THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Wednesday, November 26, 2025
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 4:15 p.m. [ET] to examine and report on access to credit and capital markets for small- and medium-sized enterprises as the basis for growth and improved productivity in the Canadian economy.
Senator Clément Gignac (Chair) in the chair.
[Translation]
The Chair: I wish to welcome you to the Standing Senate Committee on Banking, Commerce and the Economy. My name is Clément Gignac and I am a senator from Quebec.
I would also like to welcome all those watching us on CPAC or on our online platform at sencanada.ca.
Before proceeding any further, I would kindly ask my fellow committee members to introduce themselves.
[English]
Senator Varone: Toni Varone, Ontario.
Senator Loffreda: Welcome. I’m Senator Tony Loffreda from Montreal, Quebec.
[Translation]
Senator Dalphond: Good day. Welcome to our witnesses. Pierre Dalphond from the De Lormier division of Quebec.
[English]
Senator Fridhandler: Daryl Fridhandler, Alberta.
[Translation]
Senator Henkel: Danièle Henkel from the Alma division of Quebec.
[English]
Senator Yussuff: Hassan Yussuff, Ontario.
[Translation]
Senator Ringuette: Pierrette Ringuette from New Brunswick.
[English]
Senator McBean: Marnie McBean, Ontario.
Senator Wallin: Pamela Wallin, Saskatchewan.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Martin: Yonah Martin, British Columbia. Nice to see you again.
[Translation]
The Chair: Thank you, colleagues.
This is our first meeting on our special study focusing on access to credit and capital markets for small- and medium-sized enterprises as the basis for growth and improved productivity in the Canadian economy.
I wish to welcome our first witness, Mr. Etienne-René Massie, Assistant Deputy Minister, Small Business and Tourism Marketplace Services, Innovation, Science and Economic Development Canada. Welcome and thank you for accepting our invitation.
I believe you take five or six minutes for your opening remarks. Following your statement, we will move on to questions and answers.
Mr. Massie, the floor is yours.
Etienne-René Massie, Assistant Deputy Minister, Small Business and Tourism Marketplace Services, Innovation, Science and Economic Development Canada: Thank you, Mr. Chair and thank you to the committee for the invitation to discuss with you important questions relating to access to credit and capital markets for small and medium-sized enterprises, and how this supports growth and productivity in the Canadian economy.
[English]
Representing 99.7% of all employer businesses, small- and medium-sized enterprises, or SMEs, are present across every sector and vital to advancing Canada’s economic priorities. Entrepreneurs fuel dynamism by introducing new ideas, business models and technologies that challenge incumbents, spark innovation and push the economy to adapt to changing conditions.
That adaptability has defined Canada’s small businesses in recent years, as they have shown remarkable resilience through successive disruptions since the pandemic. Yet resilience alone is not enough.
To meet today’s challenges — weak growth or softening demand in certain sectors, rising input and debt-servicing costs and trade disruptions from higher tariffs and the removal of the U.S. de minimis exemption — SMEs need access to the right tools and resources.
Access to financing gives entrepreneurs the means to invest, innovate and adapt to changing markets. With capital, they can secure equipment, inventory, talent and marketing, and they can build resilience at home and competitiveness abroad. Backed by supportive policies, small businesses can move beyond simply weathering today’s pressures to driving the adaptation and productivity that fuels our economy.
The good news is that Canadian businesses, in general, are operating from a position of strength with broad access to capital through diverse providers. Chartered banks supply 60% to 70% of new loans each year, complemented by credit unions, caisses populaires and fintech lenders.
In 2024, lenders approved 89% of small business debt financing applications, and those approved applications received 91% of the total dollar amount they sought.
Yet beneath this strength, persistent gaps remain. Start-ups, under-represented entrepreneurs, exporters and innovation-driven firms with complex needs or limited operating history continue to face barriers. The contrast is clear: While 89% of SMEs overall were approved for debt financing in 2024, start‑ups saw only a 53% approval rate compared to 94% for established businesses.
To address gaps in the lending market, the Government of Canada provides a range of supports.
There is the Business Development Bank of Canada, or BDC, which is an independent, arm’s-length financial Crown corporation that has committed approximately $48.6 billion to small- and medium-sized businesses and works with around 107,000 clients across Canada. Today’s second panel will be an opportunity to learn more about BDC’s work.
The Canada Small Business Financing Program is a statutory loan loss-sharing initiative that partners with private sector financial institutions to help businesses access financing. In 2024-25, it supported over 6,400 loans valued at $1.88 billion.
Export Development Canada provides financing, insurance, equity solutions, trade knowledge and global connections to help our companies of all sizes manage risk, access capital and expand confidently into international markets. In 2024, Export Development Canada supported more than 27,800 businesses and facilitated over $123 billion in trade-related activities.
The government has also invested $1.2 billion in Canada’s venture capital market through the Venture Capital Catalyst Initiative, enabling fund managers to raise over $3 billion as of December 2023. Building on this momentum, the recent budget committed a further $1 billion to launch the venture and growth capital catalyst initiative, along with a $750-million strategy to close funding gaps and further strengthen Canada’s venture capital sector.
Additionally, multiple federal organizations provide targeted support tailored to the unique needs of different clients. Regional development agencies deliver financing and advisory services aligned with local priorities, while the Strategic Response Fund at Innovation, Science and Economic Development Canada has invested in innovation and growth projects. Farm Credit Canada focuses on agribusiness with flexible credit and long-term loans, and the National Research Council of Canada Industrial Research Assistance Program provides innovative SMEs with R&D funding and technical guidance.
The government has also provided a range of targeted supports for under-represented entrepreneurs, from the Black Entrepreneurship Loan Fund to the Women Entrepreneurship Strategy.
Responding to the challenges that Canadian SMEs face from trade disruptions caused by U.S. tariffs, the government has also implemented a range of targeted supports to improve access to capital, help businesses diversify markets and pivot and strengthen resilience.
These include: Export Development Canada’s $5-billion Trade Impact Program, BDC’s $500-million Pivot to Grow fund and Farm Credit Canada’s $1-billion Trade Disruption Customer Support program for farmers.
There is also the $1 billion for the Regional Tariff Response Initiative that regional development agencies are managing.
Finally, I would note that Budget 2025 introduced a range of initiatives to also strengthen SME resilience and improve access to financing. These range from new initiatives as well as a range of tax credits and tax proposals that will assist businesses in their journeys.
[Translation]
Thank you for giving me the opportunity to speak to you today about these very important issues.
[English]
The Chair: Thank you for sharing your opening remarks.
Senator Marshall: Thank you, Mr. Massie, for being here. In your opening remarks, you listed off existing programs and covered some of the new programs. What is your department doing to prepare for the new programs that are supposed to close some of the loopholes? I notice there will be $5 billion over six years for the Strategic Response Fund. When I was reading the budget, there was a reference to the Strategic Innovation Fund, and I had visions of the audit that was done by the Commissioner of the Environment and Sustainable Development, which wasn’t very positive.
Could you give us some idea as to how you are preparing for those new programs and how you will set your performance indicators and also measure whether you have actually closed those loopholes?
Mr. Massie: Thank you for the question. The Strategic Response Fund is built on the strategic innovation platform. There is a structured administrative process already existing within the department to enable us to deploy this additional funding.
Senator Marshall: That’s my concern because the Strategic Innovation Fund received such a negative opinion from the environment commissioner, but please carry on.
Mr. Massie: We have noted the environment commissioner’s report, and the organization and the program delivery continue to look at how we can improve.
For the Strategic Response Fund, there are a number of deals we do. We look at the different industrial sectors to help. The recent funding is to continue to help enterprises react, adjust and pivot as the recent tariff announcements are impacting Canadian companies extensively.
Senator Marshall: Have you set up performance indicators? That was one of the weaknesses of the Strategic Innovation Fund in the audit. Are you setting performance indicators? Will you measure what your progress is rather than just going along?
Mr. Massie: I can definitely return to the committee with a more substantive answer on the performance measurements. But I know in every agreement we sign under the Strategic Response Fund, we do have agreements with regard to jobs and investment that has to come through from other sources, as well as a number of economic milestones that they need to meet as the agreement progresses.
Senator Marshall: Is someone monitoring that?
Mr. Massie: There is a very adept team that monitors that on an ongoing basis. We can conduct recipient audits as required whenever we feel there is a need for further review of any agreement we have.
