CSBFP Lender Awareness and Satisfaction Study
Prepared for: Industry Canada
Prepared by: R.A. Malatest & Associates Ltd.
The Canada Small Business Financing Program (CSBFP) is a federal government program whose objective is to help small businesses obtain access to financing. Through this program, financial institutions make loans to businesses that they may otherwise not be able to offer. The financial institutions then register these loans with the program and, should the loan default, the government covers a portion of the lender's losses. The government collects fees to help offset the costs of the program, namely the cost of loans that default. Annually, CSBFP helps businesses access nearly $1 billion in capital. As lenders are under no compulsion to make loans under the program, awareness and satisfaction with the program among financial institutions is essential to its success.
A 2014 survey of financial institutions, including all of Canada's major large banks, as well as over forty credit unions and caisses populaires, found high rates of awareness and satisfaction with the CSBFP. These findings from the front lines were further verified through key informant interviews with CSBFP policy advisors and other relevant executives representing Canada's largest financial institutions. The survey was administered in late winter and early spring 2014; the key informant interviews were conducted in late spring 2014.
Virtually all loan officers surveyed were aware of the program (98%). Program users rely primarily on in-house resources for information, though these are less commonly available to small banks and credit unions. Among official resources, the program's guidelines and website are considered the most useful. There is significant demand, however, among program users for these resources to be updated more frequently and made more user-friendly.
Program use was highest among loan officers at large banks (79%), followed by small banks (59%) and credit unions and caisses populaires (54%). The primary barrier to use was a lack of suitable clients or demand. This was echoed by a common demand among program users to expand CSBFP's business and expenditure eligibility criteria, thus opening it to a broader clientele of borrowers. There was an appetite among financial institutions for Industry Canada to conduct more online and in-person information sessions to increase lenders' comfort with the program. Other barriers included the program's administrative requirements and corporate decisions previously made to not use the program based on negative experience.
Satisfaction with the program was high, though less widespread than previously observed. In 2004 6% of program users were very satisfied with CSBFP's policies and procedures overall, and 81% were somewhat satisfied. In 2014 22% reported being very satisfied and 45% reported being somewhat satisfied. This would suggest opinions of the program have polarized over the past decade, with it seemingly improving in the eyes of some while deteriorating in the eyes of others. This trend was observed for nearly all two dozen program attributes studied. Program users would like Industry Canada to consider changing CSBFP's maximum loan term, maximum loan size, the business and eligibility criteria, and the required documentation. Key informants clarified increases for loan size and loan term are necessary to match the increasing cost of real estate in Canada's metropolitan centres.
The changes made to the program on have been well received by loan officers. Over two-thirds of program users (69%) indicated that they will increase their use. Most well-received were reductions in paperwork, deregulation of the maximum financing percentage, and extra coverage for the lender in certain conditions. Credit unions were especially satisfied with a change permitting lenders to charge conventional lending fees, which will make the program a more attractive option to offer their members. Small banks were especially satisfied with administrative changes which reduce their overhead. Large banks, already the main users of the program, would likely require further changes, as those described above, to significantly increase their use.
The CSBFP remained a valued product among Canadian financial institutions. Without the CSBFP, program users estimated about nearly half (46%) of CSBFP loan borrowers would be rejected for a loan, and most others (30%) would have only be approved under less favourable conditions. The recent changes are likely to increase use among financial institutions.
This report details the levels of CSBFP awareness, use and satisfaction among Canada's financial institutions. It contains evidence that the changes are generally viewed favourably and may lead to increased use in future. Finally this report contains recommendations from lenders to potentially improve the program further.
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