SME Financing

An Interpretation of Discouraged Borrowers Based on Relationship Lending
(August 2010)
This paper investigates the determinants of discouragement for Canadian small and medium-sized enterprises (SMEs), regarding financing sought. This paper is part of the SME Financing Data Initiative – program that intends to build a comprehensive knowledge on SME financing in Canada.

The Economic Impact of the Canada Small Business Financing Program
(June 2010)
This paper investigates the economic impact of the Canada Small Business Financing Program (CSBFP) by using the 2004 edition of the Survey on Financing of Small and Medium Enterprises. Based on this analysis, the CSBFP contributed to approximately 10 percentage point growth in salary, employment and revenues of its participants between 2004 and 2006. Furthermore, CSBFP participants created 0.63 jobs per loan over this period.

Determinants of Trade Credit Use by Small and Medium-Sized Enterprises in Canada (December 2009)
This paper examines the relationship between demand, supply and importance of trade credit, and financing constraints for Canadian small and medium enterprises (SMEs).

Financing Innovative Small and Medium-Sized Enterprises in Canada (October 2009)
This paper examines whether the financing activities and experiences of innovative small and medium-sized (SMEs) in accessing financing are different from those of non-innovative SMEs. This paper also examines whether innovative SMEs face different financing terms and conditions than non-innovative SMEs seeking financing. After controlling for firm category, size, age of the owner and industry sector using logistic and linear regression models, results show that innovative SMEs had greater financing needs than non-innovative ones but were less successful in obtaining the financing requested. The results also show that innovative SMEs face more constraining financing terms and conditions than non-innovative SMEs. In general, innovative SMEs paid higher interest rates and got shorter loan terms.

Canadian SME Exporters (January 2008)
This report was undertaken to document the profiles of Canadian SME exporters and to gain a better understanding of the processes of internationalization adopted by SMEs. The relevance of four theories of internationalization was tested using logistic regression analysis to examine the relative influence of owner and firm characteristics on the propensity of a firm to export. The assumptions underlying the stage theory were not supported empirically. The resource exchange theory was partially supported in that multiple proxies of management acumen were associated with increased likelihood of export. Importantly, owners with more than 5 years of business ownership experience, who are growth oriented, with residency status (especially immigrants) and foreign language skills are significantly more likely to engage in export trade. The assumptions of network theory were supported empirically. International new venture (INV) size does not preclude performing in the international arena. INVs achieve similar levels of export intensity within three years of inception with a smaller workforce, younger and less experienced owners and fewer assets compared with established exporters. Furthermore, one-quarter of INVs are owned by women and, contrary to popular opinion, they are not confined to technology – or knowledge-based industries. The principle tenet of the feminist theory was supported empirically. Having controlled for systemic sector, firm and owner level differences, majority female-owned firms are still significantly less likely to export.

Financing Canadian SME Exporters (June 2007)
This report was conducted to examine the extent to which Canadian SME exporter firms face difficulty in accessing debt financing from commercial lenders compared to non-exporters. The results show that commercial lenders reject applications for operating loans from early-stage SME exporters at a rate more than four times that of the rejection rate for established firms. Early-stage SME exporters (those operating since 2002) are also more likely to be turned down for term loans than established firms (those operating prior to 2002). Since start-up exporter firms are less likely to receive debt financing, it will be increasingly difficult for international new ventures (those firms operating since 2002 that derive more than 25 percent of sales from exports) to prosper within Canada's relatively small home market.

Financing Global Gazelles (March 2006)
This report develops a working definition of "Global Gazelles" and analyzes financing issues faced by such firms. The report also gathers information on the financial needs of global gazelles and their financing experience; documents international global gazelle lending and investment trends and behaviours; and identifies key financial issues and barriers, including taxes and other government policies and programs, that impact on the ability of Canadian global gazelles to secure financing.