ARCHIVED—Financing Profile: Small and Medium-Sized Enterprises in Quebec

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August 2007

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Report Summary:
This profile shows the general characteristics and examines the financing activities of small and medium-sized enterprises (SMEs) in Quebec in 2004, and compares them with the national averages.

Allan Riding, University of Ottawa
Barbara Orser, University of Ottawa

In Quebec, small and medium-sized enterprises (SMEs) account for 96 percent of all businesses.^{Footnote 1} Not only have SMEs been important drivers of job creation and economic growth, but they have also been strong contributors to productivity, having led larger firms in productivity growth over the last 10 years.^{Footnote 2} Access to financing is critical if SMEs are to develop and expand. Using data from the SME Financing Data Initiative, this article provides an overview of the characteristics of SMEs in Quebec and compares financing activity between the average Quebec firm and the average Canadian firm.

Summary of Key Findings: SMEs in both Quebec and Canada are small, typically with fewer than five employees. Like many Canadian SMEs, most SMEs in Quebec rely on informal sources of financing, such as personal savings and personal credit. Yet the financing patterns of Quebec SMEs also differ in several respects from those of other Canadian firms. Caisses populaires are important suppliers of debt financing to SMEs and appear to place relatively more documentation requirements on Quebec SMEs. Overall, Quebec firms also tend to be slightly less growth oriented, but account for a significant amount of research and development (R&D) activity in Canada and are more likely to seek and receive venture capital. Risk capital is an important source of financing among high-growth and technology-focused SMEs. Firms in Quebec obtained venture capital at a rate that was disproportionately greater than its share of knowledge-based industries.

Definitions
This analysis defines small and medium-sized enterprises (SMEs) as commercial (for-profit) businesses with fewer than 500 employees and less than $50 million in annual revenues.

Excluded are non-profit and government organizations, schools, hospitals, subsidiaries, co-operatives, and finance and leasing companies.

This analysis compares the profile and financing activity of SMEs in Quebec with national averages.

^{Footnote 1} Statistics Canada, Business Register, December 2004.

^{Footnote 2} RBC Financial Group, "Small and Medium-Sized Businesses are Driving Productivity Gains," October 2006.