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Canada Small Business Financing Act
Annual Report 2010–2011
3. Program Performance Analysis
3.1 Program Activity
The Small Business Financing Directorate (the Directorate) administers the CSBF Program. During 2010–11, the Directorate received 3911 inquiries from small businesses and lenders through the CSBF Program's info-line and website. As one of Industry Canada's most visited sites, the program's website received 261 884 visits. The program's pamphlet, Lending a hand to your business, had a distribution of more than 86 000 copies. A variety of outreach activities were conducted throughout Canada in order to increase awareness of the CSBF Program among small businesses, lenders and business support organizations.
3.2 Lending and Claim Volumes
Loans
During 2010–11, the value of loans registered by private sector lenders under the CSBF Program was almost $1.03 billion, an increase of approximately $74 million (7.7 percent) from last year (see Figure 1A). This is the highest value of loans since 2006–07. There was a decrease of 68 (less than 1 percent) in the number of loans to 7 466. However, the average loan size grew by 8.7 percent to $137 521. The increase in the overall loan value and in the average loan amount is due in part to the increase in the maximum loan amount from $250,000 to $500,000, which came into effect on April 1, 2009 (see Section 3.4 "Lending and Claims by Size of Loans"). Since 1999, the CSBF Program has registered 128,800 loans worth over $12.3 billion.
For more details, see the Appendix, Table 1.
Long description for Figure 1A: Number and Value of CSBF Loans, 1999–2011
Claims
The claims paid in 2010–11 were associated with loans registered during the period of 1999–2011. There were 1579 claims paid with a value of $80.4 million (see Figure 1B), averaging $50 924 per claim. These claims decreased by approximately 18 percent in number and 26 percent in value from the previous year. Failure to comply with program requirements resulted in the non-payment of 101 claims. On average, claims were processed within 18 working days once all the necessary documentation was received from the lender.
The Directorate received nine appeals of claim decisions. Each appeal is assessed on the basis of any additional information or clarifications. The Directorate rejected eight of these appeals. As of March 31, 2011, one appeal remains to be completed.
*The CSBF Program began on April 1, 1999. Claims are typically submitted within three to four years after loans are made. This explains the rising number of claims later in the life of the program.
For more details, see the Appendix, Table 1.
Long description for Figure 1B: Number and Value of CSBF Claims, 1999–2011
3.3 Loans and Claims by Province and Territory
The CSBF Program is used by businesses across Canada (see Figure 2). It is demand driven and variations in its use reflect choices made by lenders and borrowers across the country. However, it should be noted that the majority of Canadian small businesses operate in Quebec and Ontario. For 2010–11, the distribution of loans and claims is as follows:
- The provinces of Quebec and Ontario had the largest share of the registered loans by value with a total of approximately $713.7 million (69 percent) and 4869 by number (65 percent).
- The western provinces registered 1942 loans (26 percent) or $242.6 million by value (23.6 percent).
- In the Atlantic provinces, 644 loans were registered (8.6 percent) or $69.3 million by value (6.8 percent).
- As for claims paid, Quebec and Ontario accounted for $66.8 million (83 percent) of the total value.
The shares of loan and claim values by provinces and territories have remained fairly stable over the last two years.
For more details, see the Appendix, Table 2.
3.4 Loans and Claims by Size of Loans
In 2010–11, there was a significant increase in the number and value of loans in excess of $250 000 compared to 2009–10, the first year that the maximum loan amount was increased to $500 000. There were 1209 loans (16 percent) in excess of $250 000 with a value of $405.7 million or 40 percent (see Figure 3). This contributed to an increase of approximately $74 million (7.7 percent) in the total value of loans and an increase of 8.7 percent in the average loan size from $126 481 to $137 521. The value of loans between $125 000 and $250 000 was approximately $365.6 million (36 percent by value).
The majority of claims were from loans made between $125 000 and $250 000. These loans resulted in claims being paid of $57.7 million (or 72 percent of total claims paid).
There were 10 claims paid for a total amount of $2.03 million on loans made with a value of more than $250,000. The data on the maximum loan amount will continue to be monitored and analyzed in future annual reports.
