Prepared for: Innovation, Science and Economic Development Canada
Prepared by: EKOS Research Associates Inc.
Canada Small Business Financing Program
c/o Innovation, Science and Economic Development Canada
235 Queen Street
Ottawa, Ontario, K1A 0H5
Toll free info line: 1-8669591699
The Canada Small Business Financing Program (CSBFP) is a national program that operates in all provinces and territories and is administered by the Department of Innovation, Science and Economic Development Canada (ISED), through the Small Business Branch. Under the program, small and medium-sized enterprises (SMEs) with gross annual revenues of $10 million or less can apply directly to lenders for term loans for the financing of real property, equipment, and leasehold improvements.
To continue to have a meaningful impact on the Canadian economy, it is crucial for the program to be available to the SMEs who would benefit from it. The challenge lies in the fact that ISED relies largely on a third party, the lenders, to inform SMEs of the program and its terms and conditions. To this end, it is important that lenders are aware that this tool exists and can present it as an option to an SME seeking financing. ISED commissioned EKOS Research Associates to conduct a study to examine lenders' awareness, perceptions, and use of the program.
The study consisted of two research components:
- A survey of operational partners (branch managers, loan managers/officers, etc.); and
- Follow-up (qualitative) interviews with strategic partners (key program contacts from each financial institution).
Outlined below are key findings from this study. The remainder of this report describes results in more detail. Where available, this year's results are compared with findings from the previous versions of the study, conducted in 2014 and 2004.
Awareness of the CSBFP
Nearly all respondents (98 per cent) recognized the program by its proper name — the Canada Small Business Financing Program, or CSBFP. Most operational partners could also correctly identify the eligible and ineligible expenditures under the CSBFP.
While respondents generally scored well in terms of their knowledge of eligibility criteria, they tended to score lower in terms of their knowledge of some of the program's terms and conditions. Eight in ten correctly stated that a small business can have more than one loan. However, fewer than half correctly recalled that the maximum loan amount that a borrower can access under the CSBFP is $1,000,000. Tracking suggests a substantial decline in awareness of the maximum loan size (47 per cent provided a correct response, compared to 79 per cent in 2014) – although this is likely in part a result of the increase to the maximum loan amount from $500,000 to $1,000,000 in 2015.
Experience with the program
Three-quarters of operational partners (75 per cent) had direct experience with loans made under the CSBFP since April 2009 — a slight increase since 2014.
Among those who had experience with the CSBFP (i.e., "program users"), nearly all had made a loan under the program. Three-quarters had completed a registration form, and just one in eight had prepared a claim. Tracking suggests that these results are largely unchanged since 2014.
Those operational partners who did not use the program were asked, using a prompted list, to elaborate on their reasons for not doing so. The plurality of these respondents cited a lack of suitable clients (44 per cent) or the availability of other financing options (39 per cent).
Satisfaction with the program
Satisfaction with the CSBFP's terms and conditions is generally high, with the majority or plurality of program users expressing satisfaction across the board. Eight in ten were satisfied with the array of businesses that are eligible under the program, the types of assets eligible under the program, the securities required, and the loan loss-sharing ratio. Three-quarters, meanwhile, were satisfied with the guarantees required, the maximum coverage period for loans, and the due diligence requirements. However, only half were satisfied with the required documentation, and a sizeable minority — 29 per cent — indicated they were dissatisfied.
Program users were asked, unprompted, to identify the parameters and requirements of the CSBFP that they felt could be improved. One in five (20 per cent) suggested the need for improvement to required documentation, which is consistent with results from the previous section where required documentation elicited the highest levels of dissatisfaction. One in seven called for improvements to leaseholds, property, and real estate (14 per cent) and higher limits on equipment (14 per cent). Other suggestions included expanding eligible loan classes (9 per cent), clearer rules (7 per cent), a less complicated and more streamlined process overall (6 per cent), changes to the two per cent registration fee (5 per cent), and changes to the maximum loan size (5 per cent). These responses are described in more detail later in this report.
Overall satisfaction with the service of the CSBFP was high, with three-quarters of program users indicating that they were somewhat or very satisfied with the service provided. Satisfaction with specific aspects of service provided under the CSBFP was more mixed. Three-quarters of program users were satisfied with the availability of program information, and the availability of service in their language of choice. About seven in ten were satisfied that the program meets lenders' needs and that the information provided was clear. Half were satisfied with the ease of completing forms, while one in five indicated that they were dissatisfied, again consistent with other findings from this study that suggest the required documentation is an area in need of improvement.
Turning to experiences with the CSBFP staff and administration, half of programs users expressed satisfaction with the fairness of CSBFP Administration decisions (51 per cent, compared to just 4 per cent who were dissatisfied) and the competence of the CSBFP Administration (49 per cent versus 8 per cent). Roughly four in ten were satisfied with the courtesy of CSBFP staff (44 per cent, compared to 3 per cent who are unhappy), while one-third were satisfied with the accessibility of staff (35 per cent versus 8 per cent). Very few respondents expressed dissatisfaction with any aspects of the service provided under the CSBFP.
Program users were asked, unprompted, to identify the aspects of the CSBFP's service that they felt could be improved. Most respondents did not offer a suggestion and, among those who did, responses were varied and did not appear to centre on any one theme. Areas for improvement mentioned most often include accessibility of staff (8 per cent), clarity of program information (8 per cent), ease of completing forms (7 per cent), and the availability of program information (5 per cent). These responses are described in more detail later in this report.
Respondents were presented with a list of sources of information about the CSBFP and asked to rate the usefulness of each one. While use of these information sources varied widely, those respondents who had used the sources tested provided highly positive assessments. Looking at the valid responses (i.e., excluding those who either have not used the program or did not provide a response), we find that nearly all program users felt the CSBFP guidelines were useful, while more than nine in ten offered a similar assessment of the information sources produced by their own institutions, the Canada Small Business Financing Act, the CSBFP website, and the Canada Small Business Financing Regulations. More than eight in ten rated the CSBFP Info-line, the CSBFP brochure, and lender notices as useful, and eight in ten found webinar presentations helpful.
Impact of the program
Integral to the evaluation of the CSBFP is assessing how its absence would impact small business borrowers throughout Canada. On average, program users estimated that just one in five CSBFP borrowers would be approved with the same or more favourable conditions without the program. Half of borrowers would be outright rejected, while the remaining 30 per cent would be approved, but under less favourable conditions. Tracking suggests a slight increase in the proportion of CSBFP borrowers that would be rejected without the program.
Changes to the program
Survey results indicate that just over half of program users were aware of changes made to the CSBFP in 2015 and 2016, while four in ten were not.
Despite limited knowledge, when informed of these changes, program users expressed broad satisfaction with the changes. Three-quarters indicated that they were very or somewhat satisfied, and only three of the 962 users who participated in this section of the survey expressed a negative opinion. The remainder expressed either a neutral opinion (19 per cent) or no opinion (6 per cent).
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