Worked Examples and Checklists
Business loan application checklist for Canada: documents, numbers and offer checks
The documents a Canadian bank, credit union or BDC will ask for, the numbers to work out before you apply, and what to check in the offer before you sign.
A strong Canadian business loan application answers the lender's questions before they are asked: who you are (registration and ownership), how the business has done (two to three years of financial statements, tax filings up to date), what the money is for (quotes, a purchase agreement or a plan), how it will be repaid (a cash flow forecast and debt service coverage ratio), and who stands behind it (security and guarantors). Gather all of it before you approach a lender. Incomplete files are the most common reason for slow answers and weaker offers.
This is the overview guide for Worked Examples and Checklists. Tick items as you go with the application checklist tool.
Step 1: business identity and ownership
- Articles of incorporation (federal or provincial), or registration of the business name for a sole proprietorship or partnership.
- In Quebec, your registration with the Registraire des entreprises (NEQ).
- Shareholder register or partnership agreement showing who owns what.
- Business number from the Canada Revenue Agency and GST/HST, payroll and, where relevant, provincial sales tax accounts.
- Main contracts: commercial lease, franchise agreement, major customer contracts.
Step 2: financial history
| Document | What the lender checks | Tip |
|---|---|---|
| Financial statements, last 2–3 years | Revenue trend, margins, EBITDA, debt levels | Larger loans often need a review engagement rather than a compilation |
| Year-to-date internal statements | Whether this year matches the trend | Prepare them within the last month or two |
| Business bank statements, 6–12 months | Cash balances, overdrafts, NSF items | Explain any one-off large deposits |
| Notices of assessment (corporate or personal) | Income reported and no tax arrears | Lenders often ask for owners' personal ones too |
| Proof that GST/HST and source deductions are current | CRA arrears can rank ahead of the lender | A CRA statement of account helps |
| Aged receivables and payables | Collection speed and pressure from suppliers | Required for operating lines |
Step 3: use of funds and the plan
- Quotes or invoices for equipment, renovations or inventory.
- For a business purchase: the letter of intent or purchase agreement, the target's statements and the valuation basis.
- A short business plan for new ventures or major expansions: market, customers, management experience, risks.
- A 12-month cash flow forecast, ideally 24–36 months for larger loans, that includes the new payment.
Step 4: run the numbers yourself
Before you apply, calculate what the lender will calculate:
- Monthly payment on the amount and term you want: see the term loan payment example and the payment calculator.
- Debt service coverage ratio (DSCR): cash available for debt service divided by all debt payments; see the DSCR worked example.
- Debt to equity or debt to EBITDA: total debt compared with what the owners have in the business, or with yearly earnings.
- Your contribution: how much of the project you are funding yourself.
If the numbers do not work, change the request: a smaller amount, a longer amortization, a lease for part of the equipment, or a government-backed loan. For start-ups, see financing a start-up. For equipment, see lease versus loan.
Step 5: owners and guarantors
- Personal net worth statement for each owner: assets, debts and monthly obligations.
- Consent to a personal credit check (Equifax Canada, TransUnion Canada). Pull your own reports first and fix errors.
- Résumé or summary of industry experience for each key person.
- Information about a spouse's interest in the home, if the home will be offered as security.
Step 6: where to apply
| Lender type | Strengths | Consider |
|---|---|---|
| Your main bank | Knows your accounts; can bundle line, loans and cash management | Get a second offer to test pricing |
| Credit union or caisse | Local decision-making; often strong with small businesses | Regulated provincially; product range varies |
| BDC | Federal Crown corporation that complements private lenders; flexible repayment | May price above a fully secured bank loan |
| CSBFP through a participating lender | Federal risk sharing for businesses with revenue of $10 million or less | 2% registration fee; lender decides |
| Online lenders | Fast, less paperwork | Usually higher cost and shorter terms |
Apply to two or three lenders within a short period so you can compare offers on the same numbers.
Step 7: checking the offer
When a term sheet or commitment letter arrives, write down on one page:
- Amount, rate (fixed or prime plus), compounding and amortization.
- All fees, and whether they are deducted or added.
- Required deposits, holdbacks or cash collateral.
- Prepayment terms and penalty method.
- Financial covenants (for example a minimum DSCR) and reporting deadlines.
- Whether any part is repayable on demand.
- Security to be registered and the exact scope of each personal guarantee.
- Conditions to be met before funding, and the offer's expiry date.
Then compare offers side by side using comparing two loan offers. If you already carry an expensive loan, also check refinancing an expensive business loan.
Frequently asked questions
How long does approval take?
Simple loans with complete files can be decided in days; larger or more complex loans, especially with real estate, appraisals or environmental reports, can take several weeks.
Should I apply to many lenders at once?
Two or three is usually enough. Many credit inquiries in a short time can be noticed, and each application takes time to prepare.
Do I need a business plan for an existing business?
For a routine equipment loan, usually not; good statements and a forecast are enough. For a large expansion, a new location or a business purchase, yes.
What if my statements show a loss last year?
Explain it: a one-off event, an investment year, or a recovery under way, with year-to-date figures to support it. Unexplained losses weaken any application.
Sources
- BDC — guidance on preparing a loan application
- Innovation, Science and Economic Development Canada — CSBFP and the finance map of participating lenders
- Canada Revenue Agency — business number, notices of assessment, statements of account
- Government of Québec — Registraire des entreprises and the Québec enterprise number (NEQ)
- Equifax Canada and TransUnion Canada — your personal credit reports
