Most Canadian lenders expect you to put some of your own money into the business before they approve a loan. This is called equity, and it shows the lender you share the risk. For many government-backed and community loans, the equity requirement is lower than at a bank—often around 10% of the total project cost.
Understanding how much equity you need for a small business loan in Canada can save you time and help you apply to the right programs first.
Equity is the cash or assets you contribute to your business that are not borrowed. Lenders look at equity to judge commitment and financial stability.
Equity can include:
Most lenders focus on cash equity. Personal time, sweat equity, or unpaid labour usually does not count.
There is no single rule, but these ranges are common:
If your business is newer, higher risk, or in a volatile industry, the lender may ask for more equity.
If you’re unsure where your business fits, GrantHub’s program listings can help you compare requirements across lenders and regions.
The Entrepreneur Loan Program is a provincial loan offered through Finance PEI for startups and growing businesses.
Key equity details:
This means if you apply for a $60,000 loan, you must contribute at least $6,000 of your own equity.
This program is often more flexible than bank loans, which makes it attractive for early-stage businesses.
Two Rivers offers repayable business loans, primarily serving Indigenous entrepreneurs.
Equity requirements include:
For a $200,000 project, you would need at least $20,000 in cash equity, with the remaining $180,000 potentially financed through the loan.
Equity reduces the lender’s risk. If the business struggles, equity acts as a buffer.
From a lender’s perspective:
Government loan programs accept lower equity because they want to help the economy, not just avoid risk.
If you want to see which government and community loan programs fit your equity level, GrantHub lists options with clear eligibility details.
Equity does not just affect whether you are approved. It can also influence:
If you bring more equity than the minimum, lenders may be more flexible on other terms.
Some programs require the equity to be invested into the business, not sitting in a personal account. Always confirm how equity must be deployed.
Equity is usually calculated on the full project cost, not just the loan amount.
Using personal credit cards or lines of credit often does not qualify as equity, even if the money comes from you.
If you only have 10% equity, a major bank is unlikely to approve a startup loan. Community and government programs are a better first step.
Q: What is a good equity ratio for a small business loan in Canada?
For most government-backed loans, 10%–20% equity is considered acceptable. Banks usually expect at least 25%, especially for startups.
Q: Can grants count as equity for a loan?
Sometimes. Some lenders allow approved grants to reduce the loan amount, but they rarely replace the owner’s equity requirement.
Q: Does equipment count as equity?
Purchased equipment may count if it has clear market value and is owned outright. Leased or financed equipment usually does not.
Q: Do startups need more equity than existing businesses?
Yes. Startups typically need higher equity because there is no operating history to prove repayment ability.
Q: Is the Entrepreneur Loan Program a grant?
No. It is a fully repayable loan, not a non-repayable grant.
Equity requirements vary widely across Canada, and choosing the wrong lender can slow your plans by months. GrantHub features hundreds of active loan and grant programs across the country, making it easier to find those that match your business profile and available equity.
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