Bank Loans and Other Loan Capital: Doing Business in Canada 2026
This chapter is part of our Doing Business in Canada guide, designed to help global investors navigate the legal, regulatory and strategic considerations that affect investment decisions, execution, and long-term success in Canada.
Sources of Loan Capital
Bank loans in Canada are readily available from sophisticated domestic banks, as well as from Canadian subsidiaries of foreign banks and Canadian branches of foreign banks. The Canadian banking system is well regulated, and Canadian banks are well capitalized. Canada also has competitive non-bank lenders that are particularly active in the asset-based loan, mezzanine debt, and project finance markets. In addition, federal government-supported financing is available through the Business Development Bank of Canada, which offers financing to small and medium-sized businesses, Export Development Canada, which provides financing and credit support for Canadian businesses, including in cross-border trade and investment, and the Canada Small Business Financing Program, a federal risk-sharing program that helps small businesses obtain loans from financial institutions.
Loan Terms and Pricing
Floating-rate loans are often indexed to a “prime rate” set by a Canadian bank on a periodic basis and based on the rate announced weekly by Canada’s central bank, the Bank of Canada. Fixed-rate loans are typically priced off long-term Government of Canada bond rates. Other forms of borrowing and interest-rate pricing (such as SOFR, SONIA, ESTR, and CORRA loans) are also offered, depending on availability and currency. Borrowers generally incur fees associated with such transactions, which typically include legal costs, commitment and processing fees, and other charges.
Security and Guarantees
Short- and long-term loans in Canada can be unsecured or secured against the borrower’s personal property and/or real property. In most Canadian jurisdictions, the process for granting guarantees and security is relatively streamlined and largely governed by contract, with limited statutory formalities. Secured lending law remains primarily provincial, and Québec applies a distinct civil law regime and different security concepts. There are generally no statutory limits on the amount of a guarantee, and the scope of a guarantor’s liability is principally determined by the terms agreed between the parties, subject to applicable insolvency and corporate requirements. Lenders may insist that unsecured loans be supported by a parent company guarantee or by a “negative pledge,” under which the borrower agrees (with some exceptions) not to grant security over its assets.
Registration and Enforcement of Security
All Canadian provinces provide electronic registration systems for recording security interests in personal property, and each Canadian province maintains a land registry or land titles system to record interests in real property. See Real Property. While registration of security interests in personal property is generally not required for validity as between the parties, it is critical for priority and enforceability against third parties. In practice, personal property security registry systems in Canada are efficient and notice‑based, allowing secured parties to perfect security interests without filing underlying transaction documents. Generally, the Canadian systems for registering security interests in personal and real property are conceptually similar to those in the United States, though governed at the provincial level, and subject to certain jurisdictional-specific requirements.
Canada has no currency restrictions. Loans are available in multiple currencies but are most commonly denominated in Canadian and U.S. dollars. Due to the competitive nature of Canada’s loan markets, interest rates for comparable credits are often lower than in other jurisdictions, particularly the U.S. — pricing will depend on market conditions, structure, tenor, currency, and the quality of the borrower’s credit. Where Canadian tax rates are higher than those of a foreign jurisdiction, the benefits of deducting interest expenses for loans in Canada are correspondingly higher. There are also other tax advantages when borrowing in Canada. For example, thin-capitalization rules do not apply to arm’s-length, third-party debt to limit the deductibility of interest. In addition, Canadian withholding tax will generally not apply to interest (other than certain types of interest) paid on arm’s-length, third-party debt. Finally, the Provinces provinces of Alberta, British Columbia, Nova Scotia and Prince Edward Island have unlimited liability companies. These are hybrid entities that create tax-planning opportunities for U.S. cross-border transactions. See Taxation.
A number of federal and provincial programs and agencies provide grants and/or loans to Canadian businesses. The availability of government assistance will depend on a number of factors, including the location of the proposed investment; the number of jobs to be created; the export potential of the product or service; whether the investment would proceed without government assistance; and the amount of equity that the owners of the business are investing. Foreign ownership of a corporation does not generally preclude the availability of government assistance programs.
A number of federal and provincial programs and agencies provide grants and/or loans to Canadian businesses.
All provinces and territories in Canada have Securities Transfer Act (STA) legislation. These acts govern, among other matters, the transfer of securities and other investment property and work with personal property security legislation to regulate the perfection of security interests in securities and other investment property, including securities in uncertificated form. The STA legislation was modelled after Revised Article 8 of the Uniform Commercial Code of the United States. This approach was taken to provide a more consistent regime governing the transfer of securities and other investment property across the Canada–U.S. border, as well as uniformity across Canada.
For a complete view of investment, regulatory and sector considerations, explore the full Doing Business in Canada guide.
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