May 2008, vol. 10, no. 1 - Business Financing

New data on the supply of financing to businesses were released in March by Statistics Canada. The data were drawn from the Survey of Suppliers of Business Financing, which is part of a research program investigating financing for small and medium-sized enterprises, administered in partnership by Statistics Canada, Industry Canada and the Department of Finance.

In 2006, Canadian business clients of commercial suppliers of financing, such as banks, finance companies and insurance companies, were reported to have an estimated $444.3 billion in outstanding debt, up 10.7 percent from 2005. The greater need for financing can be attributed to the upward trend observed in commodity prices; capital investments by firms in oil, gas and mining; and booming residential and non-residential construction and real estate markets across Canada.

Overall, approximately two million business loans were outstanding as of December 31, 2006, representing an increase of 4.4 percent from the previous year. The largest borrowers, those with authorization levels of $5 million or more, accounted for 57.0 percent of outstanding debt in 2006. In contrast, businesses with authorization levels of less than $1 million, generally small and medium-sized enterprises,^{Footnote 1} had outstanding debt of $95.3 billion, accounting for 21.4 percent of outstanding debt.

Among large businesses, there was an increase of 7800 new loans in 2006, representing an increase of 8.9 percent over the previous year. In comparison, new loans authorized for small and medium-sized businesses increased by 4.2 percent, representing roughly 77 500 new loans.

Domestic banks continue to be the major suppliers of debt financing in the Canadian business borrowing market, providing more than half (52 percent) of outstanding business debt.

By province, Alberta, with outstanding debt amounting to $73.9 billion, exhibited the biggest gain (22.1 percent) among the provinces. In Ontario, outstanding debt increased by 18.4 percent to $189.5 billion. As a proportion of total outstanding debt in Canada, Ontario represented 42.6 percent, followed by Alberta (16.6 percent), Quebec (16.0 percent) and British Columbia (13.3 percent).

More information on suppliers of financing can be found in the "2006 Statistics Canada Release" on the Small and Medium-Sized Enterprise Financing Data Initiative (SME FDI) website at www.sme-fdi.gc.ca/eic/site/sme_fdi-prf_pme.nsf/eng/00728.html.

^{Footnote 1} As most suppliers of financing do not track the employment size of their business clients, they were asked to group their clients by authorization size (i.e. the maximum amount they were allowed to borrow). Authorization size is used in this survey as a proxy for business size due to a lack of employment size indicators.

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