How is a line of credit different from a loan?

A loan gives you a lump sum you repay on a fixed schedule. A line of credit is a revolving limit you draw, repay, and reuse, paying interest only on the outstanding balance.

Can I get an unsecured business line of credit in Canada?

Yes. Unsecured lines exist but carry higher rates and smaller limits than secured ones, and lean heavily on your revenue, cash flow, and credit rather than collateral.

What are typical business line of credit requirements?

Consistent revenue, several months to a year-plus in business, recent bank statements, manageable existing debt, and a reasonable credit profile. Collateral is needed for a secured line.

Business Line of Credit in Canada | Crewline

How a business line of credit works

A line of credit sets a ceiling — say $50,000 — that you borrow against only when you need it. Draw $10,000 to cover a payroll gap and you pay interest on that $10,000, not the whole limit; repay it and the full amount is available again. That revolving structure is the core difference from a term loan, which hands you a lump sum you repay whether or not you use it all. For a business with lumpy cash flow, a line is a standing buffer you dip into and refill across the year rather than a one-time event.

Revolving credit vs a term loan

Use a term loan when the need is specific, known, and one-time — a large equipment down payment or a single big material order. Use a line of credit when the need is recurring or unpredictable: the slow-pay stretch every quarter, a seasonal dip, an unexpected repair. Because you only pay for what you draw, a line is usually cheaper in practice for intermittent needs, even if its posted rate looks similar. Many trades run both — a line for the routine ebb and flow, and a term advance for the occasional larger push that the line can't comfortably absorb.

Secured vs unsecured lines

An unsecured line carries a higher rate and a smaller limit but no lien and a faster setup, because there's no collateral to assess. A secured line — backed by receivables, equipment, or a general security agreement — costs less and can be larger, but takes longer to arrange and puts assets on the hook. Newer businesses and those without hard assets often start with a modest unsecured line and graduate to a secured facility as revenue and history build. The right starting point depends on how much you need and how quickly, weighed against what you're willing to pledge.

How much you can qualify for and what it costs

Limits are usually sized to revenue and cash flow — a portion of average monthly deposits — moderated by time in business, existing debt, and credit. Pricing is quoted as a rate on the drawn balance, sometimes with an annual fee or a small monthly minimum. Read for the details that bite: draw fees, whether the rate is fixed or floats with prime, and any requirement to rest the balance to zero periodically. Compare the effective cost of carrying a typical balance, not just the headline rate, because how you actually use the line drives what it really costs.

What lenders look at for a line of credit

Lenders weigh consistent revenue and healthy bank-account behaviour heavily — steady deposits, few or no NSFs, and a cushion between inflows and outflows all help. They'll look at time in business, existing debt and how you've handled it, personal and business credit, and whether the account swings negative often. Because a line is ongoing exposure rather than a one-time advance, lenders care about the stability of your cash flow more than a single strong month. Clean, recent bank statements and a clear explanation of what the line is for make approval materially easier.

When a line of credit is the right tool

A line of credit shines for smoothing timing — covering payroll between draws, floating materials before an invoice clears, absorbing a seasonal dip. It's the wrong tool for a large one-time purchase you'll carry for years (use a term loan) or for a structural loss (financing can't fix an operation that loses money on every job). If the specific problem is slow-paying invoices, invoice financing targets that more directly, and if a bank recently declined you, an alternative line may still be available. Match the product to the cash-flow shape and a line does its job; misapply it and it just adds cost.

Line of credit vs working capital vs invoice financing

These three cash-flow products overlap, and picking the right one saves real money. A line of credit is the flexible default for recurring, unpredictable swings — you draw and repay as needed and pay only for what you use. A working-capital advance suits a known, one-time gap you'll clear in a few months, where a lump sum is simpler than a revolving limit. Invoice financing fits when the cause is specifically slow-paying commercial customers, because it converts receivables you already own into cash rather than adding debt. Many businesses combine them: a standing line for everyday timing, a working-capital advance for an occasional larger push, and factoring when a big customer stretches payment to 60 or 90 days. The mistake to avoid is forcing one product to do another's job — carrying a permanent balance on a line that should have been a term loan, or borrowing working capital to cover a receivables gap that factoring would solve more cheaply. Start from the shape of your cash-flow problem and the product usually chooses itself.

What lenders look at

Consistent monthly revenue and healthy bank-account behaviour
Time in business (often 6–12+ months)
Recent business bank statements
Existing debt and repayment history
Personal and business credit estimate
Collateral, for a secured line

Frequently asked questions

How is a line of credit different from a loan?: A loan gives you a lump sum you repay on a fixed schedule. A line of credit is a revolving limit you draw, repay, and reuse, paying interest only on the outstanding balance.
Can I get an unsecured business line of credit in Canada?: Yes. Unsecured lines exist but carry higher rates and smaller limits than secured ones, and lean heavily on your revenue, cash flow, and credit rather than collateral.
What are typical business line of credit requirements?: Consistent revenue, several months to a year-plus in business, recent bank statements, manageable existing debt, and a reasonable credit profile. Collateral is needed for a secured line.

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Crewline is a referral and matching service, not a lender. We do not make credit decisions or guarantee approval. Financing is provided by third-party lenders subject to their own terms and criteria.