Get a free, no obligation personal loan quote with rates as low as 6.99%
Get Started You can apply with no effect to your credit score
📅 Last Updated: April 3, 2023
✏️ Written By Priyanka Correia, BComm
🕵️ Fact-Checked by Caitlin Wood
Business Loans Bakery

The baking market in Canada is a $8.6 billion dollar industry. It includes bread, cakes, biscuits, pastries and even frozen baked goods and desserts. With the increasing demand for special dietary products in the baking market, many entrepreneurs are looking to open their own bakeries. However, whether you’re trying to start a bakery, expand your services, hire new employees, or cover some unexpected cost, you’ll need access to some working capital.  

Importance of Financing Your Bakery

Whatever type of bakery you’re running, one thing is sure. With great quality comes great financial responsibility. That’s why it’s important, for the sake of your business, that you get the best business financing whenever you need it. That’s right, like any type of homegrown business out there, owning a bakery surely comes with a lot of expenses that require just as much attention as a cake in the oven. 

How Good Business Financing Can Benefit Your Bakery

While managing your own bakery can certainly be expensive, a little bit of financing is helpful in more ways than one. You could use your business loan to cover the costs of:     

Baking Ingredients 

A business loan can help finance the ingredients you need to create delectable bread, cakes, muffins, tarts, cookies, pies and other delicious treats. This includes dry ingredients like flour, white/brown/icing sugar, yeast, baking powder/soda, sprinkles, chocolate chips, syrups, and cocoa powder. It can also be used to finance raw ingredients such as fresh or candied fruit, nuts, eggs, cream cheese, butter, shortening, cooking spray/oils and more. If you plan on offering vegan or gluten-free baked goods, you’ll also need to purchase separate ingredients for that. 

Keeping tabs on your inventory can be difficult. Check out the best ways to manage your small business inventory

Purchase Equipment

Baking is an art, it requires great precision and top-quality baking equipment. Unfortunately, paying for industrial stoves, ovens, blowtorches, hand or planetary mixers, freezers, refrigerators, cooling racks, food processors, and other crucial equipment, upfront is very expensive. Fortunately, a business loan can help cover and spread the costs. 

Baking Tools and Supplies

Spatulas, measuring cups/spoons, rolling pins, knives, dough cutters, cake and pie pans, cookie scoops/cutters/trays, cutting boards, decoration tools and more are small expenses that quickly add up. As a bakery, these are necessary baking tools that you must have on hand in order to properly operate.  In addition, you need to consider the items you’ll need for takeaway and delivery such as cake/pie boxes, doggie bags, wax paper, string/ribbon and more. 

Repairs and Renovations

With time, equipment will wear down and break, causing unexpected needs for funds to repair or replace equipment. Depending on demand, you may also need to expand your kitchen or renovate your sitting area to better accommodate your customers.

Learn how to expand your business with new capital.

Employee Expenses

In order to properly run your bakers, you’ll need a team to support you. Waiters, cashiers, cooks, cleaners, are just some of the types of employees you’ll need to hire to run the front end of your business. In addition, you’ll need to provide them with aprons, smocks, hairnets, chef hats, name tags, oven mitts, and more for safety and branding. 

Check out how to set up payroll for your small business.

Best Business Loan Providers For Bakeries

AmountAPRTerm (months)
SharpShooter Funding1k-300kFee-Based: Starting at 9%12- 60 Learn more
OnDeck5k-300k8% – 29% 6-18Learn more
Lending Loop1k-500k+5.9%3-60Learn more
Thinking CapitalUp to 300k8%-22%6-12 Learn more
Merchant Growth5k-500k-6-18Learn more
BDC100K +6.05% +60Learn more
IOU Financial5K-100k15%+12-18Learn more

What Are The Eligibility Requirements For a Business Loan

Whether you apply with a bank, credit union or alternative lender, the requirements for approval will vary. Each lender has its own underwriting guidelines that they use and abide by. However, there are a few factors that are commonly used to evaluate a business’s ability to repay debt. 

  • Credit Score – Lenders will evaluate both your personal and business credit score to determine if you are creditworthy. The higher it is, the higher your chance of approval and getting a lower rate.  
  • Revenue – The consistency and level of revenue generated by your business is a key component in a lender’s decision-making process. 
  • Cash-Flow – Your business’s cash flow is a direct indicator of your ability to repay debt. When businesses have negative cash flow it means they are spending more than they are earning. This suggests you will be unable to repay the loan as your business is already struggling to keep up with its current expenses. 
  • Assets –  If you’re providing collateral, lenders will verify your asset’s value. 
  • Debt – If you currently hold a lot of debt in comparison to your income, lenders will be less likely to lend to you. In general, lenders like to see a debt-to-income ratio of 36% or lower. 
  • Time in Business – Banks often lend to businesses that are well established as they have a lower risk of failing than young businesses. On the other hand, alternative lenders typically require businesses to be at least 3 months old. 
  • Business plan – A business plan is a detailed report on your business goals, objectives, and finances. Lenders use this to understand your business’s viability and potential to repay debt. 

Find out if your business is a desirable candidate for financing

Other Financing Options to Finance Your Bakery

Equipment Loan

As previously mentioned, bakeries require an array of equipment to properly run their business. Unfortunately, paying for the equipment outright is very expensive. That’s where an equipment loan comes in. An equipment loan works like a traditional business loan but, the equipment you purchase acts as collateral to secure the loan. This security makes equipment loans easier to qualify for and get a better rate. 

