Small And Medium Sized Enterprise Sme Financing In Canada

This is a report on the state of financing for small & medium sized enterprises (SMEs) in Canada, with information obtained from three Statistics Canada & Industry Canada surveys. Part 1 first analyzes results of a Statistics Canada survey & other sources to create a profile of the demand for debt financing. Key issues covered include application & approval rates, suppliers & debt instruments used by SMEs, collateral & application requirements faced by firms of different employment sizes, industries, regions, & other factors. Subsequent sections in this part review results relating to leasing, risk capital financing, and other sources of financing such as factoring & supplier credit. Part two provides a profile of SMEs & entrepreneurs, with information on the effects of demographic factors on SME financing. It explores the conditions faced by women, youth, Aboriginal, and minority groups in obtaining business financing. The final part offers a history of the SME Financing Data Initiative and examines how this project will be expanded in the future. Appendices include a definition of knowledge-based industries and a glossary.

SMEs and entrepreneurs make an important contribution to the Canadian economy. SMEs account for 60% of total employment, and Canada performs very well across many measures of small business generation, growth and innovation. However, further increases in productivity in medium-sized firms, an increase in SME exports, a greater business start-up rate and an increased number of high-growth firms could bring substantial benefits for the national economy. This report identifies several areas where new policy approaches could help achieve these objectives. Framework conditions for small business could be improved in business taxation, public procurement, access to financing and the commercialisation of research. New and extended programmes could be introduced in domains including entrepreneurship education, management advice and consultancy, and workforce skills development. A major effort is recommended to prioritise women's entrepreneurship, including by supporting social enterprises, and federal support could be offered to support the exchange of information on best practice SME regulations and programmes among provinces and territories. All this could be brought together and co-ordinated through the umbrella of a national strategy and a lead agency for SME and entrepreneurship policy.

This paper examines access to business finance by Canadian small and medium-sized enterprises (SMEs) and to housing finance by Canadian households (particularly non-prime borrowers) against the background of a fairly concentrated and protected banking industry. It finds access broadly adequate for the former group. However, given the dominance of the large banks and their fairly low risk tolerance, financing of riskier projects is a challenge. Problems with venture capital, plausibly related to the prevalence of tax-advantaged labor-sponsored funds, exacerbate the situation for the most innovative SMEs. The paper also finds the market for housing finance to be highly advanced and sophisticated. However, non-prime mortgage financing is in its infancy in Canada, and further development of that sector (while avoiding the excesses that beset the U.S. market in the last few years) would be beneficial. More broadly, despite recent innovations, options available to Canadians for financing house purchases are still somewhat limited, with scarce availability of mortgage maturities beyond five years particularly surprising. Further advances in securitization could help progress in both of these areas.

The 9th edition of the Scoreboard on Financing SMEs and Entrepreneurs report provides data from 48 countries around the world on SME lending, alternative finance instruments and financing conditions, as well as information on policy initiatives to improve SME access to finance.