Senator Marshall: Thank you.
Senator Fridhandler: Thank you, Mr. Massie, for joining us today. A general question that doesn’t seem to be tied, but I would like to know how it’s tied is the old Sustainable Development Technology Canada, or SDTC. It was internalized into the department, I believe, from an independent body. Does it still operate? Does it morph into one of the new funds we are talking about? What is the status of that fund?
Mr. Massie: Sustainable Development Technology Canada was transferred and incorporated into the National Research Council Canada. They are now responsible for the programming that was done under SDTC formally.
Senator Fridhandler: It still exists? I can’t remember how or if it was directly addressed in this budget.
Mr. Massie: From memory — and I would have to go back — I do not believe there was anything specific to SDTC or its successor program as part of this budget, but I can return with a more substantive answer on that one.
Senator Fridhandler: In materials provided to us by BDC, they indicated that in the past 20 years, the number of entrepreneurs in Canada declined by 100,000. At the same time, when I looked at the population stats, we have gone from 32 million to 40 million. It is more obvious there is an issue. What do you have to say about that? What are we to do? Part of the goal here is to generate activity.
Mr. Massie: I agree. There is an inherent challenge we have as an economy in Canada. We have seen a steady decline in the number of entrepreneurs over the years. We are seeing that entrepreneurs are coming to entrepreneurship later in life. They will do different things before they get to entrepreneurship. Being an entrepreneur is a challenge. Every day, there are always 300 problems you have to simultaneously address. We are working to address some of the barriers that a number of under‑represented groups have faced. The Women Entrepreneurship Strategy has had great success in enabling us to support more women in entrepreneurship. There are initiatives like Futurpreneur Canada or the Black Entrepreneurship Program which, again, are doing important work to enable that.
We need to continue entrepreneurship. It is an ongoing challenge and something that we at the department and in my team specifically continue to look at: What are the barriers, and how can we help new entrepreneurs come into the economy? At the same time, we are also concerned with the transition that is happening within the economy as many entrepreneurs seek to retire and new entrepreneurs need to take up the baton on a number of businesses on that front.
Senator Fridhandler: In the same vein, when we talk about different groups of entrepreneurs, I’m going to switch over to our immigration policies. I haven’t followed whether we still have the entrepreneur category where we can entice people who will invest — years ago, it used to be — a quarter of $1 million into an active business and they are welcome to immigrate to Canada. Is that part of what we have today or part of any of the planning?
Mr. Massie: My understanding is the Start-up Visa Program that exists under the economic immigration stream continues to exist. We are currently discussing with colleagues at Immigration, Refugees and Citizenship Canada about bringing our entrepreneurship expertise and their immigration expertise together to see how and what we can do to improve government policies and programs to be able to capitalize on entrepreneurs. Things are happening south of our border right now, and there are entrepreneurs who may be looking to return, so what could we do to help?
Senator Fridhandler: Thank you.
Senator Loffreda: Thank you, Mr. Massie, for being with us. My question — so you can prepare for it — is on employee ownership trusts. You discussed business transitions and the concern you do have. I’ll give you a little preamble so that you can look it up and be ready for the question.
I agree that housing, infrastructure and productivity are critical priorities for our country, but we cannot overlook the reality that 76% of our SME owners are expected to retire by 2035 — and 76% is a huge amount. This raises an urgent policy question: Is access to capital now the largest barrier to the intergenerational transfer of businesses?
We are already seeing an increasing number of foreign offers being made to Canadian entrepreneurs for their successful businesses. There is so much liquidity south of the border. We want to keep those businesses in our local communities and keep them in Canada. We need programs, such as employee ownership trusts.
What are we doing to enhance support for employee ownership trusts, which I have been an advocate of from the very beginning?
Do you see an advantage to extending or enhancing the capital gains exemption of $10 million beyond 2026? Right now, it is expiring in 2026. You understand and I understand and many of us understand that when you are selling your business, there is planning involved; it takes more than 12 months. Right now, there is uncertainty. Will that be in place beyond 2026? If we look at other countries, in the U.K., employee ownership trusts took a huge launch once they made it capital gains tax-free. Now 10% of all M&As in the U.K. are employee ownership trusts — not 90%, not 80% and not 75%. We should give our entrepreneurs that possibility and that alternative and a return on labour. There is my question. It’s too late for this budget, but are you considering it for future policy?
Mr. Massie: Thank you for the question. Tax policy is always within the purview of the Department of Finance. I agree, but we often —
Senator Loffreda: You can’t skate over this one.
Mr. Massie: We do defer to the Department of Finance on tax policy. But I agree with you that employee ownership trusts have a critical role. In our work, we work with the cooperatives and the cooperative associations across Canada, and they have promoted the tax credit for their members and their worker‑owned credits. I agree with you that we hear from a lot of stakeholders who would like this certainty on this tax credit for a much longer period and not only in 2026.
In my conversations, I work with partners across the government, because entrepreneurship and small businesses are not only in Innovation, Science and Economic Development Canada. It is across the department and government. We will continue to work with our colleagues, and employee ownership trusts is one of the elements that continues to come up in those conversations.
Senator Loffreda: Do you see that as an urgent issue? You did talk about transition and the concern that entrepreneurs are aging. I gave you the numbers, but storytelling is better than numbers, so I’m trying to tell a story here.
Mr. Massie: We definitely see that employee transition is an important issue. Owners who are looking to exit their businesses need to start planning five years ahead of time to prepare their information, to prepare their businesses and to invest in their businesses to make them ready for transition.
I agree with you; having certainty over the longer term on tax measures and on a range of different tax measures would be helpful to businesses. Again, the decision on tax measures — and I’m not trying to skate — rests with the Department of Finance.
Senator Martin: Access to financing can vary by region and sector, and you did touch upon some of the underserved groups, like start-ups and whatnot. I want to ask you about the regions or sectors that you see as being most underserved today. Can you give us a sense of Canada as a whole? When it comes to access to credit, what targeted measures is your department taking or recommending to close those regional and sectoral gaps?
Mr. Massie: Thank you for the question. I agree that different sectors and regions do have some different capital needs and access to financing challenges. However, the economy is well served by the range of private financing providers that we have across the country which do match, to a great degree, the amount of economic activity that is in those regions. I know there are always demands for more, and I hear those demands on a regular basis.
There are a range of sectors that will sometimes require more funding. As I noted, some of the younger businesses in the start-up sector will need more capital. They are more capital intensive as they grow and build out their innovation or their product on that front. In more traditional sectors, we have some supports that exist for agriculture through Farm Credit Canada, for example, which has a range of economic supports.
That’s where the role of government programming comes in. The regional development agencies play a key role in stepping in when there is a market failure or a greater need for financing to enable small businesses to grow, expand and scale in their regions.
Senator Martin: Okay. We live in a very big country. There is always the urban-rural divide. I’m always concerned about the harder-to-reach places, the less populated places and the access. I have another important question, so I’m going to move to that one for now.
I’m looking at Canada’s Red Tape Report: The cost of regulation to small business. The Canadian Federation of Independent Business, or CFIB, has tracked regulatory costs for small businesses since 2005. The 2024 report finds that the average small business owner lost 32 business days to red tape. It estimates the total cost of regulation from all levels of government at $51.5 billion, with about 35% of that just under $18 billion due to red tape.
These are really big numbers, and there is the cost to business because of red tape. In light of these numbers, how is the federal government and your department taking this regulatory burden into account when it talks about improving access to credit and capital for small- and medium-sized businesses? What specific steps are you taking to reduce red tape so that owners have the time and capacity to use the financing and support programs that exist? How are we reducing the red tape?
Mr. Massie: Thank you for the question. On the red tape and the CFIB reports, we talk with the CFIB on a regular basis; we hear those reports and work with them. The government has published a number of plans to reduce red tape. There was a 60‑day initiative asking all departments to review their stock and look at that red tape. The government also, through Budget 2025, introduced regulatory sandboxes and also looked at establishing a new red tape reduction office to continue to advance and push to make progress on reducing red tape in order to free up entrepreneurs to be able to focus on their businesses.
Senator Wallin: I read a piece yesterday that said cabinet has increased funding for the Canada Infrastructure Bank by 30% even though it has billions left unspent in its budget. On the programs you outlined for us here, do you have unspent dollars?
