Survey on Financing and Growth of Small and Medium Enterprises, 2023

Small- and medium-sized enterprises (SMEs) are an important contributor to the Canadian economy as they accounted for 53.8% of all employment and employed nearly 9.5 million people in the country in 2023. These businesses have 1 to 499 employees.

External financing requests return to pre-COVID-19 pandemic levels

Almost half (49.3%) of SMEs requested external financing in 2023. External financing includes requests for debt financing, lease financing, trade credit financing, equity financing or government financing. Of the SMEs that did not request external financing (50.7%) in 2023, the most common reason was that financing was not required (81.4%). Ultimately, the proportion of businesses that requested external financing in 2023 has returned to figures similar to those seen before the COVID-19 pandemic (47.1% in 2017).

Table 1: Percentage of small and medium enterprises that requested external financing, by type of external financing

The likelihood of a SME requesting external financing increased with employment size in 2023. Four in five (80.6%) businesses with 100 to 499 employees requested external financing, compared with almost two in five (39.6%) businesses with 1 to 4 employees. When considering different sectors, nearly two in three SMEs in manufacturing (66.2%) [correction], construction (63.8%) [correction], and wholesale trade (62.7%) [correction] requested external financing. Meanwhile, SMEs in the professional, scientific, and technical services sector (35.4%) [correction] were the least likely to request external financing.

Chart 1: Percentage of small- and medium medium-sized enterprises that requested external financing in 2023, by sector

Notes: The "other sectors combined" aggregate comprises the real estate and rental and leasing; administrative and support, waste management and remediation services; health care and social assistance; arts, entertainment and recreation sectors.

Source: Survey on Financing and Growth of Small and Medium Enterprises (2941).

Debt financing requests and approvals

In 2023, one-quarter (25.7%) of SMEs made a request for debt financing. The most common form of debt financing requested was business credit cards (12.1%), followed by lines of credit (10.2%), term loans (7.3%), and non-residential mortgages (3.2%).

Nearly 9 in 10 (88.2%) SMEs had their largest debt financing request fully or partially approved in 2023. These requests totalled an estimated $94.0 billion in 2023. The largest share of debt financing was provided by Canadian chartered banks at slightly more than two-thirds (68.5%), followed by credit unions (20.6%), government institutions (9.4%), and online alternative lenders (2.2%).

Majority of small- and medium-sized enterprises expect growth despite facing key obstacles

Nearly two in three (65.9%) SMEs reported an average annual growth in sales over the period from 2021 to 2023, while 8.2% recorded an average annual sales growth of 20% or more. In contrast, slightly more than one in three (34.1%) SMEs reported zero growth or experienced an average decline in sales over the same period. Looking ahead, 72.6% of SMEs anticipate average yearly growth from 2024 to 2026, whereas 17.5% expect no growth during the same period.

Despite these expectations, SMEs face several obstacles to growth. The most common obstacles reported in 2023 were the rising cost of inputs (78.9%), the corporate tax rate (72.1%), and increasing competition (71.0%).