SME Financing Data Initiative
sme-fdi.gc.ca
Common menu bar links
First
Previous
SME Financing in Canada, 2002 — Part I: Debt Financing
Types of Instruments Most Required
Following are highlights with respect to the requests for various financing instruments (see also Table 7):
Figure 14 – Debt Instruments Most Frequently Requested in 2000
- Firms of no employees had a slightly higher than average rate of request for credit cards and term loans. While it is not surprising to find the self-employed using flexible short-term debt like credit cards, it is surprising to find that they were the most likely to request new term loans. The high number of requests for term loans is likely due to the large concentration of the self-employed in the agricultural sector.
- Agricultural and primary sectors were the most likely to request short-term debt, which possibly reflects their use of these instruments for seasonal operating credits. These sectors are probably also financing machinery, equipment, land and buildings through debt, as they are also the sectors that requested term loans most often.
- Professional services and KBIs appear to apply disproportionately for lines of credit and credit cards. As these sectors are also more likely than most to use personal assets to secure a loan and as these instruments typically do not require as much collateral as term loans, it is not surprising that there is an apparent preference for these instruments. However it may not be a preference by choice but rather by circumstance (i.e., they may have no other choices). Further study will be done on this issue.
- Manitoba/Saskatchewan/Nunavut-based firms had higher than average request rates for demand loans. This reflects the heavy use of these kinds of instruments by the agricultural and
primary industries, which are so important to the economies of these provinces.
- British Columbia / Yukon and Ontario had lower than average request rates for term loans.
- Urban-based SMEs tended to apply for more short-term debt, such as lines of credit or increases in lines of credit, while rural-based SMEs tended to request demand and term loans, which is consistent with the patterns of use by the agricultural and primary industrial sectors explained earlier.
