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"What's the interest rate?" is usually the first question business owners ask — and it's also the most misleading number to compare in isolation, because rates differ dramatically by lender type and don't tell the whole cost story on their own.
Why Rates Vary So Much by Lender Type
Canadian bank term loans and BDC financing generally carry the lowest rates because they're lending to businesses that have already cleared a high bar — strong credit, years of history, solid collateral — which reduces the bank's risk. Alternative lenders serve businesses that don't clear that bar yet, and price their rates to reflect the higher risk they're taking on, in exchange for speed and accessibility banks don't offer.
Neither is objectively "better" — they're pricing different risk and serving different needs.
What Actually Drives Your Specific Rate
Within any lender category, your individual rate is shaped by:
- Personal and/or business credit score
- Time in business and revenue consistency
- Industry risk profile
- Loan amount and term length
- Whether the loan is secured by collateral or a personal guarantee
- Existing debt load relative to revenue
Comparing Total Cost, Not Just the Rate
The headline interest rate or factor rate doesn't always capture the full picture. Origination fees, the term length, and whether interest compounds all affect what you actually pay. A loan with a lower rate but a longer term can cost more in total interest than a shorter loan at a slightly higher rate.
How to Get the Best Rate You Actually Qualify For
Rather than applying to lenders one at a time and hoping for a good number, comparing your file against many lenders simultaneously — as lendflo does across 50+ Canadian lenders — surfaces the best rate you genuinely qualify for today, instead of the first offer that happens to say yes.
