How long does it take to pay off a small business loan in Canada?

The time it takes to pay off a small business loan depends on specific variables. I know, not the answer you were looking for. But do read on, this will tell you where to look and what to expect. The answer depends on the following variables:

  • Type of borrowing option (merchant cash advance vs. loan)
    • MCA and loan are NOT the same, as discussed later.
  • The amount borrowed (principal amount)
  • Payment frequency (daily, monthly, annually)
  • Interest charged (cost of borrowing)
  • Level/frequency of delinquency (missed payments)

These numbers will be given to you at the time of you signing for the loan. Depending on whether you are borrowing from private vs. traditional lenders this information will be under different sections in the provided documents.

A fixed term loan is easy

Refer to the repayment section in your terms and conditions. Namely, the repayment conditions and penalty fees. It states an exact amount you must pay monthly, and for how long. The cost of borrowing is baked into the total money you must pay back. The only thing that can change the amount is the frequency of delinquency. Meaning if you miss a payment, that monthly amount gets added to your next payment and the new total will be withdrawn the next payment date (daily, monthly, or annually).


If you are looking for tips on how to pay off your loan fast, we recommend checking out our related article titled What are the Best Ways to Repay the Business Loan Fast.

Merchant Cash Advance is a bit complicated

We highly recommend you read our post titled What is a Merchant Cash Advance to understand more in depth. For a quick overview, a merchant cash advance (MCA) is a type of funding you can apply for based on your daily sales revenue. As repayment, you give a percent of your daily sales to the lender. Since the amount you pay back is variable, it time it takes to pay off your loan is also variable.

Your daily sales may fluctuate based on the type of business, days of operation, and seasonality. To make better sense of this, let’s look at two different scenarios that you may encounter in your sales revenue.

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Scenario #1 – Consistent sales/revenue

You are a business that generates consistent revenue on a daily basis. However, you only generate this consistent revenue when your shop is open. When you close shop, you lose a set amount of revenue each time.

Let’s say that you are closed on the weekends, and as a result have generated $0 revenue for the weekend. Meaning, you are not paying back anything for those two days. Note, these are no considered as missed payments and thus no penalties are issues. Instead, you are just extending the time it will take to pay off the loan in total.

If your revenue is consistent enough, you can quite accurately predict how long it would take you pay off your loan.

Let’s do the math!


Let’s say you generate $1000 in sales every day, and you agreed to pay the lender 25% of your sales every day. Let’s also assume that you are closed 2 days a week. This means that you make $5000 in revenue every week. This means that you are paying off $1,250 a week!

Assuming you borrowed $100,000 and have to pay back $125,000. It would take you 100 weeks (or 25 months) to pay back your MCA.

Scenario #2 – Variable sales/revenue

Building on the previous scenario, let’s say that your sales are not consistent at all. There are days where you make $1000, on good days you can make up to $5000, and on bad days you make $100.

This is where the MCA shines for business owners. Since you are paying a percentage of your daily sales as repayment, you only pay a variable amount. So on a regular day, you would pay back $250, on a good day you pay back $1,250, and on a bad day you only pay back $25.

On your good days, you are effectively reducing the amount of time it takes to pay back the loan! Assuming that you are borrowing money to grow your business, you can expect to have more good days than bad. This means you can rapidly reduce how long it takes to pay off your small business loan.


The time it takes to pay back your business loan depends on various factors. Most importantly, the type of loan you are applying for. If you take a fixed loan, read under terms and conditions of your contract for the loan term. This is usually indicated in days. For an MCA the time it takes to pay off the loan depends on your daily sales. If there is an increase in your daily sales, the repayment term decreases.