Mr. Massie: Thank you for the question. In the existing programs that we had previously, such as the Black Entrepreneurship Program, the Women Entrepreneurship Strategy and Futurpreneur, which I have direct responsibilities for — and not accounting for the new federal investments through the budget — we have spent the majority of the money. Some funding may be coming back from organizations that haven’t spent it all, but we are maximizing the spend on that side.
On other elements within the broader department, I can say that efforts are afoot to ensure we are spending funds. There have been a few setbacks with the Strategic Response Fund with investments that have happened, as we see in hearings at the other house. We have a lot of demand coming in, especially since the launch of the Strategic Response Fund and the Regional Tariff Response Initiative, to be able to expend all that money going forward.
Senator Wallin: I kind of lost count here as you went through your programs. I noted 10 of them, not even counting Indigenous economic spending, which is in a different category.
Yet with all of these tens of billions of dollars and other government departments, we still hear — and you can see it on the news pages any day or read the testimony in front of this committee — that they cannot get funding. They can sometimes get funding up front, but it does not last through the development stage; they end up selling or closing their doors.
To Senator Martin’s point, the regulatory burden is extraordinary, too costly and often the reason people give up. On those issues, what are you doing about that?
Mr. Massie: My experience has been that when we administer government programs, there is always an oversubscription of demand for the available funds. We have processes to provide funding to the most meritorious organizations, and then we work with those organizations on an ongoing basis to monitor and follow their projects to ensure that the funding is spent.
Sometimes projects do not pan out. That is part of business. Some businesses succeed and some don’t succeed. But as we do fund projects, in the majority of cases, we try to fund projects that will be successful and that advance and help the economy grow and build.
I’ll leave it at that.
Senator Wallin: Dealing with government is part of the regulatory problem they cite when they come here and give us testimony.
Let me just go to a question that Senator Marshall raised: Money spent does not equal success. I would ask you if you measure three things: Do you measure access to the program? Do you measure success? Do you measure longevity? Those are three things I’m particularly interested in.
Mr. Massie: Thank you for the question. We do measure access to the program. Every time we do intakes, we look to see if we are capturing a broad diversity of the economic activity in Canada.
For example, in the Women Entrepreneurship Strategy or the small business programming, we have always tried to ensure there is representation from a geographic perspective and from different sectors and different demographic groups. On the success, we do evaluate all our programs. All programs are mandated for an evaluation every five years. We have standard evaluations of all our programs to ensure there is success.
On longevity, there are agreements. Our bigger agreements through the Strategic Response Fund have commitments that sometimes go up to 25 years, where the businesses will need to continue to report on the progress of those investments over the long term to ensure they achieve the targets that they committed to in the agreements.
[Translation]
Senator Henkel: Thank you for joining us, Mr. Massie.
The gap between interest rates for SMEs and large companies is considered to be a structural competition issue. The Competition Bureau, which reports to your department, launched a major study of the SME lending market. We know that the study is ongoing, but the data already available is very clear: The rate differential paid by Canadian SMEs is nearly twice as high as in other OECD countries.
Without prejudging the outcome of the study, do you recognize there is already a competition problem in the SME credit market? Above all, what tools is your department mobilizing now, even before the study is complete, to begin correcting this structural imbalance?
Mr. Massie: Thank you for the question.
I completely agree with you that interest rates have a significant impact on the viability of business ventures. As you mentioned, the Competition Bureau’s study is ongoing, and I do not want to interfere with it.
We also know that the interest rates financial institutions offer businesses are based on risk. Small businesses often pose a higher risk. Among the measures we are putting in place to help small businesses is the Canada small business financing program, where we share the risk with financial institutions in Canada. Financial institutions follow their own process for determining whether to grant a loan and register that loan with us. We set caps on the interest rates charged to small businesses. For a fixed-term loan, the rate is 3%. For a line of credit, the rate is 3% or 5% above the Bank of Canada’s key interest rate. This measure is intended to ensure more affordable financing for small businesses.
The other elements we have are aimed at helping entrepreneurs. Whether it’s women entrepreneurs, the Black community, or young people, we have programs to help these groups. Regional development agency programs provide contributions that must be repaid, but at a very low rate to help businesses move forward.
We have programs then to assist small businesses.
Senator Henkel: You know as well as I do that things are not that simple, especially structurally. It takes a tremendous amount of time and effort to access these programs. In 2018, less than 16% of Canadian businesses were owned by women. Former minister Ng said that the women’s entrepreneurship strategy, which at the time had a budget of $2 billion, would double that number by 2025. However, in the first quarter of 2025, we are at 19.5% despite a budget that has now grown to nearly $7 billion. We are very far from the announced doubling. How does the department explain this gap, and what concrete measures are you considering to ensure that the billions of dollars invested finally translate into a real impact?
Mr. Massie: You are right: We have made progress when it comes to women entrepreneurs. However, there is still a long way to go. The rate of 16.8% to 19.4% represents growth in businesses with employees. However, this rate does not include all women entrepreneurs who do not have employees. The participation rate for women in the latter case is around 30%.
We have also made progress in terms of the participation of self-employed women entrepreneurs. The government will continue its approach to the women entrepreneurship strategy and will continue to work with our partners. The strategy has 20 partners. The goal is to help roll out a series of strategies to assist women entrepreneurs.
[English]
Senator McBean: Senator Marshall got close to my question, Senator Wallin kind of nailed it on the head and then Senator Henkel finished the door there. Maybe you can give more examples. I was going to ask about your evaluation of the effectiveness of the federal programs and what improvements and new initiatives are being explored to close the remaining gaps.
Mr. Massie: Thank you for the question. There will always be work to do to ensure we have an ever-increasing number of entrepreneurs in Canada because we have a deficit we need to correct. The government has a range of initiatives. On the success of the initiatives we are seeing, for example, if I take something like the Women Entrepreneurship Strategy, while overall percentages may not have increased to the degree we wanted, we have seen some increases in the number of women we serve and the number of women who are accessing those services and finding the supports, the peer mentoring, the services and the capital they need to advance their strategies.
As part of the Women Entrepreneurship Strategy, the WES Ecosystem Fund has supported over 176,000 women since it was created in 2019. The Women Entrepreneurship Loan Fund has provided over 1,100 loans worth $33 million since it was launched in 2022. We have also enabled women to make connections within the ecosystem through the Women Entrepreneurship Knowledge Hub through 5,100 events where 202,000 women entrepreneurs participated.
BDC had an objective to increase the amount of financing for women entrepreneurs, and they beat that objective a year and a half into the three-year commitment. We have many success stories in different programs.
Senator McBean: That is one lane, but what about other lanes? Senator Deacon is not here. I’m sure he would be asking you about areas like AI and technology. What programs are helping?
Mr. Massie: We have had success. The government is consulting for the next round of the AI strategy that we are putting forward. Minister Solomon has convened a task force, and we are going through the many proposals that have come in at this point. For some of the programming, the success is measured over the long term as well. On AI, it may be a little early; we’ll continue to monitor progress.
If we look, for example, at some of the industrial policy programs we had in the aviation sector dating back 10 or 15 years, they have been able to build out the aviation sector in Ontario and in Quebec quite significantly. The reports from those initiatives continue to come into the department on an annual basis to help us.
There are sectors we have been able to build over the last 15 to 20 years. We continue to support them, and through the Strategic Response Fund and the Strategic Innovation Fund, which is its predecessor program, we look at those investments made in the past few years that will pay dividends over the course of the next decade.
Senator McBean: Can you give us a quick glance into the future of what some of the new initiatives might be? What are some of the things you’re exploring there?
Mr. Massie: I’m not as familiar with the Strategic Response Fund, so I’m just trying to go back from memory and see if I have a few data points here. I think the government has looked to advance a range of supports to help enterprises adjust to the tariffs. The deals are currently under review, and we’re currently making assessments and decisions on those, and we will be able to provide more information once the investments are done. I don’t have the data handy, but I’m happy to go back and talk to my colleagues to be able to provide some information to the committee.
Senator Yussuff: Thank you for being here and for the work you do on behalf of Canadians. The department oversees many different programs to support SMEs, and I could make the argument that they’re all important. However, is there any measurement to talk about how we can measure improvements? One consistent thing we’re seeing with surveys is small businesses are saying there are tremendous challenges as to how to access capital in this country.
