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Financing SMEs in Canada: Barriers Faced by Women, Youth, Aboriginal and Minority Entrepreneurs in Accessing Capital — Phase 2: Gap Analysis and Recommendations for Further Research

Executive Summary

The objective of this project was to evaluate the accessibility of financing of Canadian small and medium-sized enterprises (SMEs) for particular business-owner profiles. Emphasis was placed on evaluating whether women, youth, aboriginals, visible minorities and language groups (collectively referred to as Profile Groups) faced more barriers to accessing small business financing than the SME population in general. Phase 1 comprised a comprehensive review of the Canadian literature on SME financing for these groups, supplemented with U.S. and international literature where relevant. Phase 2 provides further analysis and evaluation of this literature, in order to respond to the three objectives outlined for this phase of the project:

• Identify any business owner characteristic-related barriers to financing that are evident on the basis of existing data;
• Identify data gaps that need to be filled in future data collection. A gap analysis model will be developed depicting any gaps in data available;
• Recommend data collection methodology to fill identified information gaps.

The findings of Phase 2 indicate that:

Based on information collected during Phase 1, the hypothesis of business owner characteristic-related barriers to financing cannot be validated on the basis of existing data;

Barriers to SME financing do exist, and vary significantly according to business type, age, stage and industry with owners facing different barriers accordingly. Data does not exist to demonstrate whether the Profile Groups face greater barriers than the general SME population when stratified according to the categories noted above;

Significant gaps exist in the current research data pertaining to business owner characteristic-related barriers to financing in particular, and to SME financing in general;

Additional research is needed to fill these gaps, and analysis of barriers faced by any business owner profile will be relevant only if there is sufficient baseline data on access to financing for SMEs in general for comparative purposes;

Future research in this area should ideally be national in scope, and should be designed to collect SME financing data that can be disaggregated according to a variety of criteria identified as relevant in Phase 1 of this project. This research should include data collection related to firm characteristics (e.g., age, stage, sector, industry, geographic location); related to type of financing sought (e.g., debt financing, equity financing); and related to business-owner profile characteristics (e.g., gender, ethnicity, age).

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