Best Government Loans for Ontario Businesses: Our Top 11 Recommendations

As an entrepreneur, you’re probably aware of the many business loans offered by commercial banks in Ontario…

But did you know that there are many government loans for Ontario businesses?

It’s true! And there are literally billions of dollars available in loan money.

In this guide we cover the best government loans for Ontario entrepreneurs and give you some tips on how to maximize your loan financing.

Government Loans vs Government Loan Guarantees

This article covers the best government loans. There’s also something called a loan guarantee that governments in Canada offer to businesses through various programs.

Loan guarantees are meant to encourage commercial banks in Canada to offer loans to entrepreneurs who would otherwise not qualify for a business loan (for example, because their business is a new start-up).

A loan guarantee is just like it sounds: the government guarantees repayment of the loan to the bank – so if the borrower can’t pay back the loan, the government pays back the bank.

We cover the best government loan guarantee programs in a separate guide.

Pros and Cons of Government Business Loans

While government business loans offer some advantages over commercial bank loans, they also have some drawbacks. Let’s cover the pros and cons:

Pros of Government Business Loans

  • Lower interest rates

Government business loans typically have lower interest rates than commercial bank loans, making them a more affordable financing option for small businesses.

  • Flexible repayment terms

Government business loans often come with more flexible repayment terms than commercial bank loans, allowing small businesses to tailor their repayment schedules to their specific needs.

  • Less stringent eligibility criteria

Government business loans are often easier to qualify for than commercial bank loans, making them a good option for small businesses that may not meet the strict eligibility criteria of commercial banks.

  • Less collateral required

Government business loans often require less collateral than commercial bank loans, making them more accessible to small businesses that may not have significant assets to pledge as collateral.

Cons of Government Business Loans

  • Longer processing times

Government business loans can take longer to process and approve than commercial bank loans, which can be a disadvantage for small businesses that need financing quickly.

  • More paperwork

Government business loans often require more paperwork and documentation than commercial bank loans, which can be time-consuming and burdensome for small businesses.

  • Less flexibility

Government business loans may come with more restrictions and regulations than commercial bank loans, limiting the ways in which small businesses can use the funds.

  • Less personalized service

Government business loans are often more standardized than commercial bank loans, which can mean less personalized service for small businesses.


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    Where to Get Government Business Loans

    Business loans are offered by the Canadian federal government, as well as by the provinces and territories. In the following paragraphs we explain which ministries are involved in funding Ontario businesses, along with the types of funding they provide.

    • Government of Canada Business Loans

    Small businesses are an extremely important part of the Canadian economy, because they create jobs, drive innovation, and contribute to economic growth. The Government of Canada supports this by providing loans to entrepreneurs to help them start and grow a business.

    The Canadian federal government organizations that offer business loans (either directly or through partners) are:

    • Government of Ontario Business Loans

    As with the federal government, the Government of Ontario provides loans to small businesses to support job creation and economic growth in Ontario.

    The Government of Ontario ministries that offer business loans are:

    Best Government Loans for Ontario Businesses

    It’s important to stress that the “best” government loan for your business will depend on:

    • If you own a start-up vs. a business with established revenue
    • What you need financing for
    • Your industry
    • Your demographic

    Having said that, here are some top government loans that you should know about:

    1. Business Development Bank of Canada (BDC) – Small Business Loan

    The Small Business Loan helps Canadian companies get fast financing to use to:

    • supplement cash flow (purchase equipment, software, or hardware without using cash they need for everyday activities)
    • sell online to increase sales (upgrade your website, purchase inventory, run marketing campaigns, hire a consultant)
    • cover expenses (pay suppliers, landlords, employees)
    2. Business Development Bank of Canada (BDC) – Start-up Financing

    The Start-up Financing Loan provides funds to help Canadian businesses who have been in operation for at least 12 months and have generated revenues to turn their business ideas into reality.