Given all you’re doing, we should not constantly be seeing the same response that small businesses are repeating: They have problems accessing capital. One is to grow and develop, but these are also risk takers in the economy. How do we overcome this inherent problem that seems to be persistent in small businesses across the country — not just in one region but across all regions of this country?
Mr. Massie: Thank you for the question. You are right that we will always hear from small businesses and sectors that require more funding. One of the things I’ve seen throughout my years in the department is we may not hear as much from the people who are successful in accessing financing and being able to develop and build out their projects.
What we do and what I have done in every program is I have always looked to learn from previous experience to see where our gaps have been and how we can work to ensure accessibility and ensure the value-for-money proposition for the government.
We can always look to improve. We are always listening to stakeholders, trying to better understand the nuances. We try to design programs with criteria that enable companies to apply.
Every company would like a simpler process, and this is the need to balance out the value for money versus the accounting for good public-dollar spending we need to do.
We have made and have adjusted programs. One thing the pandemic has shown us is that we could adjust programs more quickly and be more nimble in responding to small businesses and Canadian businesses’ needs in our programming. Since the pandemic, I have seen that we are changing and adapting our programs on a regular basis.
I will take, for example, the Canada Digital Adoption Program that sunsetted at the end of the last fiscal year. We heard continuous feedback from businesses, some positive and some negative, but we looked to learn from that feedback by doing surveys and trying to adjust our programming and seeing where we could facilitate the process and enable more businesses to come in and be able to access the programming.
Senator Yussuff: Given that the demographic of this country has changed tremendously — with women entrepreneurs and Black entrepreneurs — in almost every ethnicity, you have a whole class of people who are now looking at how they can establish their small business but also grow it at the same time.
What has the department done to recognize this fundamental shift in the composition of the country in terms of the demographics, and how do you adapt to meet some of those specific cultural challenges which has not been the history of the country in how we loan money and also how we look at different communities wanting to get into the market and establish their businesses?
Mr. Massie: Thank you for the question. As we have developed, for example, the Women Entrepreneurship Strategy, the 2SLGBTQI+ Entrepreneurship Program and the Supporting Black Canadian Communities Initiative, we have proactively engaged with those communities to learn about the challenges, the barriers and the systemic discrimination they faced when it came to accessing capital in order to better understand and appreciate those challenges. Then we looked to design programming that took that information into account and then work with community partners to ensure those communities were made aware of those programs.
We have learned lessons from those programs. We continuously get information and requests for information and calls from other programs, be it within the federal government or elsewhere, asking us to share our learnings and share the information we have gained to help them adjust their programs.
Senator Ringuette: I have one quick question. What is the ballpark dollar amount that would be invested on a yearly basis in university research?
Mr. Massie: Thanks for the question. I’m not sure I have that answer with me. It is a bit outside of the entrepreneurship realm. I can work with my colleague in the Science and Research Sector to get that information.
Senator Ringuette: It is not outside the entrepreneurship realm. That’s where I’m heading.
Essentially, what I’m hearing is that Canadian tax dollars are funding a lot of good university research in Canada. Unfortunately, the results are patented, and Canadian entrepreneurs should be able to have access to these patents that we have funded globally, yet the Americans or other entrepreneurs are grabbing and buying these patents, and all the research money that we have put into Canadian university-based research is gone. There is no value left for Canadians as taxpayers, as a government, as new start-ups and as new entrepreneurs in Canada. That’s where I’m heading.
When are we going to understand that the investment that we make in university research provides innovation items and patents? We should be a shareholder of this research and these patents so that we have some control as to where the entrepreneur lies — hopefully within the Canadian borders, creating jobs in Canada and exporting, of course, the goods and products that they would produce.
It is very much an entrepreneurial pact.
Mr. Massie: Thank you. Maybe I will just clarify.
We do work with the Science and Research Sector at Innovation, Science and Economic Development Canada. We look at commercialization coming out of universities. Within my scope of responsibilities, I will have to talk to my colleagues to get the total amount of funding that goes to universities through either research councils or other initiatives that we have at Innovation, Science and Economic Development Canada in order to provide that fact to you. But commercialization coming out of universities and research institutes is one of the challenges we often hear.
We often hear, conversely, that there is great innovation, but they are struggling to be able to market those innovations and are looking for capital. They sometimes have their internal accelerators and incubators within the universities, and sometimes entrepreneurs look and go elsewhere to be able to develop those innovations and those products.
Senator Ringuette: What if they sell the patents that have been paid for by Canadian tax dollars?
The Chair: Thank you, senator.
If you can, please provide the answer to the committee. It would be an opportunity for me to double-check if my friend ChatGPT provided the right number, because it is $4.9 billion according to ChatGPT. It will be an opportunity to double-check how efficient my assistant is regarding that.
[Translation]
Senator Dalphond: Mr. Massie, you said earlier that there are loans to help women start a business. You talked about $33 million?
Mr. Massie: Yes, we have given $33 million in loans to women entrepreneurs.
Senator Dalphond: We are talking about 1,100 loans?
Mr. Massie: Yes, 1,100.
Senator Dalphond: Over 10 years?
Mr. Massie: Since 2022, so over the past three years.
Senator Dalphond: Those are not big loans. The average loan amount is $33,000?
Mr. Massie: These are loans up to $50,000. Entrepreneurs have different capital requirements throughout the growth of their initiative. Our strategy aims to help women entrepreneurs who want to start a business. These are loans up to $50,000.
Senator Dalphond: Are these small businesses comprising one or two people?
Mr. Massie: These are start-up loans. Often, a small business begins with an idea that grows. We want to give them access to capital, help them grow and get started. Then there is a whole series of other measures that open up access to capital in the private market and from government to complement this approach to help entrepreneurs, whether they are women or not, grow their businesses.
Senator Dalphond: Are these direct loans you are providing?
Mr. Massie: We have empowered organizations working in this field. We sought out organizations that worked with women entrepreneurs and provided loan development. We decided it was best to work with people who were knowledgeable and experienced in this field. For example, Évol in Quebec is one of the organizations we fund. We also fund several organizations such as WeBC and AWE Alberta, which are women’s entrepreneurship organizations.
Senator Dalphond: There is the Canada Small Business Financing Program, and I see on the website 53,000 loans worth $11 billion. These are not direct loans, but loan guarantees made by financial institutions?
Mr. Massie: Correct.
Senator Dalphond: You have conditions. For example, the bank cannot require more than 3% above the prime rate. Is that a competitive rate? Without you, what would be required of them?
Mr. Massie: As you know, all entrepreneurial proposals and financing requests are based on a set of criteria that the bank must use to make its decisions. The goal of this program is to provide accessible financing to entrepreneurs at an affordable price. We finance several organizations. In fact, the three major sectors we finance the most are food services and accommodation, retail trade, and health care and social assistance. These three sectors are much higher risk, and many banks are reluctant to finance them. This is a way to facilitate access to credit for certain higher-risk sectors. I am not in their shoes, nor am I their banker, but I get the impression that if these businesses were looking for a loan, the rate would be much higher than the prime rate plus 3%.
Senator Dalphond: Is this $11 million in case everything goes wrong and none of the loans are repaid?
Mr. Massie: Yes. We have formulas to limit the government’s financial liability. They are allocated by the participating financial institution. Over the last two five-year periods, the program has been roughly balanced between costs and claims paid.
[English]
Senator Varone: The reason I wanted to defer the question is because I didn’t want to set the tone in the wrong way, but following up on some of the points that Senator Yussuff talked about, 23% of Canadians were not born here. They were born elsewhere. That number grows exponentially in major centres where it reaches 40%.
There is limited access to capital for start-ups and small businesses, and when they are denied access to capital, they don’t report. It has been my experience and I have seen it first‑hand where they go to the underground market and the underground economy.
The correlation between being able to bank and reporting is symbiotic. They go together. You end up resolving much of the underground economy the minute they become legitimate businesses.
Do you have data with respect to how many people are denied that access to capital, and how big is the underground market that we have no idea exists in Canada?
Mr. Massie: Thank you for the question. I have not seen official data that would allow us to quantify the amount of the underground economy.
I will say the experience that I had designing the Black Entrepreneurship Program, where we spent six months in co‑development with the Black-Canadian community and listening to the anecdotal evidence that came up — such as a gentleman who had two businesses and had operated for 20 years but had never been able to get a credit card from a financial institution — was sobering to me. We have a number of those examples of businesses that had always worked informally through friends and family or through being able to sort of advance.
