FirstPreviousNextLast

SME Financing in Canada, 2002 — Part I: Debt Financing

Reasons Requests For Debt are Rejected

In 2000, about 82 percent of the firms that sought debt financing were able to obtain it (see Figure 13). A request may be rejected for a variety of reasons. In 2001, the CFIB reported that younger and smaller businesses, as well as businesses with high account manager turnover, were more likely to have their financing request rejected.^{Footnote 15} Of the 18 percent who were not approved for debt in 2000, 85 percent were turned down, 3 percent had their application still under review at the time of the survey and 10 percent withdrew their application. According to the Statistics Canada survey, these SMEs, cited five main reasons given by the debt financing supplier for rejection:

• they had insufficient income, revenue or sales (23 percent);
• they had a poor credit history (13 percent);
• they could not produce sufficient collateral or security (11 percent);
• their business had insufficient cash flow (10 percent); or
• their business was too young (8 percent).

In 11 percent of the cases where a request for debt was turned down, SMEs reported that no reason was given. Of those rejected who recall being given a reason for the turndown, only 27 percent were satisfied with the reason given.

15. Canadian Federation of Independent Business, Banking on Entrepreneurship, March 2001.

FirstPreviousNextLast