Quick answer: A private business lender is a non-bank finance company or fund that lends to businesses using its own capital or investor money. In Canada, private lenders tend to approve files that banks decline or move too slowly on, such as newer companies, owners with bruised credit, or deals secured by equipment. In exchange, pricing is usually higher, terms are shorter and security requirements can be stricter. A private loan makes sense when the cost is covered by what the money earns, and when you have compared it against bank, credit union and government options first.
Key takeaways
- Most small business credit in Canada still comes from banks. Statistics Canada reported that chartered banks supplied 68.5% of SME debt financing in 2023, with credit unions at 20.6%.
- Private lenders fill the gaps: speed, thin credit files, young businesses, unusual assets and deals a bank's policy rules out.
- Expect higher rates, shorter terms, a personal guarantee and often a lien on business assets.
- Canada's criminal interest rate became 35% APR on January 1, 2025, with separate thresholds for qualifying commercial loans to corporations.
- Startups usually need at least 6 months of revenue showing in business bank statements before most private lenders will review a file.
- Compare offers on the total cost of borrowing as well as the monthly payment.
What is a private business lender?
A private business lender is any lender that is not a chartered bank, credit union or government institution. That covers a wide range: specialty equipment finance companies, independent leasing firms, private credit funds, asset-based lenders and online lenders. They are funded by investors, institutional credit lines or their owners rather than by consumer deposits, so they are not bound by the same deposit-taking rules banks follow.
A bank lending out deposits has to stay conservative and consistent. A private lender can set its own appetite. One might specialize in trucking, another in construction equipment, another in short-term working capital for retailers. If your file fits a lender's niche, it can move quickly even when a bank would say no.
Private lenders are different from private individuals who lend money on the side. This guide is about institutional private lenders that fund businesses as their core activity. If you are curious about the investor side, we cover that in how to get into private lending in Canada, and the broader market in our overview of private lending in Canada.
Where private lenders sit in the Canadian market
Statistics Canada's Survey on Financing and Growth of Small and Medium Enterprises gives useful context. In 2023, 25.7% of SMEs requested debt financing, and 88.2% had their largest request fully or partially approved, according to the agency's February 20, 2025 release. Online alternative lenders supplied only 2.2% of SME debt financing that year. In other words, banks remain the default, and private lenders are a specialist tool. Most owners only reach for them when the bank route does not fit the timing, the asset or the credit profile.
| Lender type | Share of SME debt financing, 2023 | Typical strengths |
|---|---|---|
| Chartered banks | 68.5% | Lowest pricing for strong files, full banking relationship |
| Credit unions | 20.6% | Local decisions, community focus |
| Government institutions | 9.4% | Longer terms, growth and development mandates |
| Online alternative lenders | 2.2% | Speed, simple applications |
Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises, 2023 (released February 20, 2025). Specialty equipment finance companies and private funds are not broken out separately in this table.
How private business loans work
The mechanics look familiar. You apply, the lender reviews your business and the deal, you receive an offer, you sign, and the lender funds. What changes is how the lender weighs each piece.
What private lenders look at
Banks lean heavily on two or more years of financial statements, strong personal credit and ratios that fit their policy. Private lenders still look at those, but they put more weight on recent cash flow and on the asset securing the loan. A typical review covers:
- Recent business bank statements, often the last 3 to 6 months, to see deposits, balances and returned payments.
- Time in business. For startups, most private lenders want at least 6 months of revenue in business bank statements.
- Personal credit of the owners, including any past collections or consumer proposals.
- The asset, if the loan is secured: its age, condition, resale market and whether a dealer or private seller is involved.
- Existing debt and how much of your monthly cash already goes to payments, often measured with a debt service coverage ratio.
- Industry and the purpose of the funds.
Our article on bank vs private lenders in Canada walks through how these criteria differ in practice.
Security and guarantees
Private loans are usually secured. For equipment, the lender registers its interest against the specific asset. For working capital, it may register a general security interest over business assets. Almost every private lender also asks for a personal guarantee from the owners. Read the guarantee carefully: some are limited, many are unlimited, and the difference matters if the business struggles.