I think when we put in place initiatives like the Black Entrepreneurship Program or the Women Entrepreneurship Strategy and when we work with developmental lenders like the Federation of African Canadian Economics, or FACE, or with organizations like the Women Entrepreneurship Loan Fund, we are working with people who are in the community and will work with the members of the community to be able to build out approaches. Futurpreneur, for example, is one of those organizations that works extensively. About 40% of their members are women entrepreneurs. They have developed very strong practices for Black entrepreneurs and Indigenous entrepreneurs.
Senator Varone: I understand that. The point I am trying to make is: Do you acknowledge that the minute capital is accessible by the very start-ups that you are talking about, they become part of the legitimate economy? And that’s the direct point.
Mr. Massie: I will not dispute that point. But as soon as we can enable them — what we have often termed as the “classical economic sector” — that definitely helps. Once entrepreneurs can actually be able to access those funds and access the system, they can access more growth and a range of services that they need to be able to build out their services.
The Chair: Colleagues, we have five minutes left and five senators who have expressed interest in a second round. Try to be efficient. Go with a quick question.
Senator Loffreda: With respect to economic sovereignty, I don’t want a commitment on your part today, and I think it would not be fair, but we both agree that business succession is a huge concern. We agree on economic sovereignty. What’s the next step in enhancing employee ownership trusts? It’s not like co-ops, exactly. Can we go through your office? Would you say, “I have communicated to the Minister of Finance on the issue, and I have communicated to every possible department”? Great minds think alike. We agree on it. What’s the next step?
Mr. Massie: Thank you for that. I think we can continue to have conversations. I’m always happy to have conversations with you, and I’m happy to work with my colleagues at Finance Canada because, at the end of the day, we will have to work with our colleagues at Finance Canada who control tax policy. We work with stakeholders all the time who bring forward a range of initiatives, and we do talk with Finance Canada, but at the end of the day, Finance Canada will make those decisions.
Senator Loffreda: Okay. So we can use your office to —
The Chair: Thank you, senator. I have to be fair.
Senator Marshall: How come the answer is always more money? I don’t understand, and we are not getting to where we want to go. But every financial document is more money, more money, more money. It’s not the answer. So what’s the solution? I don’t know. Do you know?
Mr. Massie: Capital and financing are the fuel for businesses. Businesses and business owners always have a mission to grow and scale their business, so they will always look for more capital. I think we need to ensure there is sufficient capital in the economy to enable businesses to grow. But in my eight years working on small business, I have yet to meet a stakeholder who says, “I’m good with money.”
Senator McBean: In your own words, you said it was quite sobering to come across a story where a gentleman had no access to a credit card and was already a business owner. In line with Senator Varone, how are you working with private lenders, fintech providers and other alternative financing platforms to modernize access to capital pathways for these small- and medium-sized enterprises, particularly those without traditional collateral or credit histories?
Mr. Massie: Thank you for the question. I think when we worked on different initiatives, we have had the chance to engage with financial institutions and their industry associations. We continue to work with them and encourage them to make links with the community and build out partnerships that they can do. For example, Block is a big financial company that does a range of services for entrepreneurs. We have regular conversations with Block, and I have conversations with many others. I’m just using that as an example. We have put them in touch, for example, with Indigenous entrepreneurs, with women entrepreneurs and with FACE, and that has developed into partnerships and helped them grow elements of their business and open up financing.
Senator Wallin: I just have a request. If you can, please send us in written form your metrics for assessing success. Thank you.
The Chair: Colleagues, thank you for your efficiency and discipline.
[Translation]
Mr. Massie, thank you for sharing your thoughts. This is very helpful to us as we begin our special study. Your testimony will be taken into consideration.
Honourable senators, we continue our study on access to credit and capital markets for small- and medium-sized enterprises with our second panel.
I wish to welcome our two witnesses representing the Business Development Bank of Canada: Ms. Isabelle Hudon, President and Chief Executive Officer, and Mr. Pierre Cléroux, Vice President, Research and Chief Economist, by video conference.
Ms. Hudon, you have a rather busy schedule. We really appreciate having you join us. You have approximately five minutes for your opening remarks and then we will move on to questions and answers. Thank you and welcome to the committee.
Isabelle Hudon, President and Chief Executive Officer, Business Development Bank of Canada: I’m never too busy to meet with senators.
On behalf of the Business Development Bank of Canada, or BDC, I would like to sincerely thank you for inviting us to engage in this important discussion. I especially want to thank you for your interest in access to capital for Canada’s entrepreneurs and small- and medium-sized enterprises, or SMEs.
To start, I’ll say a few words about BDC. We deploy capital by providing financing, so loans, advisory services and venture capital. We have a portfolio of approximately $55 billion, including $6 billion in venture capital. I should also mention that we are a Crown corporation and we operate at arm’s length from the government when it comes to funding. Every year, we generate the capital we need to carry out our mandate. In addition, we pay out an annual dividend to our only shareholder, the Government of Canada.
I also want to commend your decision to focus on the issue of access to capital for SMEs — a matter of great significance for our economy, and one where we can and must do better. Let me explain. Over the past 15 to 20 years, the volume of loans granted to businesses of all sizes in Canada has consistently increased. For example, during the 10-year period between 2012 and 2022, total lending volume almost doubled. At first glance, such growth might suggest that access to capital is not a major challenge for Canadian businesses. However, the reality is quite different when we look specifically at SMEs.
Between 2007 and 2011, except for the financial crisis year of 2008, Canadian SMEs managed to secure about 17% of the total outstanding business loans each year. From 2012 to 2022, however, the share of financing directed to SMEs steadily declined, from nearly 16% in 2012 to just 11% in 2022.
[English]
This trend is concerning and deserves our attention, especially since SMEs are at the heart of the Canadian economy. Today, Canada is currently home to 1.1 million SMEs, representing 99.6% of all businesses nationwide. These SMEs account for 64% of private sector employment and generate nearly half of the GDP generated by the private sector.
SMES are not unique to Canada, but Canada stands out for the very high proportion of small businesses in its economy. For instance, businesses with fewer than 100 employees make up 98% of all companies, and three quarters of these have fewer than 10 employees. Compared to the U.S., where large corporations employ a greater share of the workforce, Canada stands out for the significant share of employment that comes from small businesses. This means that when Canadian SMEs face challenges in accessing capital, it directly affects a large part of our economy and ultimately all Canadians.
When I joined BDC almost five years ago, one of my priorities was to obtain a clear picture of the SMEs facing challenges in accessing capital. Our analysis revealed that around 350,000 entrepreneurs lack the financing they need to realize their projects and achieve their ambitions.
Most of these entrepreneurs are from groups under-represented in the portfolios of major financial institutions: businesses in rural and remote regions, women entrepreneurs, Black entrepreneurs, newcomers and Indigenous entrepreneurs.
As a development bank, it is part of our mandate to do more and better to reach these entrepreneurs. With this in mind, we have mobilized our teams on the ground and set concrete targets to expand our reach. We also developed targeted programs to better meet the specific needs of entrepreneurs who face greater barriers accessing capital.
Finally, we rallied partners from across the country, from major banks to the Community Futures Network of Canada, and we launched a new Community Banking team to make our capital more accessible. Our most recent results show that progress is possible, but there is still much work to be done.
[Translation]
In four years, we have increased the number of entrepreneurs we serve by 47%, reaching 107,000 clients across the country. Over the same period, the value of our portfolio commitments grew by 38%. In other words, our client growth has largely come from small loans. This has also led to a notable evolution in our risk profile. For example, between 2020 and 2025, we increased the value of loans authorized to SMEs with risk ratings of 3 or worse by 19%, and authorizations to higher-risk sectors by 51%.
These results demonstrate that it is possible to improve access to capital for SMEs. However, given our experience over the past four years, meeting this challenge requires targeted and deliberate efforts.
[English]
Above all, we must recognize that this is a collective responsibility and that the entire financial ecosystem must be part of the effort. One thing is sure: Our work at BDC is far from being finished. With that, Pierre Cléroux and I will be pleased to answer your questions.
[Translation]
The Chair: Thank you, Ms. Hudon, for your opening statement.
Mr. Cléroux, if you experience any technical difficulties, please let us know, so that we can suspend the meeting and follow up with you.
