Canada Small Business Financing Program (CSBFP) Awareness and Satisfaction Study

Satisfaction with Financing

This section reports on executives' views of the financing options available to small and medium-sized businesses, including the perceived importance of and satisfaction with different factors related to financing options.

High Importance Attributed to Many Factors When Considering Financing Options

All surveyed executives were asked to rate the importance of a number of factors to their business when it comes to obtaining financing or considering financing options (using a 5-point scale: 1 = not important at all; 5 = very important). The factors that were assessed were:

• The interest rate.
• The service fees.
• The time required to process applications.
• Access to a variety of financing options.
• The possibility of negotiating the terms of financing, such as service fees and repayment conditions.
• The amount of financing granted compared to the amount requested.
• The securities and guarantees required by financial institutions, whether personal or corporate.
• The quality of service received from the lender(s).

Three-quarters or more of CSBFP borrowers attributed importance to each of these factors. Moreover, each factor was much more likely to be considered very important than moderately important. Leading the way, and considered virtually equal in importance (88-89 percent), were the interest rate, service quality, and the amount of financing granted compared to the amount requested. These factors were followed closely by the possibility of negotiating the terms of financing (86 percent) and the time required to process applications (83 percent). Majorities (57-72 percent) attributed strong importance to each of these factors.

Virtually identical numbers (78-79 percent) attributed importance to the securities and guarantees required and the variety of financing options, with only slightly fewer (75 percent) considering the service fees important.

Borrowers who did not attribute importance to these factors were much more likely to rate them as neither important nor unimportant (i.e. scores of 3) than as unimportant.

Among representatives of SMEs, two-thirds or more attributed importance to each of these factors, and like CSBFP borrowers, executives were much more likely to attribute strong than moderate importance to each one. Leading the way in terms of importance was the interest rate (85 percent). Substantial and similar majorities (77-80 percent) attributed importance to the possibility of negotiating the terms of financing, service quality, and the amount of financing granted compared to the amount requested. Following this, in descending order of importance, were service fees (74 percent), the time required to process applications (71 percent), the securities and guarantees required (69 percent), and the variety of financing options (67 percent).

With one exception (interest rates), those who did not attribute importance to these factors were more likely to rate them as neither important nor unimportant than as unimportant. Between 6-10 percent considered these factors to be of little or no importance.

Borrowers were more likely than representatives of SMEs to attribute importance to each of these factors. This was especially the case regarding the variety of financing options (78 percent vs. 67 percent), service quality (89 percent vs. 78 percent), the application processing time (83 percent vs. 71 percent), the financing granted compared to the amount requested (88 percent vs. 77 percent), and the securities and guarantees required (79 percent vs. 69 percent).

Satisfaction With Aspects of Financing Varies Widely

Executives of firms that had used one or more of the main financing options available during the previous five years were asked to rate their level of satisfaction with each of these same factors using a similar 5-point scale (1 = very dissatisfied; 5 = very satisfied). If respondents' firms received financing on multiple occasions, they were asked to think in terms of their experience in general.

Levels of satisfaction with these factors varied widely both among borrowers and representatives of SMEs.

Among borrowers, satisfaction with these factors ranged from a high of 75 percent to a low of 39 percent. Substantial numbers of borrowers (73-75 percent) expressed satisfaction with the financing granted compared to the amount requested, and with the service quality. Moreover, satisfaction with both was more likely to be strong than moderate. A much smaller majority (55 percent) expressed satisfaction with the application processing time, with the rest almost equally divided between neutrality (scores of 3) and dissatisfaction.

Fewer than half the borrowers expressed satisfaction with each of the remaining factors, and satisfaction was more likely to be moderate than strong for each one. Nearly half (48 percent) expressed satisfaction with the securities and guarantees required, with the rest more likely to be neutral (31 percent) than dissatisfied (19 percent). Borrowers provided mixed assessments of the remaining factors, although they were more likely to express satisfaction than neutrality or dissatisfaction with each one. Similar proportions (39-42 percent) expressed satisfaction with the possibility of negotiating the terms of financing, the variety of financing options, the interest rate, and the service fees. A substantial minority (between approximately one-fifth and one-third) expressed either neutrality or dissatisfaction with each of these.

Dissatisfaction was highest regarding the service fees (31 percent), and ranged from 8-29 percent for other factors.

Among representatives of SMEs, satisfaction ranged from a high of 57 percent to a low of 29 percent. They were most likely to express satisfaction with the financing granted compared to the amount requested (57 percent). Smaller majorities expressed satisfaction with the processing time (53 percent) and service quality (52 percent).

Representatives of SMEs provided mixed assessments of the remaining factors. While they were more likely to express satisfaction with each one, a substantial minority (26-38 percent) expressed neutrality or dissatisfaction with each. More than one-third (35-39 percent) expressed satisfaction with the interest rate and the possibility of negotiating the terms of financing, with the rest almost equally divided between being neutral and dissatisfied.

Representatives of SMEs were least likely to express satisfaction with the variety of financing options, the securities/guarantees needed, and the service fees (29-31 percent each).

Dissatisfaction was highest regarding service fees (38 percent) and the securities/guarantees needed (32 percent), and ranged from 17-29 percent for other factors.

Borrowers were more likely than representatives of SMEs to express satisfaction with each of these aspects. More specifically, they were much more likely to be satisfied with the financing granted (75 percent vs. 57 percent), lender service quality (73 percent vs. 52 percent), the securities needed (48 percent vs. 30 percent), the variety of options (42 percent vs. 31 percent), and the service fees (39 percent vs. 29 percent). Differences were less pronounced concerning the interest rate (42 percent vs. 39 percent), the possibility of negotiating terms (42 percent vs. 35 percent) and application process time (55 percent vs. 53 percent).

