Every week, another business owner tells me why they can’t get financing. Bad credit. No collateral. Too new. Too small. And every week, I watch similar businesses walk out with funding.
The problem? They’re operating on outdated information. These small business loan myths Canada has somehow kept alive are stopping good businesses from growing. Time to clear things up.
Myth 1: “Banks Are Your Only Real Option”
This one’s so wrong it’s almost funny. Banks control about 60% of business lending in Canada. That leaves 40% happening somewhere else.
Credit unions often beat bank rates and actually talk to you like a human. Online lenders approve loans in days instead of months. Merchant Cash Advance providers fund businesses banks won’t touch. Equipment financing companies skip the bank entirely and work directly with vendors.
Jamie runs a food truck in Vancouver. Three banks rejected her. Said her business was too seasonal. A local credit union gave her $40,000 at a better rate than the banks would’ve offered anyway. She thought banks were the “legitimate” option. Turns out legitimate just means whatever gets your business funded.
Myth 2: “Perfect Credit or Forget It”
Your credit score matters. But it’s not everything. Not even close.
Traditional banks? Yeah, they want 700+ credit scores. But alternative lenders look at your whole business. Strong revenue for six months? That matters more than a credit hiccup from three years ago. Consistent daily sales? Some lenders care more about that than your personal credit score.
Merchant Cash Advances specifically work differently. They’re buying your future sales, not lending based on creditworthiness. Your payment history with suppliers might matter more than your Equifax score. One MCA provider I know approved a restaurant owner with a 580 credit score because his daily sales were rock solid for two years straight.
Myth 3: “Startups Can’t Get Funding”
“Come back when you’ve been in business for two years.” Every startup founder has heard this. And it’s garbage.
Sure, you’re not getting a traditional term loan on day one. But startup financing exists. Revenue-based financing kicks in once you have any sales coming in. Some MCAs will fund you after just three months in business. Fintech lenders have programs specifically for new businesses.
The real issue? Startups look in the wrong places. Stop walking into bank branches with your three-month-old business. Start looking at lenders who actually want startup clients. They exist. They’re hungry for your business.
Myth 4: “You Need Massive Collateral”
Banks love collateral because they’re risk-averse. Your house, your car, your firstborn. But thinking you need major assets to secure financing? That’s small business loan myths Canada needs to drop.
Unsecured business loans are everywhere now. Higher rates? Usually. But no risk to your house. Cash flow lending looks at your revenue instead of your assets. Invoice factoring uses your receivables. Merchant Cash Advances typically don’t require any collateral at all.
Here’s what actually happened to Tom from Winnipeg. His manufacturing business needed $150,000 for equipment. Bank wanted his house as collateral. Instead, he got equipment financing where the equipment itself was the only collateral. Same amount of money. His house stayed out of it.
Myth 5: “Alternative Lending Is a Scam”
Some people hear “alternative lender” and think loan shark. Let’s fix that.
Alternative lenders are regulated businesses. They report to credit bureaus. They have legitimate contracts and transparent terms. Are there sketchy operators? Sure, just like there are sketchy contractors and sketchy restaurants. Do your homework.
The difference isn’t legitimacy. It’s approach. Banks make money by being selective. Alternative lenders make money by serving businesses banks reject. Higher risk means higher rates. That’s not a scam. That’s math.
A Merchant Cash Advance costs more than a bank loan. Obviously. But if the bank won’t lend to you, comparing their rates is pointless. Compare what you can actually get.
Myth 6: “Financing Ruins Your Cash Flow”
Weird how people think borrowing money makes you poorer. Used right, financing improves cash flow.
Consider this: you’re turning away customers because you can’t afford inventory. Or losing contracts because you lack equipment. That’s cash flow dying slowly. Smart financing fixes these problems immediately.
Maria owns a Toronto catering company. She was turning away bookings because she couldn’t afford to front food costs for large events. A $30,000 MCA let her accept those contracts. The financing cost her $5,000 but generated $45,000 in profit she would’ve missed entirely. Her cash flow improved because of the loan, not despite it.
Myth 7: “The Application Process Takes Forever”
At a bank? Six weeks if you’re lucky. But claiming all business financing is slow? That’s outdated by about ten years.
Online lenders approve loans in 24 hours. Some MCA providers fund the same day you apply. Invoice factoring can be set up in under a week. Even equipment financing moves fast now with digital applications.
The slow part is usually you, not them. Scrambling for financial statements. Searching for tax returns. Looking for that one contract. Get your documents ready before you apply and watch how fast things move.
What This Means for Your Business
These small business loan myths Canada keeps perpetuating are costing you money. Real money. While you’re convincing yourself you can’t qualify, your competitor is using financing to steal your customers.
Stop assuming you know what lenders want. Requirements changed. Options expanded. That rejection from 2019? Meaningless now. Your friend’s horror story about business lending? Probably missing key details.
Want to know what you actually qualify for? Apply. Not next quarter when your credit improves or next year when you have more revenue. Now, while you still need the money to grow instead of just survive. The worst they can say is no. But based on what I’ve seen lately? They probably won’t.
