Summary of the Survey on Financing and Growth of Small and Medium Enterprises 2023

From: Innovation, Science and Economic Development Canada

Content

• Summary of results
• Financing characteristics
• Owner characteristics
• Sales destinations
• Growth characteristics
• Innovation activity, intellectual property and new technology adoption
• Methodology
• Notes
• Acknowledgements

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Summary of results

Financing characteristics

In 2023, 49% of SMEs requested external financing, compared to 82% in 2020.^{Footnote 1} Twenty-seven percent of all SMEs requested trade credit financing, 26% requested debt financing, 7% requested government financing, 7% requested lease financing, and 1% requested equity financing.^{Footnote 2}

The differences observed in SMEs' requests for external financing compared to the 2020 survey can be attributed to the impact of the COVID-19 pandemic and government support programs, which were the primary source of financing in 2020. The 2023 survey results align with figures observed before the COVID-19 pandemic, where around 50% of SMEs submitted financing requests (47% in 2017), with debt financing consistently ranking as the first or second most utilized financing options.^{Footnote 3}

In 2023, of the 51% SMEs that did not request financing, 81% did not require financing. Six percent of SMEs not requesting financing were unaware of financing sources available to the business, 6% thought financing would be too costly, 2% of SMEs were discouraged borrowers (i.e., believed their request would be turned down) and 2% of SMEs not requesting financing considered applying for financing to be too difficult or time consuming.^{Footnote 4}

In 2023, 86% of the dollar amount of debt financing requested by SMEs was authorized (Table 1). Debt financing was more often requested by and approved for larger firms, for which the request rates, approval rates and ratios of amount authorized to the amount requested were higher than those of smaller firms.

Table 1: Debt financing request and approval rates by size of business, 2023^{table 1 note *}

	Request rate (%)	Overall approval rate (%)	Amount authorized-to-requested (%)
All SMEs	75.7	90.9	86.4
Size of business (number of employees)
1–4	21.5	89.3	86.9
5–19	29.6	91.8	81.5
20–99	35.3	92.8	86.1
100–499	43.2	98.7	93.1
Table 1 Note Table 1 Note * Overall approval rates include both full and partial approvals. Return to table 1 note * referrer

On average, SMEs paid an interest rate of 7% for non-residential mortgages, 11% for lines of credit, 9% for term loans, and 19% for business credit card financing. Forty-seven percent of SME debt financing was secured by collateral, with business assets and personal assets being provided as collateral by 71% and 42% of SMEs, respectively.^{Footnote 5}

Owner characteristics

In 2023, most SMEs were male-owned: 65% were majority male-owned, 17% were majority female-owned and 18% were owned equally by men and women.

Members of the same family, visible minorities, Indigenous persons, person(s) with a disability, 2SLGBTQ+ and non-binary persons, respectively, held the majority ownership of 25%, 10%, 2%, 1%, 2% and 0.4% of SMEs.

The primary decision makers^{Footnote 6} of SMEs tended to be older, with 60% 50 years of age or older; to be well established in Canada, with 69% born in Canada and the remaining 31%, who were born outside of Canada, having resided in Canada for an average of 27 years; to be experienced, with 75% having 10 or more years of management or ownership experience; and, to be well educated, with 74% having attained a post-secondary diploma or degree.

Sales destinations

In 2023, 15% of SMEs exported, of which 34% exported goods only, 44% exported services only and 22% exported both goods and services.

Eighty-five percent of SME exporters sold to the United States, 23% to European countries (excluding the United Kingdom), 15% to the United Kingdom, 12% to China, 12% to Asian countries (excluding China, India and Japan), 8% to Mexico, 8% to Latin American countries (excluding Mexico and Brazil), 7% to Japan, 6% to India, and 4% to Brazil.^{Footnote 7} Of the 85% of SMEs that did not export, 92% did not export because of the local nature of their businesses.

Most exporters did not face major obstacles to exporting. No more than 12% of exporting SMEs considered any single issue, including those related to administration, border, logistics, market knowledge, intellectual property, financial difficulties to be a major obstacle to selling abroad.

Many SMEs sold beyond their local markets, with 55% selling outside of their municipality/region and 25% selling to other provinces or territories (Table 2). Larger SMEs were more likely to sell beyond their local markets and export. Likewise, larger SMEs had a higher proportion of sales outside their local area than did smaller SMEs.

