Demand Loan
Prêt à vue in French
Quick definition
A demand loan is repayable in full whenever the lender asks, no missed payment or default required. It is common in business operating credit and in loans between shareholders and their corporations.
Repayable when the lender says so
Most loans come with a promise: keep paying and the money is yours until maturity. A demand loan makes no such promise. The lender can require full repayment at any time, for any reason or none, and you agreed to that when you signed. Courts generally expect a lender to allow a reasonable period to arrange repayment, but reasonable can be measured in days or weeks, not years.
Why lenders like it, and what it means for you
For the lender, a demand feature is the ultimate exit: no need to prove a default or wait for maturity. If the risk no longer looks acceptable, the loan can simply be called. That comfort is why demand credit is often cheaper and easier to get than committed credit.
For the borrower, the honest description is uncomfortable: your five-year plan may be running on credit that legally lasts until tomorrow. Demand features hide inside many operating facilities, including business lines of credit that companies treat as permanent funding. Read your facility letter for the word demand; if it is there, the credit is not committed, whatever the banking relationship feels like.
When demand actually gets called
In practice, lenders rarely call loans that are performing well. Calls tend to follow deteriorating financials, covenant breaches on related facilities, or a shift in the lender's own risk appetite, a bank pulling back from a sector in a downturn. The trigger can be the lender's situation, not yours. And because demand facilities often travel with a personal guarantee, a call on the company can reach the owner's personal assets.
Managing the risk
You can rarely negotiate the demand feature away, but you can blunt it. Keep more than one banking relationship, so a single lender's change of heart is not existential. Maintain headroom, unused credit and comfortable covenant ratios, since calls follow weakness. And convert core, permanent borrowing into committed facilities where possible: a term loan with a set maturity costs a little more and buys certainty a demand facility never provides.
In Canada
Demand loans also live inside owner-managed companies: loans between shareholders and their corporations are usually papered as demand loans, simple and repayable whenever cash allows. They still deserve real paperwork, a signed note, a stated rate, interest actually paid, because the CRA looks hard at shareholder debt. Where a related-party loan must stay onside for tax purposes, the interest charged is typically tied to the CRA's prescribed rate.
Worked example
Karim's distribution business has run a $300,000 operating line for a decade without a missed payment. When his bank decides to shrink its exposure to his sector, he gets notice that the facility, a demand loan, must be repaid within 60 days. Nothing in his business changed; the bank's appetite did. He refinances in time, then draws the lesson: equipment borrowing moves onto a committed five-year term loan, and he opens a second banking relationship.
Related terms
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated August 2026