SME Financing in Canada, 2002

Demand for Debt by type of institution

Figure 11 – Percentage of Total Requests for Debt by Type of Supplier in 2000

Chartered Banks: The major banks received 66 percent of the requests from SMEs for debt financing in 2000 (see Table 6). However, in 2000 they accounted for 55 percent of total debt^{Footnote 12} that was outstanding to SMEs and accounted for about 57 percent of outstanding debt of less than $1 million in authorization (see Table 2 and Figure 12 below).

• Larger firms were more likely to seek and obtain debt financing from chartered banks.
• More than three quarters of firms in the professional service or KBI sectors that applied for debt financing approached a chartered bank for short-term debt instruments, which may be related to the stronger presence of these institutions in urban areas, where most KBIs are located.

Credit Unions / Caisses Populaires:

• Pattern of request for debt: These institutions received nearly half of the requests for debt in the Prairie provinces and nearly 40 percent in Quebec.
• Rural firms were more likely to apply to credit unions / caisses populaires (34 percent, versus 20 percent for Canada overall), reflecting these suppliers' presence in rural areas.
• Small firms with fewer than 5 employees were more likely to apply to credit unions / caisses populaires than larger firms (more than 20 percent of requests of firms with fewer than five employees, versus less than 16 percent for larger firms).
• Sectors: Firms in the agriculture, primary and manufacturing sectors were the most likely to use credit unions / caisses populaires for debt (36 percent, 28 percent and 20 percent, respectively).

Table 2 -Total Commercial Debt by Type of Supplier in 2000*

Suppliers	Share
Source: Statistics Canada, Survey of Suppliers of Business Financing, 2000 * Supplier categories do not directly correspond with the supplier categories in the Survey on Financing of Small and Medium-sized Enterprises, 2000.
Domestic Banks	55%
Insurance Companies	19%
Finance Companies	8%
Credit Unions and Caisses Populaires	6%
Portfolio Managers, Funds, VC Companies	2%
Other Banks & Trust Companies	10%

Figure 12 – Outstanding Debt (less than $1 million) by Type of Supplier in 2000.*

Crown Corporations /GovernmentInstitutions: Just over 8 percent of requests for financing were made to these institutions. Most of these requests came from firms in agriculture, manufacturing and primary industries.^{Footnote 13}

Figure 13 – Debt Approval Rates by Type of Supplier in 2000

Other Findings Concerning Request Rates for Debt in 2000

Exporting Firms: 36 percent of these firms made a request for debt compared to 22 percent of non-exporters. In this context it is worth noting that exporters tend to be larger businesses (see Table 15). Larger businesses also tend to request more debt financing than other firms (see Figure 5). So this observation may have more to do with the characteristics of the size of the business than with its exporting activities.

Urban Firms: 21 percent of urban-based SMEs^{Footnote 14} made a request for debt as compared with 31 percent of those located in rural areas. This probably reflects the impact of the agricultural and primary sectors in rural areas – two sectors that most often request debt financing (see Table 5).

---

12. According to the Survey of the Suppliers of Business Financing, 2000, chartered banks have lower than average loans outstanding – particularly for loans under $1 million.

13. Some of these Crown institutions have policy mandates to target specific sectors. Farm Credit Canada's mandate is to serve farms and farm-related businesses. The Business Development Bank of Canada has traditionally focused on the manufacturing industries, but is now growing its business with KBI firms. Still other institutions (e.g. the Alberta Treasury Branches) are important in regions where oil and gas production is predominant. Detailed information on the activities of Crown agencies is available in their annual reports.

14. See the Glossary (Appendix B) for a definition of a rural- and an urban-based firm.