Working Capital Loans for New Businesses

Launching a company is one thing. Surviving the first 12–24 months—when expenses arrive before revenue—takes a different kind of discipline. A working capital loan gives a new business the cash cushion to cover payroll, inventory, supplier deposits, advertising, repairs, and taxes while sales ramp up. This guide explains how working capital financing works for new Canadian businesses, which structures fit best, what lenders look for, and how to improve approval odds without overextending your cash flow.

If you want to jump straight to options, see Working Capital Loan and model scenarios in the calculator.

What a working capital loan is (for a brand-new business)

A working capital loan is short- to mid-term financing designed to fund operations, not buy long-life assets. For new businesses, it’s typically used to bridge timing gaps—pay suppliers now, collect customer payments later. Structures vary (term loans, lines of credit, factoring, merchant cash advances), but the goal is the same: keep day-to-day operations stable while revenue becomes predictable.

If equipment purchases are part of your launch, pair operating capital with Equipment Loans or Asset-Based Lending so capex and operating needs aren’t fighting each other.

Best working capital options for new businesses

For eligible bank-backed solutions, review the Canada Small Business Financing Program (CSBFP). For larger, asset-tied limits as you grow, consider Asset-Based Lending.

Secured vs. unsecured for a new business

• Unsecured (including many MCAs) prioritizes speed and simplicity—useful when you need a smaller amount to kickstart marketing, hire staff, or cover deposits. See Unsecured Loan.
  
  
• Secured financing (LOCs against A/R/inventory, or term loans with a GSA/equipment support) generally offers larger limits and lower cost. See Secured Loan and Line of Credit.
  
  

If you already own equipment (or will soon), you can also raise cash through a Refinancing & Sale-Leaseback while keeping assets in service.

What lenders evaluate on a brand-new file

• Cash flow visibility: Bank statements (3–6 months), projected inflows, backlog, POs, or signed contracts.
  
  
• Owner profile: Personal credit, relevant industry experience, and equity invested.
  
  
• Business model details: Unit economics, margins, customer terms, and seasonality.
  
  
• Collateral and support: A/R quality, inventory turns, equipment list, and any co-signer or guarantee.
  
  
• Documentation quality: Organized, consistent documents speed approvals.
  
  

If you’re still pre-revenue or very early, ask about In-House Financing options or a staged plan that starts small and scales with traction.

A clean application package for a new business

• Government ID and basic corporate documents
  
  
• Last 3–6 months of business bank statements (or personal if very early)
  
  
• Current A/R aging or sample invoices/POs (if applicable)
  
  
• Equipment quotes if capex is tied to the plan (Equipment Loans)
  
  
• Brief “use of funds” note and payback plan
  
  
• Existing liens or obligations (for transparency)
  
  

Structuring tips that improve approval odds and cash-flow fit

• Right-size the limit. Borrow what you can service from realistic revenue, not best-case forecasts.
  
  
• Match term to cash conversion. Shorter projects → shorter terms; recurring needs → Line of Credit.
  
  
• Consider a blended approach. Example: small Unsecured Loan for launch marketing + Factoring for slow A/R.
  
  
• Leverage assets for rate and limit. If you carry inventory or have equipment, a Secured Loan or Asset-Based Lending can materially improve pricing.
  
  
• Avoid idle principal. If spend is lumpy, a LOC is often cheaper in practice than a fixed loan you don’t fully use.
  
  
• Reprice once stable. Consolidate or reduce cost through Business Refinancing after 6–12 months of steady performance.
  
  

Cost drivers to understand from day one

• Risk & collateral: Stronger collateral and clean statements reduce cost.
  
  
• Product type: Factor-rate products (e.g., many MCAs) are not apples-to-apples with APR; ask for total dollar cost and expected payback period. See Merchant Cash Advance.
  
  
• Repayment frequency: Daily/weekly remittances can strain young businesses; monthly structures may be easier on cash flow.
  
  
• Fees & covenants: Know your admin fees, lock-ins, and any reporting required for LOC/ABL facilities.
  
  

Realistic timeline from inquiry to funding

With a complete file, boutique underwriting can often provide clear answers within 24–48 hours and fund shortly thereafter, depending on product type and any collateral checks. To move faster: pre-organize statements, invoices/POs, and insurance details where applicable.

Case study: turning purchase orders into momentum

Business: New Ontario distributor (wholesale food)
Challenge: Three POs from regional grocers, but suppliers required upfront payment and receivables would take 30–45 days to convert.
Structure: A modest Line of Credit secured by A/R for inventory buys, paired with Invoice Factoring on larger accounts to accelerate collections.
Result: The firm shipped on time, revolved the LOC twice within the first quarter, and graduated to a higher limit after consistent turns. Marketing spend for a new product launch was supported by a small Unsecured Loan, then refinanced into a lower-cost facility via Business Refinancing once velocity was proven.

If equipment is part of your launch

Mehmi also sells equipment directly. When your plan requires a truck, kitchen line, or machinery, purchasing through our Inventory can simplify inspections, pricing, and closing. We frequently pair capex financing with a working capital loan so operations stay funded while the asset starts generating revenue.

FAQ

Can a brand-new business qualify for working capital?
Often, yes. Expect stronger emphasis on owner credit/experience, contracts/POs, and a staged limit that grows with results. Start with Working Capital Loan (use main page link below).

Is it better to start with unsecured or secured?
If you need speed and a small amount, unsecured can work. If you have A/R, inventory, or equipment and want a larger, cheaper limit, secured is preferable. See Secured Loan and Unsecured Loan.

What if customers pay in 30–60 days?
Use Invoice/Freight Factoring or a borrowing-base Line of Credit to bridge receivables.

How do I estimate payments?
Model scenarios in the calculator (loan vs LOC, different limits/terms), then we’ll quote your actual approval.

Can I combine working capital with equipment financing?
Yes. We routinely pair Equipment Loans with a startup LOC or small term loan so capex doesn’t starve operations.

Are government-backed programs an option?
Potentially. Review CSBFP to see if your use case and lender fit program rules.

‍

Next step

Run your numbers in the calculator, then feel free to contact our credit analysts for a tailored plan across Working Capital Loan, Line of Credit, Invoice/Freight Factoring, Unsecured Loan, and Business Refinancing. When equipment is part of the plan, we can also source and finance it directly from our Inventory. Start the conversation here: Contact Us.