Financing Innovative Small and Medium-Sized Enterprises in Canada

Working Paper

Shunji Wang, Small Business Branch, Industry Canada

October 2009

Table of Contents

• I. Introduction
• II. Literature Review
• III. Data
• IV. Results and Analysis
  • a) Accessing Financing
  • b) Financing Terms and Conditions
• V. Multivariate Analysis
• VI. Summary and Conclusions
• References
• Appendix

Acknowledgements

The assistance of many people was invaluable to the production of this research paper. My thanks go to Allan Riding from Telfer School of Management at the University of Ottawa for his comments on the multivariate analysis. Special thanks go to Denis Martel and Richard Archambault from Industry Canada for their feedback and suggestions.

Abstract

This paper examines whether the financing activities and experiences of innovative small and medium-sized (SMEs) in accessing financing are different from those of non-innovative SMEs. This paper also examines whether innovative SMEs face different financing terms and conditions than non-innovative SMEs seeking financing. After controlling for firm category, size, age of the owner and industry sector using logistic and linear regression models, results show that innovative SMEs had greater financing needs than non-innovative ones but were less successful in obtaining the financing requested. The results also show that innovative SMEs face more constraining financing terms and conditions than non-innovative SMEs. In general, innovative SMEs paid higher interest rates and got shorter loan terms.