Banking for Small and Medium-Sized Businesses

Banking & You

Banking for Small and Medium-Sized Businesses

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Banks in Canada provide essential financing to businesses of all sizes, serving as a vital source of credit for companies across the country.

Banks represent about two thirds of the business lending market and roughly one‑quarter of the overall business financing market in Canada.
In 2023, banks authorized $1.78 trillion to growing businesses including $286 billion in credit to small- and medium-sized enterprises (SMEs).

Banks are a key source of credit for Canadian businesses

Banks represent 64 per cent1 of all lending supplied to businesses through business loans, short-term promissory notes known as bankers’ acceptances, non-residential mortgages and other lending products.
Considering the financing market more broadly, including the capital markets, banks represent roughly one-quarter of the total2 business financing marketplace.
In 2023, banks authorized $1.78 trillion to growing businesses including $286 billion in credit to small- and medium-sized enterprises (SMEs).

Banks support for SMEs

The CBA defines an SME as having authorized borrowing under $5 million and defines small businesses as having authorized borrowing under $1 million.

The CBA defines a small- and medium-sized enterprise (SME) as having authorized borrowing under $5 million and defines small businesses as having authorized borrowing under $1 million.

Banks serve close to three million self-employed, small and medium-sized businesses across Canada. The majority of bank business customers fall into this category, and banks are committed to meeting their needs. This market is becoming increasingly competitive, diverse and technologically savvy, which is why all banks have dedicated departments to help their SME customers.

Banks provide a variety of short-term lending options, including overdraft protection, credit cards and lines of credit. SMEs can also arrange a variety of longer-term financing solutions through their banks such as term loans, mortgages, and leasing. Banks also participate in the federal government’s Canada Small Business Financing Program (CSBFP). The government shares risk with lenders through this program, which helps stimulate job and wealth creation. Small businesses or start-ups operating for profit in Canada with gross annual revenues of $10 million or less are eligible for CSBFP loans.

Throughout changing economic and business cycles, including the COVID-19 pandemic, banks have continued to lend to credit worthy businesses, providing flexibility and a range of credit products including loans and lines of credit.

SME lending by the numbers

In 2023, banks authorized $286 billion in credit to small- and medium-sized enterprises (SMEs). Of this credit, SMEs have drawn close to $176 billion. They have close to $110 billion in unused credit available. ³
Approval rates are high: 90.8 per cent of all SMEs that applied for debt financing from a financial institution were approved.4 Since 2010, over 87 per cent of small business financing requests have been approved annually in Canada.5
Approval rates for rural SMEs are higher than for their urban counterparts.6
Obtaining financing is the least problematic external obstacle to growth. SMEs are more concerned about the rise in operating costs, fluctuations in demand for products and services, increasing competition, recruiting and retaining skilled employees among other external obstacles.7
For those that did not seek debt financing, 86.5 per cent of SMEs said they did not need it. Only three per cent said that it was because they thought they would be turned down and less than one per cent thought the cost of financing was too high.8

More than just lending

SMEs can turn to banks for a variety of financial and advisory solutions, including – but not limited to – financing. These banking solutions include:

providing advice and support throughout the pandemic and into the recovery to help small business clients’ manage their immediate cash management or new lending needs
business chequing and savings accounts, in both Canadian and foreign dollar denominations
tax payment services
foreign exchange services
succession and investment planning
electronic funds transfers
online and telephone banking
payroll and filing services
coaching podcasts, booklets and seminars

Supporting women entrepreneurs

Banks have taken initiatives to assist women entrepreneurs to build and grow their businesses - from financing and other banking products and services to capacity building and networking programs. According to Statistics Canada, for SME businesses majority-owned by women, 97 per cent were approved for debt financing.⁹

Canadian banks are active supporters of SMEs across Canada and this support and commitment extends to women entrepreneurs. Beyond the business banking services offered to their clients, banks have programs and services internally to support women entrepreneurs as well as offering support to external organizations.

Strong ties to agriculture

Banks in Canada also have a longstanding business relationship with farmers and agricultural customers and these strong relationships have helped banks work with their customers through significant challenges. Farmers have had to confront the COVID-19 pandemic, BSE, avian influenza, drought, floods, the H1N1 virus and country of origin labelling (COOL). Banks have been there for their clients, working with them on an individual, case-by-case basis to assess their unique needs and to develop solutions. More information about banking support for the agriculture sector can be found at https://cba.ca/farmers-and-banking.

Protecting your Small Business from Cyber Threats

The reality of today’s increasingly digital-first economy means that businesses, both large and small, use the Internet to manage their operations, serve their customers and grow their business. Cyber criminals target small businesses that they believe have not yet implemented proper cyber security safeguards; and this means that small businesses could be exposed to cyber security risks to a greater extent.

Banks in Canada are working around the clock on the prevention and detection of cyber security threats and work closely with each other and with bank regulators, law enforcement and all levels of government to protect the financial system and their customers from cyber crime. There are also simple steps small business owners and managers can take to recognize cyber threats and protect their businesses and employees from cyber crime.

The CBA’s Small Business Cyber Security Toolkit can help small business owners and managers protect against their businesses from the most common cyber threats.

¹ Stats Canada, Survey on Financing and Growth of Small and Medium Enterprises, 2020, Released March 2022.
² CBA Business Credit Statistics, December 2023, figures from nine banks
³ Ibid.
⁴ Stats Canada, Survey on Financing and Growth of Small and Medium Enterprises, 2020, Released 2022.
⁵Innovation, Science and Economic Development Canada, Credit Conditions Survey, 2023
⁶ Stats Canada, Survey on Financing and Growth of Small and Medium Enterprises, 2020 (Data Tables), Released 2022.
⁷ Ibid.
⁸ Ibid.
⁹ Ibid.

Questions?

If you have general questions about banking in Canada, call the Canadian Bankers Association’s Banking Information Line at 1‑800‑263‑0231 or send an email to inform@cba.ca.