Apply Now

What is a Demand Loan?

Loans Canada: The Country's Best Loan Comparison Platform

What is a Demand Loan?

Written by Bryan Daly
Fact-checked by Caitlin Wood

What is a Demand Loan?

Categories

Business Financing Demand Loan

Essentially, a demand loan, otherwise known as a “call loan” or Working Capital Demand Loan (WCDL) is somewhat similar to a traditional term loan, meaning you can borrow a lump sum of money from various lending institutions across Canada and repay it gradually through installments. 

How Does a Demand Loan Work?

A demand loan gives your lender the right to request full or partial payment from you at any given time. This condition will be specified within your loan contract, which may be a bit more complex than that of a regular loan. 

Also different from a traditional installment-based loan, demand loans are often used for investment purposes, rather than personal expenses. Since these sorts of investments carry more risk for the lenders involved, they want to be assured that they can ‘demand’ payment whenever they feel it’s necessary. 

Should you incorporate your business provincially or federally?

What Can You Use a Demand Loan For?

In order to be approved for a favourable and cost-effective demand loan, you’ll first need to build a solid relationship with your chosen lender. Why do you ask? Because, as mentioned, the funds you acquire are usually meant for more significant things than your everyday expenses, including but not limited to:

  • Partnership loans
  • Investment programs/loans
  • Short-term business financing
  • Bridge financing
  • Temporary working capital 
  • Financing small assets (vehicles, business equipment, etc.)
  • Renting or leasing new properties (offices, farms, etc.)
  • Repaying various short-term liabilities  

All this said, you can use your demand loan to finance plenty of other expenses and ventures. Just make sure you clearly understand how this product can alter your current financial health, assets, and lifestyle as a whole. 

Learn how to protect yourself from a business loan scam.

When Should You Use a Demand Loan?

Now that you know what demand loans are commonly used for, let’s talk about when the best time to apply is. Remember, demand loans may pose a lot of risk for both you and your lender. After all, your lender can choose to recall your loan at any time and both parties can experience financial turmoil if you end up defaulting on your payments. 

Therefore, it’s best to apply when you have strong finances and healthy credit history, not to mention a longstanding rapport with your bank, credit union, or other lending facility. Additionally, consider the fact that demand loans are typically used to finance short-term goals. 

As such, you should only take out a demand loan if you’re planning to use the funds for something that your lender considers a worthwhile venture and when you’re financially prepared to cover your full balance whenever they request payment. 

Whether you’re trying to finance a small business or invest in something else that’s important to you, the key is to do it when you’re financially stable, looking for a flexible payment alternative, and are well aware of all the potential dangers involved.

Need help deciding when and how to open a business bank account?

Who Can Use a Demand Loan?

As you can imagine, demand loans are not for everyone. In fact, they can be quite difficult to get approved for if you’re a relatively new credit user. Generally speaking, banks and other prime lenders will only consider clients that have been borrowing responsibly from them for several years and are truly qualified to handle their debt.

Examples: 

  • Homeowners
  • Landowners
  • Small business owners
  • Entrepreneurs 
  • Shareholders 
  • Venture capitalists

Make sure you avoid these business loan application mistakes.

What Are The Benefits of a Demand Loan?

Being that your lender is able to ask for payment whenever they deem it necessary, the idea of a demand loan can seem quite nerve-racking at first. However, there are plenty of different benefits that can accompany this credit product, including but not limited to:

  • You won’t have to follow a set repayment plan
  • You’re allowed to repay your loan at any time without penalty, which is typically not  the case with a traditional term loan
  • If you’re qualified, you can borrow as much as you want, whenever you want, until the lender demands payment 
  • Similar to a line of credit, interest is only applied to the money you actually use, rather than on the full loan amount
  • Repayment terms may only last one week to several months, which can be more appealing than being in debt for years at a time 
  • Most lenders will allow you to secure your loan using different kinds of collateral, such as stocks, land, buildings, or other assets
  • Offering collateral can help you get approved for more credit, lower interest rates, and better overall conditions

Is a Demand Loan Right For You?

Depending on your needs as a business owner and the financing needs of your company, a demand loan could be the right option. If you’re interested in learning about your other business financing options, Loans Canada can help.



Rating of 5/5 based on 2 votes.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Industry Spotlight

What's happening with Canada's credit industry?

Leap Financial ⎯ Helping Consumers Take The Leap Into Financial Freedom

Leap Financial ⎯ Helping Consumers Take The Leap Into Financial Freedom

Leap Financial helps consumers in British Columbia take the leap into financial freedom through personalized mortgage solutions.

Read Post
Locator
Find The Best Rate
In Your Region
OR
Best Personal Loan Provider by Greedy Rates
Icon

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan.

Your data is protected your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.