The following graphs show the difference between perceived importance and the level of satisfaction with each factor for both survey populations.

Various Factors RE: Financing Options
Importance vs. Satisfaction
CSBFP Borrowers

Factor	Importance  %	Satisfaction  %	Gap +/-
Interest rate	89	42	-47
Negotiating terms	86	41	-45
Service fees	75	39	-36
Variety of options	78	42	-36
Securities/guarantees needed	78	48	-30
Application process time	83	55	-28
Lender service quality	89	73	-16
Financing granted vs. requested	88	75	-13

Various Factors RE: Financing Options
Importance vs. Satisfaction
SMEs

Factor	Importance  %	Satisfaction  %	Gap +/-
Service fees	75	29	-46
Negotiating terms	80	35	-45
Interest rate	84	39	-45
Securities/guarantees needed	69	30	-39
Variety of options	66	31	-35
Lender service quality	78	52	-26
Financing granted vs. requested	77	57	-20
Application process time	71	53	-18

As well, the following graphs plot the perceived importance of the various factors against satisfaction in the same areas. They are based on the mean scores for each issue on the 5-point scale for each population.

In the graph pertaining to borrowers, all issues above the horizontal line received mean importance ratings of 4.39 or higher, and all issues below the line received ratings of less than 4.39. All issues to the right of the vertical line received mean satisfaction ratings of 3.47 or higher and all issues to the left of the line received ratings of less than this.

As can be seen, relative strengths (i.e. areas where both importance and satisfaction were assessed above the mid-point on the scale) include service quality and the amount of financing granted compared to the amount requested. Relative challenges include the interest rate and the possibility of negotiating the terms of financing.

In the graph pertaining to representatives of SMEs, all issues above the horizontal line received mean importance ratings of 4.33 or higher, and all issues below the line received ratings of less than this. All issues to the right of the vertical line received mean satisfaction ratings of 3.21 or higher and all issues to the left of the line received lower ratings.

As can be seen, relative strengths include service quality and the financing granted. Relative challenges include the possibility of negotiating the terms of financing and the interest rate.

Many Satisfied with Available Financing Options

A majority of borrowers (55 percent) and a near majority of representatives of SMEs (45 percent) whose firms had used one or more of the financing options during the previous five years expressed overall satisfaction with the financing options available to them. Using a 5-point scale (1 = very dissatisfied; 5 = very satisfied), many expressed satisfaction with this, although it was more likely to be moderate than strong.

Borrowers who did not express satisfaction were more likely to be neutral (28 percent) than dissatisfied (16 percent). SME representatives who did not express satisfaction were similarly likely to be neutral or dissatisfied (24-26 percent).

Satisfaction With Aspects of CSBFP

CSBFP borrowers^{Footnote 4} that acknowledged receiving a CSBFP loan in the previous 12 months (i.e. were aware that the loan they received was part of the CSBF program) were asked how satisfied they were with various aspects of their CSBFP loan. Using a 5-point scale (1 = very dissatisfied; 5 = very satisfied), they were asked to rate their level of satisfaction with the following:

• The availability of information on the CSBF Program.
• The administrative reporting requirements related to the 'life' of the loan.
• The time needed to obtain approval.
• Other aspects of the application process.
• The program registration fees.
• The annual administration fee.
• The securities and guarantees that are required.
• The amount of financing granted compared to the amount requested.

Satisfaction with CSBFP loan aspects among borrowers ranged considerably, from 31 percent to 75 percent. They were most apt to be satisfied with the financing they received relative to their request (75 percent). Almost two-thirds (61-64 percent) were satisfied with other aspects of the application process, and the approval time. More than half also expressed satisfaction with the availability of program information and the administrative requirements (55-58 percent).

Satisfaction was lowest concerning fees associated with the CSBFP loan, including both the registration fees (37 percent) and the annual administration fee (31 percent). Dissatisfaction with these fees was correspondingly higher than with other loan aspects (27-31 percent vs. 7-20 percent).

Substantial Majorities Likely to Use Same Lenders in Future

The large majority of CSBFP borrowers (90 percent) and SME representatives (84 percent) whose firms received loans during the previous 12 months said their business would be at least moderately likely to use the same lender for financing in the future. Moreover, two-thirds from each population said their business would be very likely to do this. Representatives of SMEs were more likely to indicate that there would be little or no likelihood that their businesses continue to use the same lenders in future (17 percent vs. 9 percent of borrowers).

Borrowers who indicated that their firm would not be likely to use the same lender for financing in the future (n = 28) most often pointed to poor service quality to explain why (12 borrowers). This was followed by high service fees (8 borrowers), services no longer meeting their needs (5 borrowers), complex documentation or lack of need (4 borrowers each), and the guarantees required (2 borrowers) (multiple responses accepted).

Of the nine representatives of SMEs who said that their firm would not be likely to use the same lender in future, no more than two identified any one reason. Reasons included lack of need, high service fees, complex documentation, poor quality service, and services no longer meeting needs.

Most of Those Who Were Refused Loans Were Not Satisfied With Explanation

Respondents who indicated that their business was refused financing for a loan(s) in the past 12 months (30 borrowers; 27 SMEs) were asked how satisfied they were with the reason(s) provided by the financial institution to explain why the loan was refused. Using a 5-point scale (1 = very dissatisfied; 5 = very satisfied), the vast majority (83-85 percent or 23-25 respondents) expressed dissatisfaction with the explanation given, and most said they were very dissatisfied. Borrowers were more likely to express strong dissatisfaction than SME representatives (73 percent or 22 respondents vs. 52 percent or 14 representatives of SMEs).

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Footnotes

1. ^{4 back to footnote reference 4} Representatives of SMEs were not asked about this because none of their firms had received a CSBFP loan.