[English]
Senator Varone: Welcome. Lending is complicated, and the only thing more complicated is borrowing. In my experience in small business, there are two solitudes that exist in the banking community. Without patting my colleague Senator Loffreda on the back, my experience extends to all banks, but two in particular: RBC which follows the edict of “know your client,” and they spend a lot of time getting to know the client; and TD Bank which pretty much doesn’t care if I exist or not. It is a mathematical equation, and you have to fill out a bunch of forms to figure out whether you qualify for lending. Where does BDC fit in that landscape as it relates to small business? Do you have the resources and the time it takes to know your clients and understand who they are? I ask because not everything manifests in numbers.
Ms. Hudon: The short answer is yes. We are seasoned to answer the category of “know your client” and more than that, which is to make sure that client satisfaction is at the right level. You discussed the key performance indicators, or KPIs. We are data-driven, and we want to know our clients more every day, but we also want to make sure the satisfaction of our clients is at the right level.
On that front, I can tell you that over the last five years, we have gained ground on the satisfaction of our clients, and it is probably linked to the fact that we do not apply all the same rules to all clients. I would say it is sad, but it is still difficult to believe that in 2025, we need to have dedicated teams for dedicated clienteles — for example, serving women or Indigenous clients. Without those dedicated teams applying not different rules but applying the rules differently to those specific clients, we would not be able to stand in front of you and tell the story that I just told you. Are we the best? Probably not. Are we very close to our clients? More and more.
Senator Varone: I have a follow-up question, if I may, on banking platforms. I borrow money from RBC, but I manage my money through TD, because they have a better platform. It is a reality in the small business landscape. They know it because I have duplicate accounts for everything. But the question that I have is: Some banks that I steered away from prevent me from the easily understood platforms of other banks. They insist that you bank with them and their platform notwithstanding how complicated they are. Where does BDC stand in that landscape?
Ms. Hudon: BDC is slightly different in that we exclusively serve entrepreneurs for their business. We don’t do the day-to-day and the retail banking. Is it good or bad? I don’t know. But that is exclusively what we do.
On the platform, I’m not going to brag that it’s under my regime that BDC launched this with my predecessor who saw a huge opportunity to bring a platform that would make it easier for entrepreneurs to borrow money.
And we have that online platform where you answer five questions and usually the money can be in your bank account for a loan under $150,000 within 10 days.
Being easy to do business with is a key driver for us. We would not be able to apply this platform to all sizes of loans, but the experience was so good for the first tranche of $100,000 that we’re bringing this platform to serve clients for loans up to $350,000.
Senator Marshall: Thank you very much for being here today.
I know from reading the material on your website and your annual report, there are certain things that you measure, like the number of loans, the amount outstanding, loans written off and your allowance for doubtful accounts.
But in your opening remarks, you gave the impression, if I understood you correctly, that you’re also measuring other things like client satisfaction, I think you said. Do you look at the number of clients who make it? How many don’t make it?
Can you just give us some idea of what else you measure? I’m looking in terms of what your performance indicators are besides strictly relating to the amount of money that you lend out.
Ms. Hudon: Very good question. When I joined five years ago and we redesigned our strategic vision for the next five to seven years — and we’re almost done with this strategy — it was important for me to review the KPIs to ensure we were driving the right behaviours of our teams on the ground to deliver more and to do better and more for a greater number of entrepreneurs in Canada. And we moved from a scorecard of 90% of our KPIs being financial KPIs to a scorecard that now has less than 50% of the KPIs being financial KPIs. Let me tell you, it was a series of robust conversations with my board because it can sound like everything but a banker conversation when you move away from financial KPIs. However, as a development bank, we needed to include the evolution and progress on supporting Indigenous entrepreneurs and also include client satisfaction. It was not part of the scorecard back then. So we’re now less than 50% of financial KPIs.
Senator Marshall: Do you consider yourself self-sustaining, or do you still require financial assistance from the government? And I’m thinking in terms of “more money, more money, more money,” and eventually it will come to an end. Is the corporation sustaining on its own, or do you still need that influx of government money?
Ms. Hudon: The only place that we do use “more money, more money” is that we do provide more loans and more loans and more loans, but we are self-sustaining financially to deliver on our core business.
Senator Marshall: What is your collection rate? Do you recover 90% or 95% of your loans?
Ms. Hudon: It all depends on the category of loans. But we are self-sustaining, and we produce benefits and pay dividends. And our portfolio is not that much different on default rates and provision. The last few years were quite challenging on that front. But even if our clients look riskier on paper, our portfolio performance is quite good, I have to say. We don’t lose money; we make money. And we pay dividends to the shareholder. Though I want to say: For specific programs that we were asked and tasked to deliver during COVID or right now for the Softwood Lumber Guarantee Program, we do receive an injection of capital from the shareholder.
Senator Fridhandler: I would like to know a little bit more about your venture funds rather than the debt side of your business. I have one question, and then it’s over to you to give a broader description. Do you follow or lead? Do you need partners that you then fund jointly with, or do you lead in your funding of your venture funds? How are your venture funds managed, and can you tell us a bit more about them?
Ms. Hudon: Our investment arm is called BDC Capital. We have a portfolio, and depending on the day you look at the valuation, it’s between $6 billion to $8 billion. And we have different funds from which we invest directly in companies. And we also invest in funds, so it’s indirectly.
The performance of our investment is quite significant. We are mainly into the early stage, as that’s where private funds are not. We’re playing our role of the development bank. We like to believe that we play where others are not, until they do. We are capable of crowding in private money.
I’ll give you an example: our Cleantech Practice. When it was launched 15 years ago, everyone was highly skeptical on the potential return on equity from investments in cleantech. It is one of the most performing funds at BDC Capital, but what makes us most proud is that for every dollar that we’ve invested in cleantech, we were able to crowd in $6 from the private sector. The crowding in is part of our development role, and we take this very seriously.
Senator Fridhandler: Someplace in your report or the summary from July, you talked about increasing your higher risk-rated loans of 3.0 or worse, and then you equated it to an S&P bond level. Can you explain in plain French or English what that means to a lay person in terms of what you’re doing?
Ms. Hudon: I’ll bring you back to my opening remarks. When I joined and found out that our total addressable market was around 400,000 entrepreneurs in Canada to serve, we have to realize that we cannot think that the 1.1 million SMEs in Canada are for BDC to help and support because we have to be complementary to other financial institutions. In the portion of the 400,000 SMEs that need more of our support, when we dug into understanding who they are, 60% of them are mainly women, Indigenous and Black entrepreneurs as well as entrepreneurs in rural regions or remote regions, and all of them present way much more risks on paper.
We’ve decided to go after those clients and mainly help those clients. That’s why for our risk profile and the evolution of our risk profile, some bankers would say it got worse, but I say it got better from a development bank perspective.
We’re about where it should be as a development bank to stay healthy and financially sustainable. I want to make sure that I protect for the future as well as future CEOs who will have the same privilege that I have to preserve the self-sustaining posture of the bank. We don’t have to come knocking on the federal government’s door every year to have more money and more money. We deliver up to $9 billion of loans each year without knocking on our shareholder’s door.
Senator Wallin: Just as we sit here today — and I’m not in any way critiquing the work you do — we heard from Mr. Massie about the billions of dollars that are offered and injected into the economy through the Canada Infrastructure Bank, BDC, Export Development Canada and a myriad of special programs that we see in budgets and just off the top of politicians’ heads.
How crucial is it to the Canadian economy to have this substantial injection every year? Why is it so needed?
Ms. Hudon: I’ll answer from the BDC perspective. When we do receive additional capital from the shareholder, it is for a specific program to answer a specific challenge — for example, COVID or now softwood lumber. I can tell you that the key here is not necessarily asking for more money but the design of the program to ensure that we fix what’s broken.
Right now, senator, the additional capital that we inject into the economy is non-negotiable. The level of uncertainty on the shoulders of our entrepreneurs is quite heavy. Tariffs are one thing, but way heavier is the cost of uncertainty, waking up every morning and not knowing what will be the pet project of one of our neighbours.
I can tell you that the turbulence is quite significant for entrepreneurs, and the additional money we are deploying is quite important.
Senator Wallin: We could go back to COVID, or we could look at 2008. It’s just that as an economy overall, we seem to be very subject to all of these high-risk events and, therefore, very needy for all of these specialized injection programs. It makes me uncomfortable about the status of our basic economy that it needs so much propping up.
