How to Secure Business Funding with a Low Credit Score in Canada

For many Canadian entrepreneurs, access to capital is the lifeline of their business. Whether it’s launching a new venture, expanding operations, or simply managing day-to-day cash flow, securing business funding plays a vital role.

But what if you have a low credit score? Does that automatically disqualify you from getting the funding you need? The short answer: No.

While a low score can limit your options with traditional banks, Canadian entrepreneurs still have multiple pathways to access financing. The key is knowing where to look, prepare, and position your business for success.

At Aura Finance Inc., we work with startups, small business owners, and established entrepreneurs every day — many of whom face credit challenges. Here’s a comprehensive guide on how to secure funding even with a less-than-perfect credit score.

1. Understanding the Role of Credit Scores in Business Loans

Credit scores are important, but they are not the whole story. Banks often use them as a first filter, but many lenders, especially alternative ones, go beyond just the numbers.

• What lenders look at besides credit:
  
  • Revenue consistency
    
  • Debt-to-income ratio
    
  • Business cash flow
    
  • Collateral value
    
  • The strength of your business plan
    

👉 Example: A restaurant owner in Toronto may have a poor credit history due to personal debts, but demonstrates consistent sales growth and healthy cash flow. An alternative lender might prioritize revenue over the personal score.

Pro tip: Don’t let your credit score discourage you from applying. Instead, strengthen other areas of your financial profile.

2. Alternative Lenders — A Lifeline for Low Credit Entrepreneurs

If banks turn you down, you still have several alternative financing options in Canada. These lenders focus on your business’s potential and assets rather than just your credit history.

Popular options include:

• Merchant Cash Advances (MCA):
  Get funding based on your daily credit/debit card sales. Repayments are tied directly to sales performance, making it easier during slow months.
  
• Invoice Factoring or Financing:
  Turn unpaid invoices into immediate cash. This is especially useful for businesses that deal with long payment cycles.
  
• Asset-Based Loans:
  Use equipment, vehicles, or inventory as collateral to access credit.
  
• Online Business Loans:
  Many fintech lenders use innovative models to evaluate businesses, offering quicker approvals and flexible repayment terms.
  

👉 Keep in mind: These loans may come with higher interest rates, but they provide quick access to capital when you need it most.

3. Strengthening Your Loan Application

Even with low credit, a well-prepared application can improve your approval chances significantly.

Steps to strengthen your application:

• Prepare financial statements: Profit and loss, balance sheets, and cash flow statements that show stability.
  
• Draft a strong business plan: Highlighting how funds will be used and how they will generate future revenue.
  
• Offer collateral: Lenders are more likely to approve funding if risk is reduced with assets.
  
• Show repayment ability: Demonstrating repayment schedules tied to actual business revenue.
  

Pro tip: Work with a professional accountant in Toronto to ensure your financials are presented in the most lender-friendly way possible.

4. Building Business Credit Separately from Personal Credit

Many Canadian entrepreneurs don’t realize they can build business credit even if their personal score is low. This creates a more reliable profile for future funding.

How to build business credit:

• Register your business as a legal entity.
  
• Open a separate business bank account.
  
• Apply for a business credit card and pay balances in full each month.
  
• Work with vendors that report payments to credit bureaus.
  
• Keep business and personal expenses completely separate.
  

👉 Over time, this builds credibility with lenders, making future loans easier and cheaper to secure.

5. Government-Backed Programs for Small Businesses

Canada has excellent government-backed programs designed to support small businesses with limited access to credit.

The Canada Small Business Financing Program (CSBFP) is one of the most popular. It allows businesses to borrow up to $1 million, with the government guaranteeing a significant portion of the loan.

This reduces the lender’s risk, making them more open to approving entrepreneurs with less-than-perfect credit.

Other federal and provincial grants also exist for specific industries like technology, manufacturing, and green energy.

6. Consider a Co-Signer or Business Partner

If you’re struggling to get approved on your own, consider bringing in a business partner or co-signer with stronger credit. This strategy can:

• Improve loan approval chances.
  
• Reduce interest rates.
  
• Distribute financial responsibility across multiple individuals.
  

👉 Example: Many family-owned businesses in Canada leverage this strategy when one partner has stronger credit than the other.

7. Improve Your Credit Score Along the Way

While you’re exploring funding, don’t forget the long-term goal: improving your credit health.

Tips to boost your score:

• Pay bills on time (this is the single biggest factor).
  
• Reduce outstanding debts where possible.
  
• Avoid applying for multiple credit products at once.
  
• Regularly check your credit report for errors.
  

Even small improvements can unlock better financing options in the future.

8. Seek Expert Guidance

Securing funding with a low credit score can be complex. That’s why having an experienced accountant in Toronto or a financial advisor can make a world of difference.

At Aura Finance Inc., we don’t just connect you to lenders — we:

• Help you prepare bank-ready financials.
  
• Identify which lenders are most likely to approve you.
  
• Negotiate favorable terms on your behalf.
  
• Provide ongoing support to build business credit and financial stability.
  

Conclusion

A low credit score does not have to stop your business dreams. In fact, with the right strategy, it can be the push you need to explore creative funding solutions that suit your business better than traditional loans.

From alternative lenders and government-backed programs to building business credit and expert financial planning, Canadian entrepreneurs have more options than ever before.

At Aura Finance Inc., we’ve helped countless small business owners secure funding — even when banks turned them away. Whether you’re looking for a loan, line of credit, or tailored business funding solutions, our team is ready to guide you every step of the way.

📞 Contact us today to explore funding opportunities and turn your vision into reality — no matter your credit score.