Unsecured options exist, but they are smaller, shorter and priced higher. Our page on secured business loans explains how collateral changes the conversation.
Pricing and the legal ceiling
Private lenders price for risk, speed and flexibility, so expect rates above bank pricing. How far above depends on credit, time in business, the asset and the term. We do not quote rates here because they change with the market and with each file. For context, the Bank of Canada raised its policy rate by 25 basis points to 2.5% on October 28, 2026, which moves the base that many lenders build from.
Canada does set an outer limit. Under amendments to the Criminal Code, the criminal interest rate fell to 35% APR effective January 1, 2025, according to analysis by Cassels and Bennett Jones. Under the Criminal Interest Rate Regulations published June 19, 2024, loans to a borrower that is not a natural person, for a business purpose, are treated differently: over $10,000 up to $500,000 the cap is 48% APR, and above $500,000 no criminal rate applies. Sole proprietors borrowing in their own name do not get those commercial thresholds. These ceilings protect borrowers and say nothing about fair pricing. A reputable lender should be well below them, and you should always ask for the annual percentage rate in writing.
| Borrower and loan | Criminal rate ceiling (from January 1, 2025) |
|---|---|
| Individual or sole proprietor, any amount | 35% APR |
| Corporation, business purpose, $10,000 or less | 35% APR |
| Corporation, business purpose, over $10,000 up to $500,000 | 48% APR |
| Corporation, business purpose, over $500,000 | No criminal rate applies |
Source: Criminal Interest Rate Regulations as summarized by Bennett Jones (July 2024) and Cassels (January 2025). Confirm with legal counsel for your situation.
Types of private business financing in Canada
Private lenders offer several products, and the product you choose shapes the cost and term more than the lender does.
| Product | Best used for | Typical security | Term length |
|---|---|---|---|
| Equipment loan or lease | Trucks, machinery, medical or restaurant equipment | The equipment itself | Usually 2 to 7 years |
| Business term loan | Expansion, renovations, buying a business | Business assets, personal guarantee | Usually 1 to 5 years |
| Short-term loan | Bridging a gap, a time-sensitive purchase | General security, personal guarantee | Months, often under 2 years |
| Line of credit | Recurring cash flow swings | Receivables or general security | Revolving, reviewed yearly |
| Invoice or freight factoring | Slow-paying customers | The invoices | Ongoing |
Term lengths above are general ranges seen across the market, not offers. Explore each option on our business term loans, line of credit, working capital loan and equipment financing pages. For equipment buyers, the best business loans in Canada for equipment goes deeper.
Private lender vs bank vs BDC
Choosing between these comes down to three questions: how fast do you need the money, how strong is your file, and how long do you want to pay?
- A bank fits when you have two or more years of solid financials, good credit and time to wait. You will usually get the lowest cost.
- BDC, the federal Crown corporation, fits growth projects where longer amortization and flexible repayment matter more than speed. We compare it head to head in BDC vs private lenders.
- A private lender fits when timing is tight, the asset is unusual or used, the business is newer, or the bank has already declined.
Farm owners have another option, which we cover in FCC vs private lenders. If a bank has already said no, read alternative financing for declined commercial loan deals before you reapply anywhere.
When a private lender makes sense
Common good fits include:
- A revenue-producing asset, such as a truck or excavator, where each month of delay costs real income.
- A business with 6 to 24 months of revenue that is too young for most banks.
- An owner with a past credit event that is now resolved and explained.
- A used or private-sale asset that falls outside bank age or seller rules.
- Fleet growth beyond what your bank will extend. See fleet expansion with private lender leases.
It is usually a poor fit when the money covers ongoing losses with no clear fix, when you would be stacking new payments on top of existing short-term debt, or when a bank offer is realistically available within your timeline.
What we see on real files
Across the files we review, a few patterns repeat. Applications move faster when the owner sends complete bank statements, a clear explanation of any credit issues and a specific quote or invoice up front. Files stall when deposits do not match stated revenue, when there are frequent returned payments, or when existing debt is not disclosed and shows up on the credit report. Down payments help most on older equipment and newer businesses. And owners who already have a bank decline in hand often do better when they explain why the bank said no, rather than hoping the next lender will not ask.
