Borrower Awareness and Satisfaction Study 2023-2024

Prepared for: Innovation, Science and Economic Development Canada

Prepared by: EKOS Research Associates Inc. and Ference & Company Consulting Ltd.

January 2024

Contact Information

Canada Small Business Financing Program
c/o Innovation, Science and Economic Development Canada
235 Queen Street
Ottawa, Ontario, K1A 0H5
Toll free info line: 1-866-959-1699
Email: csbfp-pfpec@ised-isde.gc.ca

A. Background and Objectives

The Canada Small Business Financing Program (CSBFP) is a federal government program, the objective of which is to help small businesses obtain access to financing that would not otherwise be accessible to them or would only be available under less favorable conditions. The program is open to Canadian small businesses with gross annual revenues of $10 million or less in all industry sectors, with the exception of agriculture. Businesses can access term loans of up to $1,000,000 and lines of credit of up to $150,000 to finance their business needs, including real property, equipment, leasehold improvements, intangible assets and working capital.

Through this program, businesses apply directly to financial institutions, who are responsible for approving and distributing the financing pursuant to the requirements of the CSBFP. The financial institutions then register these loans with the program and, should the loan default, the government covers a portion of the lender's losses. The government collects fees to help offset the costs of the program, namely the cost of loans that default. The program operates in all provinces and territories and is administered by the Department of Innovation, Science and Economic Development Canada (ISED).

ISED commissioned Ference & Company and EKOS Research Associates to administer the 2023-2024 CSBFP Borrower Awareness and Satisfaction Study. Previous program borrower awareness and satisfaction studies were conducted in 2001, 2007, 2013, and 2018.

This iteration of the study continued to examine awareness of and satisfaction with the CSBFP from both program participants and the broader small business community, and track views on the program over time.

B. Methodology

EKOS surveyed roughly equal numbers of two different sub-populations of Canadian small businesses:

• CSBFP participants (according to CSBFP records); and
• CSBFP non-participants who are eligible to participate in the program – i.e., Canadian businesses with revenues less than $10 million, excluding farms, and government agencies/public administration and services.

A total of 1,133 surveys were completed (558 from CSBFP participants and 575 from non-participants). Surveys were conducted both online and by telephone across Canada, in both official languages. The field dates for the surveys were November 6, 2023 to January 19, 2024.

C. Findings

Outlined below are key findings from the study. Where available, this year's results are compared to those of previous years of the study. This year's results appear to be strongly influenced by the government emergency response programs such as the Canada Emergency Business Account (CEBA), which provided interest free loans to help small businesses during the COVID-19 pandemic, and the recent increase in interest rates in Canada (which may be affecting views on the CSBFP in general).

Financing Applications

All participants were asked whether or not their business had applied for financing from a financial institution in the past five years. Results reveal that 91% of CSBFP borrowers and 41% of non-participants indicated they had.

Those who indicated they had applied for financing were asked what type of financial product they applied for. Results reveal that 87% of CSBFP borrowers indicated they applied for a term loan in the past five years, compared to 58% of non-participants, while roughly the same proportion of borrowers and non-participants said they had applied for a line of credit in the past five years (37% and 41%, respectively).

Awareness and Use of the CSBFP and Government Programs

When asked if they were aware of any federal programs that help small businesses access loans, only four in ten CSBFP borrowers (43%) indicated awareness of federal financing support programs. Even fewer non-participants (34%) indicated awareness of these types of programs. Tracking reveals that awareness is the same as that found in 2018 for borrowers, but is somewhat higher for non-participants, possibly due to the high number of small businesses that accessed government emergency response programs, such as CEBA, during the pandemic.

CSBFP borrowers and non-participants who indicated that they were aware of a federal financing support program were asked whether they had heard of any specific government programs. When factoring in those not aware of any federal financing support programs, awareness of the CSBFP among borrowers increased by 5% in comparison to 2018 (29%), however remains relatively low, with only 34% indicating awareness. Awareness of the CSBFP among non-participants, including those who were not aware of any federal support programs, increased by 6% since 2018 (10%) but remains low, with only 16% indicating awareness of the program.

Findings also reveal that two in three CSBFP borrowers (64%) indicate awareness that their loan was covered by a federal program that provided a guarantee on the loan or line of credit, down from 67% in 2018. For non-participants, 22% of them indicated that their recent loan application was guaranteed by a federal government program, in comparison to 5% in 2018.

Those who indicated they knew their loan application was covered by a federal government program were asked to identify the name of the program. Results reveal that 82% of borrowers indicated the CSBFP. The CEBA was mentioned most often by non-participants (43%).

Perceptions of the Program

Survey findings reveal that perceptions of the CSBFP program among both borrowers and non-participants are generally positive. Many borrowers found the program's terms and conditions to be reasonable, particularly that the loans could be used for the financing of equipment, real property, leasehold improvements, intangible assets, and working capital (76%); and the maximum loan size of $500,000 for equipment or leasehold improvements (71%). However, there are lower levels of agreement that the registration fee (39%) and the maximum interest rate charge for terms loans (31%) and lines of credit (21%) are reasonable.

Many non-participants also found the program's terms and conditions to be reasonable, particularly that the loans could be used for the financing of equipment, real property, leasehold improvements intangible assets, and working capital (68%); and the maximum loan size of $500,000 for equipment or leasehold improvements (62%). However, as with borrowers, there are lower levels of belief that the registration fee (38%) and the maximum interest rate charge for terms loans (29%) and lines of credit (20%) are reasonable.

Respondents were also asked to evaluate the overall fairness of the program's terms and conditions. CSBFP borrowers were somewhat more likely to express a positive opinion on the program, with over half of borrowers (55%, down from 66% in 2018) rating the terms and conditions as reasonable or very reasonable, compared to 47% (down from 59% in 2018) of non-participants.

Satisfaction with and Impact of the CSBFP

Results reveal that CSBFP borrowers are generally satisfied with the program. Respondents expressed the greatest satisfaction with the invoices and proof of payment requirements (62% of respondents were either satisfied or very satisfied), the assets/expenses that were eligible for financing (63%), the securities and guarantees requirements (54%), and the availability of program information (53%). There was less satisfaction expressed with the registration fee (28%) or interest rates (19%); and satisfaction levels across many of these aspects have worsened somewhat since 2018 (particularly the interest rate charged – down 18% since 2018).

CSBFP borrowers were also asked how the CSBFP impacted the various aspects of their business. Eight in ten CSBFP borrowers (82%) reported their loan had a positive impact on their ability to start-up their business, while seven in ten indicated it had a positive impact on their ability to grow (70%) and stay in business (69%). However, the perceived positive impact of the CSBFP is down somewhat across several of these issues, particularly the firm's ability to increase sales or profits, since 2018.