    The financing can be used to:

    • purchase assets, pay start-up fees, or buy a franchise
    • invest in marketing, a website, or advisory services
    • replenish working capital depleted by start-up costs
    3. Business Development Bank of Canada (BDC) – Working Capital Financing

    The Working Capital Loan helps Canadian businesses complement other lines of credit, launch growth projects (expand into new markets, develop new products, protect intellectual property, launch a marketing campaign) and improve profitability (pay suppliers upfront to get special discounts, obtain certification, train employees).

    4. Business Development Bank of Canada (BDC) – Technology Financing

    BDC’s Technology financing helps companies invest in the technology they need in order to increase productivity and become more efficient and profitable.

    The capital can be used to buy hardware, software, or ITC advisory services.

    5. Business Development Bank of Canada (BDC) – Commercial Real Estate Financing

    The Commercial Real Estate Loan offers financing that can be used for:

    • increasing capacity (purchasing land and buildings or covering construction costs to build new ones)
    • upgrading facilities (expanding or renovating existing premises)
    • complementing the line of credit (replenishing working capital depleted by real estate costs)
    6. Business Development Bank of Canada (BDC) – Business Purchase or Transfer Financing

    BDC’s Business Purchase or Transfer Financing program provides funding to entrepreneurs thinking of buying a company, making a merger or acquiring a competitor to expand their business.

    Financing can be used to:

    • acquire fixed assets (purchase land, a building, equipment and shares of an existing business)
    • buyout a business (secure financing for a family succession, a management buyout (MBO) or to refinance vendor financing (vendor take-back)
    • acquire intangible assets (access additional financing to obtain intellectual property, goodwill, and client lists).
    7. Community Futures Development Corporations (CFDCs) in Ontario (Community Futures Ontario) – Community Futures Program (CFP)

    The 61 Community Futures Development Corporations (CFDCs) servicing Ontario’s rural and remote communities also provide flexible loans to new and existing small and medium sized businesses in their area. Funding is usually a loan of up to $150,000 or more and loan terms and conditions are specific to each CFDC. Contact the CFDC in your area for further details.

    8. Business Development Bank of Canada (BDC) – Canada Digital Adoption Program (CDAP): Boost Your Business Technology Loan

    The Canada Digital Adoption Program (CDAP), by the Government of Canada, helps small and medium-sized enterprises (SMEs) adopt digital technologies to increase their competitiveness. Eligible businesses will receive a grant to build their digital plan, followed by a 0% loan of up to $100,000 to implement it. Once your digital plan is approved, you can apply with BDC for the loan.

    The Boost Your Business Technology Loan can be used for:

    • acquiring IT equipment
    • installation of new technologies
    • updating and/or expanding IT equipment
    • training staff on onboarded technologies
    • materials and support services directly related to onboarding the technology
    • further advisory services on aspects of the digital adoption plan

    Note: this program has a minimum annual revenue threshold of at least $500,000.

    9. Futurpreneur Canada and Business Development Bank of Canada (BDC) – Futurpreneur Startup Program

    Futurpreneur Startup Program offers financing to aspiring young business owners to secure financing and launch successful businesses across Canada. This program also includes industry-leading mentoring that can go up to 2 years. It offers expertise, resources, and skill-building opportunities to take you and your business to the next level.

    10. Indian Agricultural Program of Ontario (IAPO) – Business Financing

    IAPO provides a number of financing options to First Nations small businesses and entrepreneurs in Central and Eastern Ontario including:

    • business start-up and expansion loans – working capital, bridge financing, and term loans
    • equipment loans and – production machinery and equipment, commercial vehicles, construction equipment, and technology – servers, network, computers
    • commercial and real estate financing – purchase of land and buildings; construction of new premises and expansion or renovation of existing premises
    11. Innovation, Science and Economic Development Canada (ISED) and FACE (Federation of African Canadian Economics) – Black Entrepreneurship Program: Black Entrepreneurship Loan Fund

    The Black Entrepreneurship Loan Fund is a partnership between the Government, Black-led business organizations, and several financial institutions. It will provide loans up to $250,000 to Black business owners and entrepreneurs across the country.