How to compare private loan offers
Two offers with the same monthly payment can cost very different amounts. Before signing, put every offer side by side and check:
- The APR and the total amount you will repay over the full term.
- Fees: origination, documentation, registration and broker fees.
- Prepayment terms. Some loans carry a prepayment penalty or require all remaining interest if you pay early.
- Payment frequency. Weekly or daily payments feel smaller but can strain cash flow.
- Security and guarantee scope. Is the lien on one asset or on everything?
- End-of-term options on leases, such as a buyout. Our guide to private lender lease buyout options explains the choices.
Run the numbers yourself with our business loan calculator or the loan vs lease comparison tool.
Red flags to watch for
Most private lenders in Canada are legitimate businesses. A few warning signs are still worth knowing:
- Upfront fees requested before any approval or contract.
- Guaranteed approval promises without a review of your file.
- Refusal to state the APR or total cost in writing.
- Pressure to sign the same day.
- Contract terms that differ from what you were told verbally.
If any of these show up, slow down and get a second opinion.
How to prepare before you apply
Preparation shortens the timeline and can improve the terms you are offered. Gather the following before you contact anyone:
- The last 6 months of business bank statements, complete and unedited.
- Your most recent financial statements or, for younger businesses, a simple income summary.
- Government-issued ID for each owner and your articles of incorporation or business registration.
- A quote, bill of sale or invoice for what you are buying.
- A short note explaining anything unusual, such as a slow season or a past credit issue.
- A list of current debts with balances and monthly payments.
Apply through one channel at a time where you can. Several lenders pulling your credit in the same week can raise questions. Working with a broker who has access to over 50 lenders lets one complete file reach the lenders most likely to fit, without multiple separate applications.
Frequently asked questions
Are private lenders regulated in Canada?
Private business lenders do not take deposits, so they are not supervised the way banks are. They still must follow the Criminal Code interest rate limits, provincial consumer and personal property security laws, and contract law. Commercial loans have fewer disclosure rules than consumer loans, so read every document closely.
Can a startup get a private business loan?
Often, yes, once there is some track record. Most private lenders want at least 6 months of revenue in business bank statements. Strong personal credit, a down payment and industry experience help a newer business stand out.
How fast can a private lender fund?
It depends on the lender, the product and how complete your file is. Simple equipment deals with complete documents can move in days, while larger or more complex loans take longer. See our same-day funding guide for realistic expectations.
Will a private loan hurt my credit?
A credit check may cause a small, temporary dip. Making payments on time can help build your business's track record. Missed payments, like with any lender, will hurt.
Can I refinance a private loan with a bank later?
Many owners do. After 12 to 24 months of on-time payments and stronger financials, a bank or credit union may refinance the balance at a lower cost. Check prepayment terms before you sign so that option stays open. Our refinance calculator can help you test it.
Tools and next steps
- Estimate payments with the business loan calculator.
- Check affordability with the DSCR calculator.
- Compare non-bank routes in alternative business financing in Canada.
- Read bank loans vs alternative lenders for a side-by-side view.
- Look up any unfamiliar term in our financing glossary.
- See all business loan options.
Talk to Mehmi Financial Group
Not sure whether a bank, BDC or a private lender fits your situation? We work with over 50 lenders across Canada and the USA, and we will tell you plainly which route makes sense for your file. All financing is subject to lender review and approval. Call 1-833-863-4644 or contact us online to start a conversation.
Sources
- Statistics Canada, "Survey on Financing and Growth of Small and Medium Enterprises, 2023," The Daily, February 20, 2025.
- Bank of Canada, "Bank of Canada raises the policy rate by 25 basis points to 2½%," October 28, 2026.
- Bennett Jones, "Canadian Government Finally Provides Certainty on Criminal Interest Rates," July 2024.
- Cassels, "New Year, No Criminal Interest Rate for Commercial Loans," January 2025.
Written by Jodhbir Mehmi. Reviewed under our editorial standards. Updated November 2026.