Top 9 Popular Sources of Micro Loans in Canada to Start a Small Business

Rahul Maingi

By Rahul Maingi, Aug 29, 2019

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Micro loans are generally less than $10,000 to help small businesses grow and establish themselves. Whether it is a food truck, a small consignment store or a fashion boutique, the prospects are endless even for Canadians with no or limited financial resource, thanks to various sources of micro loans.

According to one study, 58% of small business owners start with $5000 or less, and the percentage goes up to 77% in the case of one-person shops. Acquiring that initial $5000 can be extremely difficult for people with a poor credit score and no collateral. This is where micro loans can be a great resource. And despite popular belief, they are not limited to the developing world.

Micro loan for Business

Benefits of Micro Loans

Before discussing the different sources of micro loans you can find in Canada, it is important to understand why this is an advantageous way to finance a new business:

  • Easy to access as the borrower does not have to show collateral and assets
  • Easy to repay as the interest rates are generally lower than banks
  • Creates more employment opportunities as more people can establish small businesses from scratch

Top 9 Sources of Micro Loans in Canada

Sources of micro loans in Canada and the rules and criteria to qualify vary according to region. Here is a list of the various micro loan programs available in different provinces:

1. Remarkable micro loan program

This is a revolutionary micro loan program launched by credit unions across British Columbia to help young people from 18-29 start their own business. It is a low-interest micro loan up to $5000 provided to start any small Canadian business.

2. Community Micro Lending

This is a non-profit society that is billed as the first to offer peer-to-peer loans to borrowers with a small business. They have two branches in British Columbia, one each in Victoria and the Okanagan. You can apply for a startup loan between $500-$5000. There is also a business expansion loan up to $10,000 provided to business owners who cannot get the credit they need from a bank or credit union.

Prospective borrowers create a profile on their website explaining their business plan and lenders provide loans based on their details and other information like their credit history and income. Presently, the minimum amount you can lend through the website is $250.

3. Kick$tart

If you are from Newfoundland and Labrador and under 35, this is the best source of micro finance for your business. Aspiring entrepreneurs can get a loan up to $5000, and those younger than 18 can apply for a loan with their guardian’s signature. The loan can be used for business development, expansion, research and other purposes.

There are similar programs in other parts of Canada for those under 18. For example, in New Brunswick, students starting their businesses during summer break can get a loan up to $3000 from the Student Entrepreneurship Program. The primary eligibility criteria include at least one full-time employee and that the venture should provide valuable business experience.

4. Immigrant access fund micro loans

This loan is specifically designed to help immigrants establish businesses and settle in Canada. It extends loans to traders, skilled professionals and workers who have recently moved to Canada. The loan is primarily to help them get the licensing and training they need to work in their professional field in this country.

This program can help applicants get a loan up to $10,000. While it does not aid directly in establishing a business, it can help immigrants get the right certifications for getting a job or establishing a company. (Immigrants residing in British Columbia and Quebec are excluded.) You can find other provincial equivalents of this program, like the Canada Microedit Educators Group in Prince Edward Island.

5. Enterprise Saint John

This is a seed program by the Atlantic Canada Opportunities Agencies (ACOA) that can be accessed by residents of Saint John, New Brunswick. Its monies are used to start, expand and improve any small business.

6. Seed capital initiative

This is not exactly a micro loan program but has similar perks. Another loan program operated by the ACOA, this government-funded program provides a loan of up to $20,000 to aspiring entrepreneurs in the Atlantic provinces to grow and establish their business. Each client of the Seed Program also has access to up to $2000 for training and consulting purposes. These monies do not have to be repaid.

7. Access Community Capital Fund

This registered charity provides micro loans to people without collateral or credit history who want to start a business in the Greater Toronto Area. For first time borrowers a maximum of $5000 is provided; second time borrowers can get up to $10,000.

8. Montreal community loan association

Low-income individuals from the Montreal region trying to establish a business can access up to $5000 to develop their own business through this program. This is a particularly great opportunity for those who are not eligible for bank loans.

9. Micro-Business Development Group

This is another opportunity for Saint John residents. The Micro-Business Development Group (MBDG) pilot project is for entrepreneurs trying to expand or establish their small business. Micro loans up to $10,000, as well as training, business networking and counselling, is also provided to borrowers.

These are some of the best sources of micro finance for Canadians trying to set up their dream business. Acquiring a loan is the first step towards success; deriving maximum use out of the money and ensuring it is not wasted is the next big hurdle. If needed, you should collaborate with professional bookkeepers and accountants to make sure you have an accurate record of how this loan is being spent. Only then can you grow your business and take crucial and necessary financial decisions with confidence.

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