Ms. Hudon: I would invite you to look at the difference between a grant, a contribution and a loan. I could send you the performance of our COVID portfolio tomorrow, specifically the loans that we deployed during COVID. Everyone was guessing that the default rate would be very high and that we would lose money. We did not lose money. We will return capital to the shareholder.
I understand your comment, but it’s two different things. What we do are not grants and contributions. We make loans. Those loans are being paid back. Especially for specific programs that we deliver for the shareholder, we do return capital once the program is done.
Senator Wallin: I’d like to also ask this briefly, if I could: You said about the change from 90% to 50% in terms of KPIs, where you’re focusing on other issues there. Can you also answer or provide to us a response to the same question I put to Mr. Massie: How do you define success? Over time, what is the success of the business? Do they develop? Do they sell? I’d like to know some of the metrics that you use.
Ms. Hudon: I would invite my colleague Pierre Cléroux to say a few words on this because he does a lot of survey analysis, and I’m sure he would bring some interesting data.
Pierre Cléroux, Vice President, Research and Chief Economist, Business Development Bank of Canada: Thank you for the question.
We do a lot of research about the performance of our clients compared to similar businesses in the economy. What we see is they perform better in terms of growth. We help them to grow more than similar businesses. Also, the survival rate is higher for BDC clients than others.
Here is one final thought: What we also do — and we haven’t talked about this much — is advisory services. Our clients who are using both advisory services and loans perform better than others. The combination of financial support and also some advice and some coaching seems to be a really great solution for a lot of small businesses. Our businesses are performing better than similar businesses in the economy.
[Translation]
The Chair: Would it be possible, Ms. Hudon and Mr. Cléroux, to share those figures with us? I saw the TV ad as well. It would be very appreciated if you could send us the figures, including in relation to the pandemic.
Senator Henkel: Thank you for being with us.
In your 2025 report, you said that small SMEs, which represent 68% of your clientele, received just 23.2% of total loan commitments. Conversely, large SMEs, which have annual sales of $10 million plus and make up 8.8% of your clientele, received 48.4% in total loan commitments.
How do you explain that disparity, which clearly deviates from BDC’s mandate? You talk a lot about small- and medium‑sized enterprises, but that disparity doesn’t attest to something that is happening in the market. It attests to your allocation of loans internally.
Ms. Hudon: That’s a very good question, senator.
Our mandate is to serve small- and medium-sized businesses. Those bigger loans fall within the definition of medium-sized businesses. It’s important to look not only at the dollar amount, but also at the number of loans. We issue a lot more small loans. For example, our average loan in Canada is $350,000, when you consider the Canadian average. It is true, though, that some clients receive loans between $1 million and $10 million. Much of the time, it has to do with the fact that we are participating in loan syndicates and other banks are asking us to step up, because we assume the last tranche of risk that chartered banks are not willing to assume.
Third, we talked about client satisfaction, and that’s something we are very proud of. We have clients we have been working with since they opened their doors. For loyalty reasons, they want to keep us in their financial mix. When BDC has a return client, no matter the loan size, if the client is choosing to continue working with us, we issue the loan.
Senator Henkel: Thank you.
Now I’d like to talk about venture capital for women. It’s estimated that barely 5% of venture capital goes to women‑owned businesses. That illustrates how important BDC’s role is in correcting that structural inequality.
With that in mind, I want to follow up on the Thrive platform, a $500-million fund to support women entrepreneurs in technology. According to your annual report, actual disbursements are below the announced funding. After two years, less than 30% of the fund has been used. Why has BDC been so slow to deploy the funding, especially when it’s meant to help a client group that falls under BDC’s mandate? Does it have to do with a market failure?
Ms. Hudon: Thank you for giving me the opportunity to discuss an initiative that I actually championed in the organization, an initiative I have great ambitions for.
The half a billion dollars was a non-negotiable fund to close the gap women experience in accessing capital. In the venture capital market, when funding is launched, there’s a 10-year window. It is usually deployed during the first five years, and a portion is kept to reinvest in the businesses supported in the first five years.
With 30% of capital being deployed in the first two years, the initiative is on track to deploy the right percentage of capital at the end of five years, while keeping a portion of that capital to reinvest in the same businesses in the second and third rounds.
You are referring to the statistic whereby 5% of venture capital goes to women-owned businesses. On average, about 20% of the venture capital we deploy goes to women-led businesses, and more than 28% of the loans in our lending portfolio go to women. When you look at the average, then, it’s 17% for women-owned businesses in Canada, and there’s an overweight in our portfolio for loans to women.
[English]
Senator Martin: Thank you very much for your testimony and for answering the questions. I wanted to ask you specifically about the entrepreneurs who face greater barriers, whether it be language or culture. We have small business people across Canada and, in some regions, greater numbers from various ethnic communities.
My first question would be: In terms of your presence across Canada, are there places where entrepreneurs can walk in and inquire? I know you have an online application process. I was just thinking about access and the visibility. Would you answer that first question?
Ms. Hudon: Our headquarters are in Montreal. We have 3,000 employees, and 1,200 of those are around the headquarters, so let’s say it’s between Montreal and Toronto. The rest of my colleagues are spread across Canada, and we have 100 offices across Canada, which we call business centres. It’s not perfect, but we are present across the country, including in the territories.
The market where we perform the most has historically always been Quebec, with a penetration rate of up to 10%. The second market is the Atlantic, then B.C. and the Prairies, and the one where we perform the least is Ontario. There is no good reason for that. We need to do better across the country but especially in Ontario.
I was challenged at the beginning of my mandate about the fact that we were present only in urban centres. I dug into the data, and it’s not really true. When we look at our performance across Canada, we’re slightly more present and performing better in urban centres, but we also show almost the same kind of performance in non-urban and rural areas.
Senator Martin: What about the diversity within your clientele? Do you have data that looks at the ethnic background of your clients?
Ms. Hudon: We have imperfect, incomplete data. Five years ago, we started to ask clients to declare if they were part of one group or another. After three years of getting that data, we’ve started publicly sharing information on women and Indigenous entrepreneurs, and next year, we will start declaring on Black entrepreneurs, so we have that and I can send you all the details.
Senator Martin: In terms of ethnocultural communities, I was curious about the uptake because when we talk about barriers or accessing BDC, it may be more difficult because of language or cultural differences. You talked about having dedicated teams and that things required targeted and deliberate efforts. I’m curious about the various cultural communities that primarily have small businesses. This would be such an important resource, but I don’t know whether they know how to access BDC.
Ms. Hudon: You will not be surprised that in B.C., a big portion of our portfolio is Asian clients. We do target actions to make sure that we speak to those potential clients and that we’re credible in those communities. That is not what we do, for example, in the Atlantic. We have regional strategies to make sure that we are credible and relevant with the right set of clients.
[Translation]
Senator Loffreda: Welcome, Ms. Hudon.
At a recent meeting, you said that you wanted BDC to be more involved, and to strengthen its commitment and cooperation when it comes to policy development. I’m happy that you are here with us. Congratulations on BDC’s results, which, as you shared with us, are exceptional. Thank you for the support you provide to businesses.
[English]
We did talk about loan losses, and you will see where I’m going with this question. I was looking into Canada’s largest banks, and the recent reports show the provision for credit losses ranging from 0.09% to 0.19% for the last quarter. That is 9 to 19 basis points. From my experience, I think the industry average is around 33 to 50 basis points, so those are exceptional results for our banking sector. And your sector, as you said, is very similar to those results.
You said it is an ecosystem. If you had a silver bullet, what would it be? Are banks taking enough risk? Should they take more risk? In particular, 9 to 19 basis points is very low when it comes to risk taking.
I don’t want to put you on the spot and have you say our banks should or shouldn’t. But in essence, where is the silver bullet? We talked about Indigenous communities, women entrepreneurs and minority communities, and when we look at the results, they are exceptional, your results included. Forget about our banks — it’s your results.
Yet when we talk to entrepreneurs, many feel that they need more capital. Capital is like oxygen, just like the song “Love Is Like Oxygen” says:
You get too much, you get too high
Not enough and you’re gonna die
Our entrepreneurs need more capital. Is it pension funds, is it venture capital or is it our banks, including BDC? And it’s not government money. At BDC, it’s loans you’re making. You’re getting that back and at a much higher rate than our banks.
Ms. Hudon: Well, I am not asking for more money. The short answer is that we all need to do better to support entrepreneurs. That means all financial institutions.
