Sources of Microloans for Starting a Canadian Small Business

A young mother who saw the need for a children’s consignment store. A man who dreamed of having his own food truck business. These are just two examples of people whose skills and business ideas would have been wasted without the startup loans that microfinance programs provide.

When we think of microfinance, we tend to think of the developing world. But the concept of providing loans and financial services to people who would otherwise have limited or no access to them is alive and well in Canada, too. This is good news for prospective entrepreneurs looking for startup money.

How Much Do You Need?

Fifty-eight percent of Canada's small business owners started out with less than $5,000, according to a study of entrepreneurship in Canada by Intuit Canada. For one-person shops, the study found that that number is even higher: 77% reported starting with less than $5,000.

But that $5,000 can be as difficult as trying to borrow $5 million if you’re a person with poor credit and no collateral. Fortunately, the Canadian government, credit unions, and community groups have developed programs that offer microcredit (small business loans of under $20,000) to people who would have difficulty getting a traditional business loan.

Here are microloan sources you may be able to tap into for starting your Canadian small business:

Who Offers Microfinance Programs?

Many microfinance programs in Canada are location based—you have to be living in a particular region to qualify. Check this list to see what microloans are available to start (and sometimes to expand) a business where you live.

1. 3+ Economic Development Corporation: If you live in the Dieppe, Moncton, or Riverview area of New Brunswick, access the Seed Capital Program here.
2. Access Community Capital Fund: A registered charity, Access provides "character-based" microloans to people without collateral or credit history who want to improve their standard of living by starting a business in the Greater Toronto area. Loans are a maximum of $5,000 for first-time borrowers and $10,000 for second-time borrowers. The company also provides loans of up to $15,000 to foreign businesses starting up in Canada.
3. Alterna Savings Community Micro-Finance Program: This Ontario-based bank provides small-business loans ranging from $1,000 to $15,000 for those wanting to start businesses in any Alterna service area.
4. Centre for Entrepreneurship Education and Development (CEED): Available to businesses in several cities in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island, the Seed Capital Program offers loans of $5,000 to $25,000 for people who want to start a business age 18 and up. Young entrepreneurs (age 19 to 39) may also use funds as a business growth loan.
5. Community Micro Lending: Billed as Canada’s first peer-to-peer microlending program, this nonprofit society serves businesses in southern Vancouver Island in British Columbia. They provide startup loans of up to $5,000 and expansion loans of up to $10,000 to entrepreneurs who aren’t able to get the credit they need from a bank or credit union. Anyone can loan money to successful loan applicants through the organization’s website. (Currently, there’s a minimum of $250 for lenders.)
6. Economic Development Greater Saint John: The development organization fro the greater Saint John area provides myriad resources to entrepreneurs in the region, including funds to start, expand, or improve a small business.
7. Kick$tart: If you’re under 35, living in Newfoundland and Labrador, and unable to get the money you need to start or expand your business, you can get a $5,000 low-interest loan. (Note that you do not have to be 18 or older to access this program, as long as your parent or guardian is willing to co-sign the loan if you’re under 18.) Other microfinance programs target particular groups and are available to qualifying people across (most) of the country.
8. Metro Business Opportunities (MBO): To access the SEED program in Newfoundland and Labrador, you must be located in the St. John’s-Mount Pearl area.
9. In St John’s, there is also a Micro-Business Development Group (MBDG) Pilot Project for entrepreneurs who are planning, starting, or expanding a micro-business. The program offers microloans of up to $10,000 along with training, business counseling, and business networks.
10. Microcrédit Montréal (formerly Montreal Community Loan Association or ACEM): This community organization provides loans between $500 and $20,000 to low-income individuals who want to start their own businesses but can’t get credit through the usual channels. You must live on the Island of Montreal to access the program.
11. Microloans for Green Business: Vancity Credit Union in Vancouver, British Columbia, offers a suite of small business loans. This program’s aim is to help startup entrepreneurs develop green businesses or work on launching green technologies.
12. Ottawa Community Loan Fund: Loans of up to $15,000 to start or expand a business in the Ottawa area.
13. Remarkable Micro-Loan Program (Credit Unions of BC): offers BC residents 18 to 29 years old low-interest microloans of up to $5,000 for starting a Canadian small business.
14. Seed Capital Initiative: While not technically a microloan program, this government program operated by the Atlantic Canada Opportunities Agency (ACOA) provides loans of up to $20,000 to aspiring entrepreneurs in the Atlantic provinces (as well as loans to expand or improve small businesses). The Seed program also allows each client to access up to $2,000 for business training and consulting (which does not have to be repaid).
15. Student Entrepreneurship Program: The Government of New Brunswick offers interest-free loans of up to $3,000 to students who want to start a summer business. The business has to create at least one full-time summer job and provide the applicant with “valuable business experience."
16. Western Economic Diversification Canada: This government agency offers a microloan program to provide small business loans to small businesses throughout western Canada.
17. Windmill Micro Loans: IAF loans are for tradespeople, professionals, or skilled workers from other countries to get the licensing or training that they need to work in their field in Canada. Loans of up to $15,000 are available to immigrants living in Canada.

No Microloans Listed for You?

The best news of all is that the microfinance movement is spreading. If you don’t see any loans that you can apply for in the list above, check with the economic and social development agencies in your hometown and ask your credit union or caisse populaire if they have such a program. Just because a bank won’t give you a loan doesn’t mean the money you need to launch your dream is out of reach.