Canadian Manufacturing

Financial help for business improving

by Erika Beauchesne   

Operations Small Business Food & Beverage Canadian Federation of Independent Business (CFIB) capital lending SMEs

But small firms say credit more costly and out of reach

TORONTO—Lending conditions for Canadian businesses are looking up, but company size is still blocking firms from getting the cash they need, according to a recent report from Ernst & Young.

The Toronto-based advisory firm found that capital availability in Canada improved from March 2009 to September 2010.

Canadian senior executives reported that as of early 2011, it was easier and cheaper to control debt structure, cash balances and asset performance than it was in March 2009.

Respondents were also optimistic that financing would continue to improve, with 77 per cent expecting credit to become available or very available by September 2011.


While companies of all sizes agreed that lending conditions haven’t returned to pre-recession levels, small companies especially reported having a rough time during the downturn.

Half of all small public firms said credit has been pricier to obtain—more than twice the amount of large public companies that reported cost increases.

That discrepancy also played out in the private sector, with 49 per cent of small businesses reporting expensive financing compared to just 32 per cent of large firms.

More smaller companies also reported that government assistance programs weren’t useful, perhaps because 31 per cent said they were not at all familiar with them.

Bureaucracy and the complexity of lending requirements were the key reasons for not using these programs.

Ted Mallett, vice-president and chief economist with the Canadian Federation of Independent Business, said the survey results mirror other small business studies across Canada.

CFIB’s own research found only 40 per cent of small manufacturing companies have access to the capital they need and less than a quarter have access to most of what they need.

Things improved somewhat among mid-sized companies, two-thirds of which reported obtaining all the financing they need.

“Lack of access to capital is impacting small business’ ability to grow by not being able to cover things like inventories and presale expenses or manage any dips in revenues versus expenditures,” Mallett says.

He recommends small business owners establish a strong relationship with their financial institution.

“Get the company’s financial manager and accountant involved in negotiations with the financial institution,” he says.

Companies can also minimize their “risk footprint” by presenting a clean record of loan repayments and solid set of clients.

Effectively communicating what your business does and how it is succeeding is also important.

“This is especially the case with unique businesses that banks won’t always understand and may react by not lending,” Mallett says.

“The more you can show them what the business is all about, the better.”


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