What a commercial loan is actually judged on
A commercial loan is assessed on the business, its cash flow and the assets that stand behind it, not on the owner's personal credit score alone. A sole proprietor with a thin personal file can still be financed when the business shows steady, documented cash flow and offers security a lender can value, while a founder with an excellent personal score can still be declined when the business cannot show that it can service the debt.
That shift in focus explains most of the difference between consumer borrowing and commercial loans. Consumer credit models lean on your personal history and your score. Commercial credit models lean on the enterprise: what it earns, what it owes, what it owns, and what happens to the lender's money if the business stops earning.
loanmoose.ca is not a lender. It does not make loans, set rates or make credit decisions, and it does not decide who qualifies. It matches Canadians with licensed providers and lets them compare, and every figure in a real offer comes from that provider.
The three things underwriters work through
Most commercial underwriting follows the same sequence.
- The business. How long has it operated? What does it sell, to whom, and how concentrated is that revenue? If a single customer represents most of your sales, the lender is effectively analyzing that customer.
- The cash flow. Can the business service the payment out of operating cash, after the owner's own draw? Lenders look at debt-service coverage — operating cash against total annual debt payments — and at how stable that coverage is from year to year.
- The assets. What can be pledged, and what would it be worth to a buyer if the lender had to sell it? Equipment, vehicles, real property, receivables and inventory behave very differently in that scenario.
The owner's personal profile is a fourth input, and how much it matters depends on how well the first three carry the deal.
Comparing the main structures
The table contrasts how each common structure is underwritten. It is a map of what lenders examine, not a set of terms: no amount, rate or term is offered here.
| Structure | What the lender leans on most | Security typically involved | Weight of the owner's personal credit |
|---|---|---|---|
| Secured term loan or commercial mortgage | The appraised value of the asset and the debt-service coverage ratio | Real property, a general security agreement, often a personal guarantee | Reviewed, but usually secondary to coverage and collateral |
| Equipment loan or lease | The equipment's value, resale market and useful life | The equipment itself | Reviewed; a weaker personal file can be offset by a strong asset and a larger down payment |
| Working-capital line of credit | Receivables, inventory and the cash-conversion cycle | Receivables and inventory, sometimes a personal guarantee | Carries more weight, because the collateral is less predictable |
| Unsecured or lightly secured business loan | Demonstrated profit and the strength of the owner's own balance sheet | Often none beyond a guarantee | Carries the most weight of any structure here |
| Invoice or receivables finance | The credit quality of the businesses that owe you money | The invoices themselves | Usually a minor input compared with the debtors' credit |
Equipment loans and bad credit
Searches for equipment loans for bad credit usually come down to one question: does a damaged personal credit file make equipment financing impossible? The honest answer is that it depends on the asset, the down payment, the trading history of the business and the appetite of the individual lender. No single national rule settles it, because lending in Canada is licensed provincially, so the regulator and the rules differ from one provider to the next.
What changes when the personal file is weak is the weight given to each pillar. With equipment financing, the asset is the lender's main comfort, so condition, age, useful life and resale market can count for more than a score. What usually works against a weaker file is a request for a long schedule with nothing down: the lender's exposure is greatest at the start, when the equipment is worth least relative to the balance owed. A larger down payment, a shorter schedule or newer equipment can change the answer without changing the score — but that is never certain, and only the lender can decide.
How rates and costs are framed in Canada
Canada's outer limit on interest is criminal law rather than commercial policy: the Criminal Code sets the criminal rate of interest at 35% per year under section 347, and a lender cannot contract around it.
Consumer products carry additional caps. Where a province operates a licensed payday lending regime, the federal Payday Lending Regulations (SOR/2024-114) cap the cost of borrowing at $14 per $100 advanced, and where a province sets a lower cap, the lower cap applies. Quebec does not license payday lending, which effectively prohibits the model there. A payday loan is generally up to $1,500 for a term of 62 days or less. Those are short-term consumer products rather than commercial loans, but they show how differently the rules can be drawn for different kinds of credit.
Benchmarks are a separate matter. The Bank of Canada publishes the policy interest rate, the prime rate, conventional mortgage rates and Government of Canada benchmark bond yields. These are benchmarks, not offers, and no lender is obliged to lend at them. A commercial quote is built from a benchmark plus a spread for risk, security and the lender's own cost of funds, which is why two providers can quote different prices for the same business. One structural rule is worth knowing because it affects cost: Canadian fixed-rate mortgages are compounded semi-annually by law.
Residential rules can also matter indirectly, because some owners weigh using home equity. At federally regulated lenders, a home equity line of credit is generally limited to 65% of appraised property value, with total secured lending usually capped at 80%. Federally regulated mortgage lenders generally work to a total debt service ratio ceiling of about 44%, and qualify an uninsured mortgage at the greater of the contract rate plus 2 percentage points and 5.25%, under OSFI Guideline B-20. Those are residential rules, not commercial ones, and using home equity to fund a business is a significant decision that deserves regulated professional advice.
Where your personal credit still shows up
Personal credit does not disappear in commercial lending; it changes role. It carries the most weight when the loan is unsecured, when the business has a short operating history, and when the lender asks for a personal guarantee.
Insolvency history is a clear example. A consumer proposal stays on a credit report for 3 years after completion, or 6 years from filing, whichever comes first. A first bankruptcy stays on a credit report for 6 years after discharge. Canada has two national credit reporting bureaus, Equifax Canada and TransUnion Canada, and a lender may see an item on one file and not the other, which is one reason two providers can reach different conclusions about the same person. Only a licensed insolvency trustee can administer a consumer proposal or bankruptcy, so anything that claims otherwise is not a legitimate process.
Regulation, complaints and what this site does
Lending in Canada is licensed provincially, so the regulator and the rules differ depending on where the lender operates. Complaints about federally regulated financial institutions go to the Financial Consumer Agency of Canada, while provinces license and supervise most other lenders.
The Government of Canada — business financing directory lists federal and provincial programs, including guarantee and co-lending options that can sit alongside private lending. Those programs have their own eligibility tests, and eligibility is not approval.
Because loanmoose.ca is not a lender and does not make credit decisions, nothing on this page is an offer or a credit decision. The lowest rates are only available to the most qualified applicants.
What to have ready before you apply
- Financial statements. Recent year-end statements, plus interim statements where available, so the lender can see the trend rather than a single good month.
- A cash-flow picture. Not just profit: what comes in, what goes out, and what is left after your own draw.
- An asset list. Equipment, vehicles, property, receivables and inventory, with a realistic view of what each is worth used.
- Guarantee questions. Ask early whether a personal guarantee will be required and what it covers.
- The regulator. Confirm which regulator licenses the provider you are dealing with, because provincial rules differ.
The right structure depends on your circumstances, and for a significant borrowing decision the answer should come from the lender's own disclosure and, where appropriate, from regulated professional advice.