Business borrowing in the U.S. and Canada

The principle

U.S. and Canadian businesses can encounter term loans, revolving lines, equipment finance, and receivables products. Public support programs differ: U.S. SBA programs are separate from Canada’s Small Business Financing Program and BDC financing. A provider’s cross-border brand does not establish that the same product is available to every entity.

Put it into practice

Identify which entity earns the revenue, owns the assets, signs customer contracts, and needs the funds. Prepare financial statements in a clearly stated currency. If borrowing and operating cash flow use different currencies, model how exchange movements affect payments and coverage rather than converting only on the application date.

What people often miss

Guarantees, security registration, disclosures, tax treatment, and legal documentation require jurisdiction-specific review. A Canadian parent with a U.S. subsidiary may need a more complex structure than a domestic borrower. Verify current program rules directly and obtain appropriate professional advice for cross-border obligations. Do not submit a foreign entity under a domestic program merely because the owner lives there.

Map the borrower before comparing programs

Start with a simple group chart naming each legal entity, its jurisdiction, operating location, revenue currency, assets and existing obligations. A Canadian parent may own a U.S. subsidiary, but they are not automatically interchangeable borrowers. If a machine belongs to the U.S. subsidiary while the proposed loan sits in the parent, ask how proceeds, security and repayment are meant to move between them. Cross-border tax and legal advice may be needed before commitments are made.

The SBA 7(a) program supports eligible U.S. businesses through participating lenders; Canada's Small Business Financing Program shares risk with financial institutions for qualifying Canadian financing. Those are separate frameworks, not a common North American guarantee. A guarantee supporting the lender does not remove the borrower's repayment obligation or mean every application qualifies. Verify current eligibility, permitted uses and documentation with the specific program and provider.

Source: SBA: 7(a) loans

Test currency exposure in the payment forecast

Suppose a Canadian business must make a US$5,000 payment and earns its operating cash in Canadian dollars. At an illustrative exchange rate of C$1.35 per US$1, the payment costs C$6,750 before conversion charges. At C$1.50, it costs C$7,500, an extra C$750 or about 11.1%. These are hypothetical rates, not current market quotations. The contractual U.S.-dollar payment has not changed, but the business needs more of its operating currency.

Model exchange exposure on both receipts and payments, including the timing of customer collections and supplier obligations. A business receiving U.S. dollars may have a partial natural offset, while one with only Canadian-dollar receipts may not. Ask whether hedging or a different borrowing currency fits, and understand the costs and obligations before choosing either. Keep statements in their original currency and label any translated comparison and exchange date. Converting a figure on application day does not eliminate the exposure during the loan.

• Which entity receives funds and has the repayment source?
• Where are the pledged assets and relevant registrations?
• Does the program permit this borrower and proposed use?
• What does a weaker operating currency do to cash coverage?

Source: ISED: Canada Small Business Financing Program

Your next-step checklist

• Exact borrower and operating locations
• Asset ownership and revenue entity
• Borrowing and repayment currencies
• Current domestic program and cross-border requirements