Bank of Canada Holds Rate at 2.25%: Why Your Business Loan Still Costs So Much

If you've been waiting for cheaper financing before expanding your business or refinancing existing debt, the Bank of Canada isn't giving you a reason to celebrate. On September 2, the central bank held its policy rate at 2.25% for the seventh consecutive decision — a signal that the era of aggressive rate cuts is, for now, over.

What the Hold Actually Means

A held rate isn't a hike, but it's not relief either. Canadian chartered banks' prime lending rate — the number that directly determines variable-rate loan pricing for most small businesses — sits at 4.45%. That rate flows straight through to your line of credit, your equipment financing, and any floating-rate term loan you're carrying. Forecasters at TD, BMO, RBC, National Bank, CIBC, and Scotiabank largely agree the rate will stay put through the remainder of 2026, with potential increases only entering the conversation in 2027.

The reason for caution: trade uncertainty tied to US tariffs and elevated oil prices are keeping inflation risks on the table, even though core inflation is sitting close to the Bank's 2% target. That combination — sticky external pressures against a stable domestic inflation picture — is exactly the kind of environment that produces a long stretch of rate holds rather than decisive moves in either direction.

What Small Businesses Are Actually Paying

According to Statistics Canada, the average small business loan rate currently sits at 4.40%. But that average masks a wide range. Established businesses with strong financials and collateral can access rates around prime + 1 to 3%, or roughly 5.45% to 7.45%. Growing businesses with moderate risk profiles typically face prime + 3 to 6%, pushing rates into the 7.45% to 10.45% range. Startups or businesses without collateral can see unsecured borrowing costs exceed 10% entirely.

For businesses that qualify, the Canada Small Business Financing Program (CSBFP) remains the most predictable option. Rates are capped at prime + 3% for floating-rate loans — currently a maximum of 7.45% — though borrowers should factor in a 2% registration fee and a 1.25% annual administration fee on top of the interest rate itself. The program had a record year in 2024-25, approving 6,409 loans totaling $1.9 billion, with individual loans capped at $1.15 million for businesses with annual revenues under $10 million.

The Gap Between Policy Rate and Reality

It's worth being clear-eyed about what a 2.25% policy rate actually buys a small business owner: not much, directly. The Bank of Canada's rate influences the prime rate, and prime influences what you're quoted — but the spread between the policy rate and what you actually pay reflects risk premiums, administrative costs, and lender margins that don't move in lockstep with central bank decisions. That spread is precisely why a business owner watching rate-hold headlines might reasonably wonder why their own line of credit still feels expensive.

What This Means for Your Business

If your business relies on variable-rate financing, don't expect meaningful relief before 2027 at the earliest — and even then, forecasts suggest increases rather than cuts. That makes this a good window to revisit your financing strategy rather than wait it out. If you have strong financials and haven't shopped your current line of credit or term loan recently, ask your lender directly where you land relative to prime; a rate near prime + 1-2% is a reasonable target for an established, low-risk borrower, and if you're paying meaningfully more, it may be worth requesting a review or comparing offers.

For businesses considering expansion, equipment purchases, or working capital lines, the CSBFP is worth a serious look if you haven't already applied — the rate cap and program's record approval volume in 2024-25 suggest lenders are actively originating these loans. Just build the registration and annual administration fees into your actual cost-of-capital calculation, since the headline rate cap doesn't tell the whole story. Whatever financing path you choose, run your cash flow projections assuming today's rates hold through 2026 rather than betting on a cut that forecasters aren't currently pricing in.