Business Loan Agreement Template (Canada)
Updated on August 9, 2026
A Canadian business loan agreement documents commercial lending to a business borrower. Unlike the US, UK, or Australia, Canada has a federal criminal-law cap on interest — but since January 1, 2025, that cap runs on a tiered scale for genuine business loans, not a single flat number, which is easy to get wrong if a template just imports a US-style 'no usury cap for business lending' assumption.
The widely circulated free version of this agreement has a clause literally titled "Guarantors" that states no guarantor is responsible for anything, an arbitration clause that names no rules body or seat, no security section at all, and hard-codes the currency as US dollars. This template fixes each of those for the Canadian market: a working guarantor election, a provincial PPSA security structure, a named Canadian arbitration framework, and the tiered interest-rate exemption stated correctly.
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Business Loan Agreement
- Borrower:
- ,
- Lender:
- ,
1. Promise to pay
On , Borrower promises to pay Lender the principal sum of (the "Loan"), with interest accruing on the unpaid balance at percent per annum.
2. Interest rate compliance
As Borrower is a corporation or other business entity and this Loan is for commercial or business purposes, the interest rate stated in this Agreement does not exceed the criminal rate of interest permitted for the applicable loan-amount tier under the Criminal Interest Rate Regulations.
3. Payment
The full balance, including accrued interest and fees, is due on . The Loan shall be repaid as follows:
4. Security
This Loan is unsecured. No security interest secures Borrower's obligations under this Agreement.
5. Guarantor
No person or entity other than Borrower is responsible for repayment under this Agreement.
6. Default
An Event of Default occurs if Borrower fails to make a payment when due, breaches a material term of this Agreement, or becomes insolvent or subject to insolvency proceedings. Upon default, Lender may increase the interest rate to percent per annum, subject to the applicable criminal-interest-rate tier.
7. Late payments
If a payment is not received within days of its due date, Borrower shall pay a late fee of percent of the unpaid amount, to the extent permitted by applicable law.
8. Dispute resolution
Any dispute arising under this Agreement shall be resolved by binding arbitration administered by , seated in , under the arbitration statute of that province then in effect.
9. General provisions
Any modification of this Agreement must be in writing signed by both parties. If any provision is held invalid, the remaining provisions remain in full force. This Agreement may be executed in counterparts.
Lender
Date:
Borrower
Date:
Get the tiered criminal-interest-rate exemption right
Section 347 of the Criminal Code sets a general criminal rate of interest, and since amendments and new regulations came into force on January 1, 2025, the cap depends on the loan's size and the borrower's status. For a loan of $10,000 or less, the general 35% APR cap applies regardless of borrower or purpose. For a loan between $10,000 and $500,000 made to a borrower that is not a natural person (a corporation or other entity) for commercial or business purposes, the cap rises to 48% APR. For a loan over $500,000 made to a non-natural-person borrower for commercial or business purposes, no criminal interest rate limit applies at all.
This template makes the loan amount and borrower type explicit fields precisely so the correct tier — not a guessed 'no cap for business loans' assumption — governs the interest-rate clause.
Make the guarantor clause actually work
A clause headed "Guarantors" that states no one but the borrower is responsible isn't a guarantor election — it's confusing drafting. This template makes it a genuine toggle: off, the loan carries no guarantor and the clause says so; on, it names the guarantor and states their liability.
Register security under the correct provincial PPSA
Canada has no single national lien registry. Each common-law province runs its own Personal Property Security Act registry, while Quebec registers security through the RDPRM under its own civil-law hypothec regime. A lender should register in the province where the collateral or the debtor is located, not assume one filing covers the whole country.
Name a real Canadian arbitration framework
"The parties may submit to arbitration chosen by both parties" names no seat, no administering body, and no rules — an arbitration clause this vague won't do its job if a dispute actually happens. Domestic commercial arbitration in Canada runs under the arbitration statute of the relevant province (most based on the Uniform Arbitration Act model), while international commercial arbitration seated in a Canadian province generally follows the UNCITRAL Model Law as adopted through that province's international commercial arbitration legislation. This template names a specific province and administering body — the ADR Institute of Canada is a widely used option — rather than leaving the process undefined.
Clause-by-clause guide
- Promise to pay
- States the principal amount, currency and interest rate.
- Interest rate compliance
- States which criminal-interest-rate tier applies based on loan amount and borrower type.
- Security / PPSA registration
- States whether the loan is secured, and if so, the specific provincial PPSA (or Quebec RDPRM) registration.
- Guarantor
- An optional clause naming a guarantor and their liability, or stating plainly that none exists.
- Default
- Defines default and states the default interest rate, subject to the applicable tier.
- Dispute resolution
- Names a specific arbitration administrator, seat province, and applicable arbitration statute.
Canadian compliance checklist
Confirm the loan amount and borrower type before assuming a criminal-interest-rate exemption applies.
Check which criminal-interest-rate tier applies
Loans of $10,000 or less are capped at 35% APR regardless of borrower; loans of $10,000-$500,000 to a non-natural-person business borrower are capped at 48% APR; loans over $500,000 to a non-natural-person business borrower have no criminal interest rate limit.
Stewart McKelvey — Canada's new criminal rate of interestRegister security in the correct provincial registry
Each common-law province runs its own PPSA registry, and Quebec uses the RDPRM under its civil-law hypothec regime.
Name a specific seat province and arbitration statute
Domestic commercial arbitration runs under the relevant province's arbitration statute; international arbitration seated in Canada generally follows the UNCITRAL Model Law as adopted provincially.
How to complete the agreement
- Confirm the borrower type and loan amount. Establish whether the borrower is a natural person or a business entity, and the loan amount, to fix the applicable interest-rate tier.
- Enter the loan terms. Add the principal amount, currency, interest rate and payment schedule.
- Decide on security. State whether the loan is secured and register in the correct provincial PPSA.
- Decide on a guarantor. Name a guarantor if one exists, or leave the clause off.
- Name the arbitration administrator and seat. Choose a specific administrator and a seat province.
Frequently asked questions
Is there a maximum interest rate I can charge on a Canadian business loan?
It depends on the loan amount and borrower type. Loans of $10,000 or less are capped at 35% APR regardless of borrower. Loans between $10,000 and $500,000 to a business entity are capped at 48% APR. Loans over $500,000 to a business entity have no criminal interest rate limit at all.
Does the cap apply differently to a loan to an individual versus a company?
Yes. The higher exemption tiers (48% APR, or no cap at all) only apply where the borrower is not a natural person — a corporation or other business entity — and the credit is for commercial or business purposes. A loan to an individual is subject to the general 35% APR cap regardless of amount.
How do I register security over business assets?
Register in the Personal Property Security Act registry of the relevant province (Ontario, British Columbia, Alberta, and others each run their own), or Quebec's RDPRM if the collateral or debtor is in Quebec.
Do I need a guarantor for a business loan?
Not necessarily. If a guarantor is required, name them specifically and state their liability, rather than using a clause that promises a guarantor mechanism and then disclaims it.
Which arbitration framework applies to a dispute under this loan?
Domestic arbitration runs under the arbitration statute of the seat province; international arbitration seated in Canada generally follows the UNCITRAL Model Law as adopted by that province. Name a specific administrator and seat province rather than leaving the process undefined.
Related templates
Disclaimer
This template and guide are for general information only. They are not legal or financial advice, and no lawyer has reviewed or approved them. The criminal interest rate tiers, PPSA registration and arbitration enforceability are fact-specific and provincial rules vary; confirm the requirements that apply to your agreement before relying on this document.
