Comprehensive Review Report (2004–09)

Conclusions and Future Directions

This comprehensive review of CSBF Program operations from 2004–09 has demonstrated that the program continues to be a successful, efficient mechanism for facilitating asset-based debt financing to small businesses.

Due to the competing nature of the program's objectives, this review period has seen the program move toward greater levels of incrementality, while achieving lower levels of cost recovery. However, while the program is not fully cost recoverable when solely considering revenues from the administration and registration fees charged, it is cost recoverable when additional federal income taxes and GST remittances from CSBF Program borrowers are included. In addition, an analysis of the total costs and benefits resulting from CSBF Program loans has shown substantially greater net benefits to Canadian society.

The CSBF Program supports billions of dollars in new financing for small businesses, helping them to drive the Canadian economy forward; however, CSBF Program lending levels have decreased by 29 percent in number and 13 percent in value over the review period, causing concern about the future sustainability of the program, and whether access to financing for SMEs is decreasing as a result of this decline.

Most major lenders have registered a significant decline in use of the CSBF Program over the review period, with administrative burden and low lender profitability cited as the key reasons for this decline. Despite efforts to reduce the administrative burden of the CSBF Program while maintaining its core design elements and key parameters, the main causes of administrative burden still persist and are jeopardizing the future sustainability of the program.

Future Directions

In January 2010, program officials undertook consultations with representatives from the small business community and lending institutions to discuss possible changes to the CSBF Program. All stakeholder groups acknowledged that the CSBF Program remains an important product to increase the availability of funding to SMEs. However, it was reiterated that potential use of the program continues to be hindered by its current design. More specifically, financial institutions stressed the importance of bringing the CSBF Program in line with conventional lending practices for small businesses outside of the program, particularly in regards to fees, proof of purchase requirements, allowable interest rates and the use of electronic/online services. Borrower representatives highlighted the need for greater awareness among SMEs and the elimination of irritants, which may hinder access to financing.

The Government of Canada recognizes that changes along these lines would strengthen and modernize the CSBF Program, thereby securing its continued success. However, the Government of Canada remains committed to maintaining the program's core strength, the provision of a reliable program, with specific parameters, on which SMEs (particularly start-ups or young businesses and those in the food service and retail sectors) have come to rely. Any changes to increase program uptake would need to maintain a balance between all program objectives, including mitigating risks to public funds.

Industry Canada officials will look to strengthen relationships with stakeholders. In particular, they will examine means to expand awareness of the program among borrowers. A commitment to enhance efforts to increase awareness and knowledge of the CSBF Program among SMEs will ensure that individuals seeking financing will be better equipped to more actively engage financial institutions about the program. The program has received positive feedback on its recent awareness campaign, which shows further potential as a means to address the lack of awareness among SMEs, as expressed by borrower representatives during consultations.

As the economic climate in Canada improves, the ability of entrepreneurs to take advantage of emerging opportunities and develop new products and services for the marketplace is essential to economic recovery. During this time, it is important for entrepreneurs to be both aware and able to access the financing they need to start a business or to expand their current business operations. Modernizing the CSBF Program would advance the Government of Canada's objective of improving access to financing and supporting the growth of small businesses in all sectors across the country.