Small Business Access to Financing Report Summary

Published: Jul 17, 2013
Last Updated: Apr 27, 2017

The Small Business Access to Financing: Request and Approval Rates, Interest Rates and Collateral Requirements (2000-10) report by Daniel Seens was just released by Industry Canada. This report brought together and analyzed the results of two surveys: the Survey on Financing of Small and Medium Enterprises and the Credit Conditions Survey.

The aim of the report was to present information on financing activities for small businesses from 2000 to 2010. Below is a summary on the findings of the report as well as short descriptions of surveys that provided the data for the report.

Survey on Financing of Small and Medium Enterprises
(Is now called the Survey on Financing and Growth of Small and Medium Enterprises)

  • Developed by Industry Canada with Statistics Canada.
  • The purpose of this survey is to “measure the demand for, and sources of, financing for Canadian SMEs”.
  • The survey began in 2000 and is conducted every three years.
  • Other data that this survey records include: “information on the financing application process, firm profiles and demographic characteristics of SME ownership”.
  • Sample size = 10,000 respondents

Credit Conditions Survey

  • Developed by Industry Canada.
  • The purpose of this survey is to “monitor changes in lending conditions”.
  • Conducted in 2009 and 2010 and is not conducted in years when the Survey on Financing of Small and Medium Enterprises is done.
  • This survey concentrates on analyzing “debt financing”.
  • Sample size = 3,500 respondents

Conclusions from the Report

The Small Business Access to Financing: Request and Approval Rates, Interest Rates and Collateral Requirements (2000-10) report found that approximately 25 percent of small businesses on average in Canada looked for external financing each year between 2000 and 2010 for operational expenses. The report also concluded that debt financing requests were considerably higher than equity financing requests. Regarding equity financing, the greatest number of businesses requesting this type of financing were young, innovative and growth-oriented businesses.  This coincides with the fact that these same types of businesses alongside research and development (R&D) intensive businesses had the highest financing costs.

The report also investigated what small businesses viewed as obstacles to their growth. Of six options available, qualified labour (50% of respondents) was the first obstacle followed by insurance rates (38%), instability of consumer demand (34%), government regulations (32%) and financing (20%) in fifth place. For those businesses that did find access to financing an obstacle to their growth, they were primarily younger, growth-oriented and/or R&D intensive companies.

The final conclusions of the Small Business Access to Financing: Request and Approval Rates, Interest Rates and Collateral Requirements (2000-10) report are that small businesses have significant financing requirements but generally have been successful at obtaining the necessary funds. However, smaller, younger and R&D intensive businesses in Canada face greater challenges when trying to obtain debt financing. This is an important issue to address as the report points out because these businesses are “key drivers for economic activity and job creation in Canada”.  Finally, the author suggests that this report “provides evidence supporting the need for public policy action to improve access to financing for these types of firms so that they might thrive and reach their full potential.”

Resources for Finding Financing

  • Fundica - This is a free funding search tool that is regularly updated with the most up-to-date information possible. Currently has 2500+ funding programs from both the private and public sectors in many industry sectors. The pro version allows for many additional features including multiple profiles and goes for $500.00.
  • MaRS Funding Sources Directory - This database compiles provincial, national and international funding sources suitable for technology or science companies. It draws from both the public and private sectors. Many of the sources are directed at Ontario-based companies, but other opportunities listed are eligible for companies from across Canada.
  • Rural BC - Funding Sources - "Use this grant search tool to connect with a wide range of funding opportunities. You can narrow the search by grant description, name, subject area or the application deadline."
  • Business Development Bank of Canada (BDC) - BDC is a government owned financial institution that serves Canadian entrepreneurs. BDC acts as a 'complementary lender', offering loans and investments that supplement services available from commercial financial institutions. BDC puts special focus on SMEs in sectors such as manufacturing, exporting, innovation and knowledge-based industries.
  • National Angel Capital Organization - For high-growth technology or life sciences business.

 

What are your thoughts on this report's findings? Do you have experience with trying to obtain financing for your small business? How was the experience? Positive or negative? Let us know!

 

PHOTO CREDIT: Finance, created by Tax Credits on March 5, 2012. Image made available under Attribution 2.0 Generic license. Last viewed on July 17, 2013.
 

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