What Is A Demand Loan?

What Is A Demand Loan?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated June 11, 2021

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. 

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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. 

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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.

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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

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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 4/5 based on 3 votes.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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