Table 2: Sales destinations by size of business, 2023

	Within local municipality or region	Outside of local municipality or region but within province/territory	Rest of Canada	Outside Canada (export sales)
	Propensity (% of businesses)
All SMEs	91.6	54.8	25.3	15.1
Size of business (number of employees)
1–4	90.1	51.9	22.4	13.5
5–19	94.6	57.0	25.8	14.9
20–99	92.0	62.3	37.1	23.0
100–499	89.4	68.3	48.7	29.9

Growth characteristics

Sixty-six percent of SMEs reported positive average yearly growth in sales or revenues between 2021 and 2023. In particular, the sales of 32%, 15%, 7%, 4% and 8% of SMEs grew by 1% to 5%, 6% to 10%, 11% to 15%, 16% to 19% and 20% or more, respectively. The sales of 17% SMEs did not grow, while sales declined for 17% of firms.

The proportion of SMEs reporting negative sales growth was lower relative to 2020 survey iteration, while the proportions reporting no growth or positive growth were elevated.^{Footnote 8}

In 2023, the most common obstacles to growth were the rising costs of inputs (79% of SMEs), corporate tax rate (72%), increasing competition (71%) and fluctuations in consumer demand (70%). Other obstacles of growth included maintaining sufficient cash flow or managing debt (65%), recruiting and retaining skilled employees (62%), a shortage of labour (59% transportation costs (59%) and government regulations (42%). Forty percent of SMEs considered obtaining financing to be an obstacle to their growth.

Innovation activity, intellectual property and new technology adoption

Twenty-seven percent of SMEs introduced at least one type of innovation between 2021 and 2023 (Table 3). Fifteen percent introduced a product innovation, 9% an organizational innovation, 8% a process innovation and 7% a marketing innovation.

Fifteen percent of SMEs held intellectual property. Nine percent were party to non-disclosure agreements^{Footnote 9}, the most commonly held intellectual property. Seven percent of SMEs held registered trademarks, 3% trade secrets, 2% patents and 1% industrial designs.

The proportion of SMEs introducing innovations was lower in 2023 relative to previous survey iterations.^{Footnote 10}

Fifty-one percent of SMEs adopted at least one type of new technology between 2021 and 2023. Thirty-three percent adopted business intelligence technologies, 17% information technology security and authentication systems, 17% industry-specific business software, 8% clean technologies, 8% design or information control technologies, 6% material handling, supply chain or logistics technologies, 4% internet of things systems, and 3% processing or fabrication technologies.^{Footnote 11} Fifty-nine percent of SMEs had an online presence in 2023, most commonly a website (80%) or social media account (68%).^{Footnote 12}

The proportion of SMEs adopting at least one type of new technology was significantly higher in 2023 compared to 2020, with notable increases driven by business intelligence, IT security and authentication systems, and clean technology, while adoption of other technologies remained stable or even declined.^{Footnote 13} Larger SMEs were more likely than smaller SMEs to innovate, hold intellectual property and adopt new technology.

Table 3: Innovation, intellectual property holdings and new technology adoption, by size of business, 2023

	At least one type of innovation over the last three years (2021 to 2023) (%)	Held at least one type of intellectual property (as of December 2023) (%)	Adopted at least one new technology over the last three years (2021 to 2023) (%)
All SMEs	27.1	15.4	50.9
Size of business (number of employees)
1–4	20.9	9.1	43.7
5–19	33.8	19.9	56.5
20–99	41.3	34.8	70.9
100–499	45.7	52.0	78.6

Methodology

The target population for the survey was private sector, for-profit, SMEs employing between 1 and 499 people and generating over $30,000 in annual revenues in 2023. The target base population of over 900,000 SMEs was stratified by geography, employment and industry, with random samples selected from these strata in order to generate representative estimates. The survey was conducted by Statistics Canada from February to June 2024. The base sample size was 22,084 SMEs. For the main population, the response rate was computed as 52%.

Notes

For more information, or to enquire about the concepts, methods or data quality of the survey results, contact Statistics Canada (infostats@statcan.gc.ca or 1-800-263-1136).

For additional information about small and medium-sized enterprises in Canada, contact Lyming Huang or Patrice Rivard (Small Business Branch). To find related research topics and data sets, consult the SME Research and Statistics website.

Acknowledgements

The Small Business Branch would like to thank our many partners for their contributions. In particular, we are grateful to the Centre for Special Business Projects Team at Statistics Canada for their role in developing and conducting the survey, and for survey funding from and collaboration with our Innovation, Science and Economic Development Canada partners Automotive, Transportation and Digital Technologies Branch, Canada Small Business Financing Program, Canadian Intellectual Property Office, Co-operatives Policy Unit, Women Entrepreneurship Strategy and Tourism Branch, as well as from our external partners Atlantic Canada Opportunities Agency, Business Development Bank of Canada, Global Affairs Canada, Export Development Canada, Employment and Social Development Canada, Federal Economic Development Initiative for Northern Ontario, Institut de la statistique du Québec, Ontario Ministry of Economic Development, Job Creation and Trade, and Public Services and Procurement Canada.