For more details, see the Appendix, Table 3.
3.5 Loans and Claims by Asset Type
Figure 4 illustrates the total value of 2010–11 CSBF Program loans and claims by the type of assets eligible for financing:
- Equipment accounted for the largest percentage of the total value of both loans (43 percent) and claims (59 percent). Relative to last year, the loan value percentage declined about 2.5 percent while the claim percentage remained stable.
- Leasehold improvements accounted for 29 percent of the total value of all loans and 34 percent of the total value of claims. This represents a decrease of about 1.5 percent in the value of loans relative to last year. The percentage for claims has remained somewhat stable.
- Real property represented the smallest percentage of the total value of loans (28 percent) and the total value of claims (7 percent). In comparison to 2009–10, the percentage value of loans for real property increased by approximately 4 percent. Since the maximum loan amount was increased in 2009 from $250 000 to $500 000, the value of loans made for real property increased by 58 percent from $178.5 million in 2008–09 to $282.6 million in 2010–11.
Equipment loans have the lowest average loan value at $102,310. Leasehold improvement loans averaged $161,318. Real property loans had significantly higher average loans at $222,183.
Long description for Figure 4: CSBF Loans and Claims by Asset Type, 2010–11
3.6 Loans and Claims by Industry Sector
The industry sector in which small businesses operate is part of the information provided by lenders. Based on this information, the following patterns for industry sectors were observed in 2010–11 (see Figure 5):
- The four main industry sectors by value of lending are: accommodation and food services (27.4 percent), retail trade (16.8 percent), transportation and warehousing (6.5 percent), and manufacturing (6.7 percent).
- During this reporting period, the value of claims paid to these sectors was as follows: accommodation and food services (34 percent), retail trade (19.7 percent), transportation and warehousing (3.9 percent), and manufacturing (10 percent).
These top four industry sectors together accounted for 57.4 percent of the total value of loans and 67.6 percent of the total value of claims.
For more details, see the Appendix, Table 4.
3.7 Loans and Claims by Age of Business
As outlined in Section 1 "Overview of the CSBF Program," one of the indicators of incrementality is the number of start-ups and new businesses that receive loans. In 2010–11, businesses that were in operation for less than one year accounted for more than half of the value of all loans made, that is, $587.9 million or 57 percent of the value (see Figure 6). These businesses accounted for $61.6 million or 77 percent of the claims during this same period. Over the last three years the percentages for loans and claims have remained constant for all businesses irrespective of their age.
For more details, see the Appendix, Table 5.
Long description for Figure 6: CSBF Loans and Claims by Age of Business, 2010–11
3.8 Loans and Claims by Business Size
Businesses with annual revenues less than $1 million accounted for 73 percent of the value and 80 percent of the number of all loans made in 2010–11 as well as 76 percent of the claims paid (see Figure 7). Businesses with revenues between $1 million and $2 million accounted for the next largest percentage of the loan values, 18 percent (13 percent of the number of loans).
*Based on borrower's revenue forecasts at time of loan registration.
For more details, see the Appendix, Table 6.
3.9 Loans and Claims by Type of Borrower and Business
Type of Borrower
Under the CSBF Program, borrowers can carry on a small business as a corporation, a partnership or as a sole proprietor. In 2010–11, corporations received 91 percent of the total value of loans, partnerships received 3 percent and sole proprietors received 6 percent (see Figure 8). This has remained relatively stable over the last two years. The data for claims show a similar pattern to loans: loans made to corporations resulted in 94 percent of the claims, 2 percent for partnerships and 4 percent for sole proprietors.
For more details, see the Appendix, Table 7.
Type of Business
A franchise is a business relationship between a franchisor and a franchisee where the franchisee is given the right to use the franchisor's name, products and ongoing support. In 2010–11, franchise businesses accounted for 16 percent of the total value of loans and 24 percent of the total value of claims. This represents a 5 percent decrease in the value of loans and a 6 percent increase in the value of claims from 2009–10. The non-franchise businesses accounted for 84 percent of the total value of loans (a 5 percent increase) and 76 percent of the value of claims (a 6 percent decrease).
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