Smallest businesses face biggest barriers getting bank financing

Crowd-funding, FinTech lending are limited options for most

Toronto, October 4, 2016 – The smallest businesses have the hardest time accessing bank financing, according to a new CFIB report that also found many small business owners are using their own personal assets as additional sources of financing.

“Small businesses face considerable barriers based on their size when they apply for bank financing,” said CFIB president Dan Kelly. “While there has been much buzz about FinTech and online lending in general, what small business owners want most from their bank is a personal relationship based on mutual understanding.”

Crowd-funding still has a long way to go before it’s seen as a viable source of financing for small firms, as only 0.1% of small businesses say they’ve relied on this source of funding.

The smaller the business, the likelier the rejection
The smallest of firms (those with fewer than five employees) are nearly six times as likely to be rejected for a loan than mid-size firms (50-499 employees). The overall rejection rate for small and medium businesses is 15%, with wide variability in rejection rates between different banks.

“The Small Business Banking Code of Conduct is pretty clear: banks must not only explain why they rejected a loan application, they must also provide information on alternative sources of financing,” noted Kelly.

In addition to bank credit, many small firms rely on their own assets for additional sources of financing: almost half (49 per cent) of small businesses relied on their own personal equity; 30 per cent used a credit card.

The report found that half of small businesses had applied for credit financing from banks over the past three years; the median amount of financing approved was $150,000, with the smallest businesses being approved for $50,000.

The smaller the business, the costlier the loan
For those who are approved for loans, smaller businesses then face higher interest rates, paying an average of 2 percentage points above the prime rate. The rate is even higher for the smallest of businesses, who paid 2.28 percentage points above prime.

Read the full CFIB Research Snapshot, SME Financing Indicators, the second installment in a three-part research series on banking in the small business sector. The final installment, which ranks Canada’s big banks, will be published October 20.

To arrange an interview with Dan Kelly, please contact Kiara Morrissey at 416-222-8022, 647-464-2814 or

CFIB is Canada’s largest association of small- and medium-sized businesses with 109,000 members across every sector and region.