Invoice Factoring 

As a bakery, you’re likely to offer catering services for big events like weddings, baby showers, birthday parties, Christmas parties, and other events and holidays. While some clients pay their invoices quickly, others may lag behind. This, in turn, can cause a shortage of cash flow. That’s where invoice financing can help. Invoice financing works by selling your outstanding invoices to a lender at a discount. This ensures you get the money you need quickly to run your business. 

Merchant Cash Advance

A merchant cash advance is an expensive but quick way of obtaining a lump sum of cash. This form of credit works well for bakeries and businesses that accept cards (credit, debit) as a form of payment. The reason is, a merchant cash advance is not a typical loan, it provides a lump sum of cash in exchange for a portion of your future card sales. 

Business Line of Credit

Running a bakery involves managing a lot of inventory. You need to keep tabs on your takeout items like the cake/pie boxes, doggy bags, wax paper, as well as the ingredients for baking all your goods. However, sometimes, miscalculations or sudden increases in demand can lead to shortages and urgent needs for more inventory. In such cases, a business line of credit can help fund small emergency expenses like these. You’re able to withdraw money up to a certain credit limit whenever you need and you only need to pay interest on the amount you use. It is a versatile and highly accessible form of credit that every business owner should have. 

Government Financing

There are a number of financial services for small businesses available through the Government of Canada. One of the most well-known and most accessible loans available is the Canadian Small Business Financing Program (CSBFP). The CSBFP is partially backed by the government and you can apply for it with any major financial institution such as banks and credit unions. You can qualify for a maximum of $1 million dollars in funding for your business expenses. However, loans for equipment purchases and leasehold improvements only go up to $350,000.

Bakery Loan FAQs

How to qualify for a small business loan in Canada?

Qualifying for a business loan will depend on your business and the lender you choose to work with, but generally speaking this is the information you will need to provide:
  • Business financial statements
  • Business bank account statements
  • Proof of personal income (you may be asked to provide your personal bank statements and personal tax returns)
  • A business plan
  • Personal and business credit scores

Do lenders check personal credit scores for business loan applications?

Yes, typically a lender will ask to pull both your personal and business credit. While not all lenders take your personal credit into consideration, most will still ask to check it. This is because they want to see how you’ve handled debt in the past.

How big of a loan can I get for my bakery business?

This is completely reliant on your revenue, how long you’ve been in business, the collateral you have to offer, and even how much other debt you have. A good rule of thumb is that lenders will typically only lend a maximum of 10-30% of your business’s annual revenue.

How long does it take to get approved for a business loan?

Getting approved for a business loan is more complicated than getting approved for a personal loan. With that said, it also depends on the lender you’re working with. A bank can take up to three months to approve while an alternative lender can often approve you within a week. 

Baking Your Way to a Successful Business

True, running your own bakery can be extremely expensive and time-consuming. However, with an appropriate business loan, you’ll be able to put your mind at ease and concentrate on what’s really important, the success of your shop. Loans Canada can help you find a lender that offers the options and terms you want, including:

  • Simple online application that can be completed on any computer, laptop, or smartphone
  • A quick and  dependable approval process 
  • Fast financing! Funds can be received as quickly as 48-hours after approval
  • Competitive rates 
  • Installment plans that work for you and your business
Caitlin Wood Priyanka Correia Lisa Rennie Bryan Daly Cris Ravazzano Margaret Johnson Kale Havervold Liz Enriquez Sean Cooper Veronica Ott Corrina Murdoch Chrissy Kapralos

A Team of Experts

Get expert tips and guidance from a community of renown personal finance experts right here at Loans Canada. We're here to help you stay informed so you can make the best financial decisions.

Trusted by more than

1,500,000 Canadians

More From Our Experts
Chase Payment Solutions Review

By Lisa Rennie
Published on March 20, 2024

Looking for a reliable payment solution for your business? Chase Payment Solutions offer quick payment deposits and several customizable point-of-sale...
Best Business Credit Cards Canada 2024

By Trevor O'Hagan

Elevate your business with the top Canadian Business Credit Cards. Discover benefits, drawbacks, and expert tips for financial success.
Everything You Need To Know About Leasehold Improvements

By Bryan Daly

Are you thinking about leasing a space for your business? So you know what leasehold improvements are? We have all the information you need.
Kapital Solutions Review

By Lisa Rennie

Check out Kapital Solutions for secure and robust payment processing and verification solutions for businesses in all sorts of industries.
Wix Review | Is It The Right Website Builder For You?

By Bryan Daly

Wix is a professional website building platform. Today, they have over 200 million users globally and offices in 12 countries, including Canada.
Ownr Review: An Easy Way To Register Your Business In Canada

By Lisa Rennie

Ownr makes it easy to launch a new business by cutting out all the hassle involved in registering as a sole proprietorship or corporation.
Are Business Loans A Tax-Deductible Liability?

By Corrina Murdoch

Whether you have an existing business loan or are considering one, understanding the tax ramifications goes a long way.
Business Loans: Interest Rates vs. Factor Rates

By Corrina Murdoch

Have you ever taken out a merchant cash advance and wondered what is a factor rate? And more importantly, how much a factor rate translates as an inte...

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Expert Tips
And Advice

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card