    Loans can be used for:

    • Capital investments–equipment, leasehold improvements, property improvement, office equipment
    • Working capital–inventory, payroll, lease payments, accounts management, rent, overhead costs
    • Short-term receivable financing (i.e., financing to service a contact)

    Common Eligibility Requirements for Government Business Loans

    Business loans provided by the Canadian federal government and provincial governments have varying eligibility requirements, depending on the loan program you’re applying for – but there are some common requirements across loan programs. We cover those common requirements in this section:

    Business Type

    To be eligible for Government of Canada business loans, a business should:

    • Be incorporated in Canada
    • Operate within Canada
    • Have a valid Canada Revenue Agency (CRA) business number

    Business Age

    While there are a handful of government loans available for new businesses, most loan programs require that a business be operational for at least 12 months (and usually 24 months).

    Revenue Requirements

    Some loan programs require minimum revenue levels. For example, Canada Digital Adoption Program – Boost Your Business Technology is an excellent program that provides a loan up to $100,000 for investments in IT and other technology – but it requires that a business show minimum annual earnings of $500,000 in at least one of the previous three years.

    The “5 Cs”

    Just like bank loans, government business loans are often evaluated through the lens of the 5 Cs of credit:

    • Character refers largely to the credit score of the applicant, but can also mean their experience, education, and other aspects of their personal history
    • Capacity is the debt-income ratio of the borrower
    • Capital is the money they are contributing to the project
    • Collateral is any asset they can pledge toward the loan
    • Conditions include the most important aspects of the loan (interest rate, term, etc.) as well as market and economic conditions

    Tips for Maximizing Government Business Loans

    Securing a government business loan can be a great way to help your business grow and thrive. However, the application process can be challenging and time-consuming. Here are a few tips to help you avoid mistakes and increase your chances of success:

    • Research all available loan programs: The federal government and Ontario provincial government offer a variety of loan programs for small businesses. Research which programs are available and which ones best fit your business needs.
    • Understand eligibility requirements: Each loan program has specific eligibility requirements. Make sure you understand these requirements before applying.
    • When assessing loan programs, look at the whole package. Some entrepreneurs only look at the interest rate of a loan, when they should also consider factors like the loan term, repayment terms, and personal guarantees.

    “There are qualitative items in a loan agreement you have to think through very carefully.

    Some entrepreneurs will skim over the loan terms and conditions because they think they’re just legal jargon or standard terms requested by all lenders.

    But the truth is that terms and conditions can differ greatly between lenders.”

    Joanne MacKean, Regional Director Advisory, Prairies, BDC
    • Prepare a solid business plan: A well-written business plan is essential to securing a government loan. It should clearly outline your business goals, strategies, and financial projections. Make sure to include a detailed analysis of your market and competition.
    • Ensure your financial records are up-to-date: The government will want to see accurate financial records, including income statements, balance sheets, and cash flow statements. Make sure your records are up-to-date and organized.
    • Prepare a strong loan application: Your loan application should be clear, concise, and well-organized. Make sure to include all required documentation and follow the application instructions carefully.
    • Maintain a high credit score. Business loans, particularly for new businesses, are often offered by lenders based on personal credit history. Increase your chances of getting approved by maintaining a personal high score or improving your business credit.
    • Be prepared to provide collateral: Some government loans require collateral. If possible, line up assets that you can use as collateral.
    • Be patient: The loan application process can take time. Be patient and follow up with the lender regularly to ensure your application is moving forward.
    What to Do Next :
    1. Get the 10 best bank loans for your business (low interest, bad credit & more)
    2. Learn 26 other types of funding (besides government loans) to start or grow a business

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