that 35% APR is roughly 41.2% as an effective annual rate when compounded monthly, so the change was a larger cut than the headline suggests.

Testing an offer: three worked examples

All figures are illustrative.

1. Sole proprietor, $8,000 over 12 months at 30% with a $600 fee deducted. The borrower receives $7,400 and makes 12 payments of about $780. Solving for the rate gives an APR of about 45.7%. The borrower is an individual and the loan is under $10,000, so the 35% limit applies: this offer exceeds it.

2. Corporation, $60,000 over 24 months at 22% with a 3% fee deducted. Cash received $58,200; APR about 25.2%. Under 35%, so it is within the limit whatever the borrower type.

3. Corporation, $40,000 merchant cash advance repaid as $54,000 over about 8 months. If treated as a loan, weekly repayments of about $1,543 over 35 weeks imply an annual rate of roughly 92%. Providers of merchant cash advances usually say the product is a purchase of future receivables, not a loan, and so outside section 347. Courts look at the substance of each agreement, so that position is not guaranteed. Either way, the cost is far above what a bank or BDC loan would cost. See merchant cash advances.

You can compute the cash you actually receive in the fee calculator, then use a spreadsheet's RATE function to find the APR, as described in the true cost of fees.

What happens if a loan exceeds the limit

The criminal offence is aimed at lenders. For the borrower, the civil effect matters more: Canadian courts have generally not let a lender collect the illegal part. In Transport North American Express Inc. v. New Solutions Financial Corp. (2004), the Supreme Court of Canada approved reading down the interest to the legal limit rather than voiding the whole agreement, and courts decide case by case. If you think your loan breaches the limit:

1. Keep the agreement, statements and every payment record.
2. Recalculate the APR, including all charges.
3. Get legal advice before you stop paying, because the principal is still owed.
4. Complain to the lender in writing, then to the relevant complaints body; see the complaints guide.

Other limits that still apply above the caps

A loan that is exempt from the criminal rate can still be challenged on other grounds:

• Interest Act section 4: if the contract states a rate only per day, week or month without the yearly equivalent, no more than 5% a year is recoverable.
• Unconscionability doctrines in the common law provinces and, in Quebec, the Civil Code's rule that an abusive clause in a contract of adhesion can be annulled or reduced; see Quebec differences.
• Provincial rules on high-cost credit, which are mainly aimed at consumer loans but vary by province.

A short checklist before you sign a high-cost loan

• Is the borrower you, personally, or your corporation? That decides which limit applies.
• Is the amount above $10,000 or above $500,000?
• What is the APR including every fee? Ask the lender to state it in writing.
• Is there a daily or weekly payment? Model the true annual cost.
• Is there a lower-cost alternative: a bank line, a CSBFP loan, BDC or a supplier credit term?

Frequently asked questions

Does the 48% limit apply to my corporation's $300,000 loan?

If the loan is for business purposes and the borrower is the corporation, not you personally, the 35% cap does not apply but the loan must not exceed 48% APR.

My corporation borrowed and I signed a personal guarantee. Which limit applies?

The test looks at the borrower, which is the corporation. The guarantee does not change the borrower, but get legal advice if the structure looks designed to avoid the 35% cap.

Did the change affect loans signed before 2025?

The new rate applies to agreements entered into from 1 January 2025. Earlier agreements were measured against the old limit; check with a lawyer if an older loan was renewed or amended.

Where is the official text?

The Criminal Code and the Criminal Interest Rate Regulations are on the Justice Laws Website.

Sources

• Justice Laws Website — Criminal Code section 347, Criminal Interest Rate Regulations, Interest Act
• Canada Gazette — the regulations and their regulatory impact analysis (SOR/2024-114)
• Financial Consumer Agency of Canada — information on high-cost credit
• Supreme Court of Canada — Transport North American Express v. New Solutions Financial Corp.