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Many Canadian small businesses are sole proprietorships. A common myth is that this limits financing a lot. In reality, sole proprietors can get most of the same products as incorporated businesses. The process just looks a little different.
What Changes as a Sole Proprietor
A sole proprietorship is not legally separate from you. So lenders rely more on your personal credit score and personal finances than they would for a corporation. There is no separate corporate credit file, and you are personally liable for the business's debts by default.
What Stays the Same
The core financing products remain fully available:
- Term loans for expansion or major purchases
- Working capital for day-to-day cash flow
- Equipment financing, secured by the equipment itself
- Revenue-based financing for businesses with steady sales
Documents to Have Ready
Sole proprietors should have these ready before applying:
- 3 to 6 months of business bank statements (a dedicated business account, even if not legally required, makes this much cleaner)
- Your CRA Business Number if registered, or your master business licence/registration
- Personal identification
- A general sense of your monthly revenue and expenses
Should You Incorporate Before Applying?
You do not need to incorporate to get financing. Incorporating does have benefits worth considering separately: liability protection and, over time, a business credit file apart from your personal one. It is a legal and tax decision for an accountant or lawyer. Do not make it only to unlock financing you can already get.