I took it upon our shoulders for us to do better and more for a greater number of entrepreneurs when I joined because when I joined, we were serving 65,000 entrepreneurs, and I compared this to the 1.1 million SMEs in Canada. Intellectually, it was not the perfect thing to do because we cannot think that 100% of the 1.1 million are clients of ours, but still, after eight decades of activities, the ratio was pretty low. That’s why I drove the team not only to do better and not only to deliver a better client experience, but also to reach a greater number of entrepreneurs.
We’re now closer to 30% of our addressable market. I would love to see us at 50% of our addressable market in the next few years.
The banks need to believe that risks on paper are not necessarily risks that will get confirmed for clients who are unconventional to them.
To slightly force the banks, what we did is have the loan guarantee program where we say, “On paper, those clients are not appealing to you. We could serve them but you could also, so we’ll be helpful by taking up to 100% of all risks on the loans that you provide to clients like women as well as Black and Indigenous people.” By doing so, we’re exposing banks to those unknown clients — or the worst word that they use which is “unbankable” clients — to show them that it could be the reverse story with those clients. The loan guarantee program is not for us to reach more clients directly but to show the banks that their “unbankable” clients are highly bankable clients.
On the venture capital, or VC, side, we did a study with Deloitte a few years ago. It was shocking to learn about corporate VC. It’s one thing for BDC Capital to deploy up to $600 million or $700 million a year in VC, but we looked at corporate VC, so it was big global Canadian companies investing in VC in our own start-ups, where 6% of the VC money in Canada comes from corporate VC compared to 40% in the U.S.
Again, when we say, “more money, more money,” we should put pressure on big companies to keep on investing more and more in SMEs, not only and solely in big labels and big names and outside of Canada.
The Chair: Thank you for your answer because one of my questions is related to VC.
[Translation]
Senator Dalphond: Ms. Hudon, thank you for being with us.
In September, The Globe and Mail reported that BDC paid out a dividend of $50 million this year, but a dividend of $337 million in each of the two years prior. That’s $280 million less. The article also says that, in March 2025, your provision for expected credit losses went from more than $400 million to $624 million.
Is there a direct link between the roughly $200-million increase in the provision and the lower dividend payout?
Ms. Hudon: The answer is yes, no and partly. The two years you’re referring to, when the dividend paid out was around $300 million, were pre-pandemic years. We received a major injection of capital in order to deliver specific programs, and the payable dividend was so high because the programs performed much better than expected.
In addition, you are right that the size of the loan loss provision meant that we had less capital for the dividend payout.
I must tell you that I’m one of those who believes that paying out dividends is a healthy requirement, because it’s consistent with how things are done in the private sector. At the same time, I believe that if capital is available, more of it needs to go to SMEs, especially when you consider the statistics I shared with you.
Senator Dalphond: As far as small- and medium-sized businesses are concerned, you say, on slide 20 of your deck, that Canada has 100,000 fewer entrepreneurs than it did 20 years ago. Under your business model, when it comes to SMEs, some of them will turn to other banks and some of them will stay with you out of loyalty. Doesn’t the drastic reduction in the number of SMEs put your business model at risk, since you have a shrinking pool to work with?
Ms. Hudon: Yes and no. In other words, potential is lower because there are fewer businesses we can serve, but at the same time, the major banks leave them high and dry. Consequently, even though the number is declining in absolute terms, the proportion of SMEs receiving support from the major banks has dropped by nearly 8%. The answer, then, is yes and no.
When the big banks say that we have too much of a presence in the marketplace and we are too competitive, I tell them that when the trend reverses and the investment of capital in SMEs is on the rise, I’ll be willing to take a secondary role. For the time being, however, the decline continues to be very apparent.
The Government of Canada is incredibly fortunate to be the owner of a bank that operates in accordance with bank rules, is financially independent and pays a dividend. You can accuse me of being biased. I am, I admit it. I am the president of the Business Development Bank of Canada, but I didn’t come up with this model. There should be pride in the fact that an institution like ours is one of the tools the government has in its portfolio.
[English]
Senator Yussuff: Thank you, Ms. Hudon, for being here.
My question is: The country has a productivity problem, and it has been talked about quite a bit. Part of that comes in a two for one, as businesses need to modernize, buy new equipment and train their workers if they are going to be successful.
What part of your loan program assists businesses in acquiring the capital necessary to finance the purchasing of new equipment, and in some cases, of course, they’ll have to train their employees? Do you track that as a metric, and are you able to provide that to us?
Ms. Hudon: More and more, we at BDC are being known to do loans on real estate. We started a few years ago to develop the expertise on lending for equipment, and we see right away the impact on productivity.
The share of our loans that will go toward equipment will increase quite rapidly over the next few years to make sure that we play the role that we can play in getting the productivity at the right level.
I will leave it to Mr. Cléroux to bring some data around productivity for SMEs, but one place that I’m convinced we can play a huge role in making productivity higher is with rapid and fast deployment of artificial intelligence, or AI, in all sizes of business.
At one point, small businesses thought that AI was not for them; it was only for big companies. They have changed their minds, and we are delivering specific programs for SMEs to invest in technology, and not only technology but specifically AI.
Mr. Cléroux, do you want to bring additional data?
Mr. Cléroux: Yes, thank you. We do a number of things to help businesses improve their productivity. For example, we have advisory services that are especially targeted to help businesses increase their productivity.
We have developed a number of tools. For example, there is a free tool on the BDC website where you can calculate your productivity. You can not only calculate your productivity for your business, but you can also compare the productivity of your business with the entire sector. We developed this model with Statistics Canada, so you are able to see if you are performing well and how you can compare your business with other similar businesses in Canada within a similar sector. That’s kind of a wake-up call for many businesses.
And like Ms. Hudon said, we also do a lot of financing for technology. We know that we underinvest in technology in Canada. It’s one of the reasons why our level of productivity is lower, so we also help businesses choose the right technology and invest in technology.
Senator Yussuff: One of the challenges we have — and this is one of the things we are dealing with in this study — is that the country is quite diverse, so the entrepreneurial community and small business are very different.
Promotion is a significant part of people knowing who you are. You may think you are really important and people know who you are, but in some cases, they do not know who you are.
What is, I guess, the effort in big centres or smaller centres across the country to get the message out there about what BDC actually does and how it can help you? For example, “If you are looking to establish a start-up, we are here to do so.”
In many cases, our communities across this country lack knowledge about what services the government already provides to help them get to that place because in many cases, we know the banks are not providing that service.
How do you promote yourself better so that they learn that they can reach out to BDC for what they are hoping to establish as a business in their community?
Ms. Hudon: You are quite right. It is an easy trap to fall into, thinking that we are doing so good and that everyone is aware of who we are, and we are quite lucid here. I know very well that if we are quite known in Quebec for different reasons, there are also some areas in Canada where they don’t have a clue what BDC is all about. That’s why we’ve increased our marketing budget, not only to do TV ads like Senator Gignac mentioned but also to do targeted efforts in different communities to raise the profile of BDC.
We have developed in another way. When I joined five years ago, 90% of our distribution was direct distribution. I quickly understood that it would be impossible to serve more clients to reach my level of ambition by working only organically. We’ve developed an indirect channel whereby, with partners on the ground in different regions, we deploy capital through partners. For example, with Community Futures organizations, which are mainly in rural regions, we reserve capital for them to deploy toward entrepreneurs in those regions whom we would not get to know and vice versa.
The right mix of direct and indirect distribution will get us to a better place. A targeted marketing strategy adapted to different regions will also help us. But you’re right; we’re almost not known.
Senator McBean: I have a technical question, but I’m going to go with something you said in your testimony that piqued my curiosity. You were saying that 98% of all companies in Canada have fewer than 100 employees. You said Canada stands out in this. Is that a strength or a weakness? What do you mean Canada stands out in that?
Ms. Hudon: When we compare to other countries, the percentage of SMEs in our economy is where we stand out. That’s where it is so different. When we compare ourselves to the U.S., the number of SMEs in their economy is far less, and they have bigger companies. That creates a different dynamic, especially around access to capital.
We would have a lower number of SMEs with less access to capital in that category, and we could say, “Well, too bad.” But when you combine both, 98% of our companies in Canada are struggling to access capital. So when you combine both, it doesn’t look great for the future of our economy. It is difficult to change the structure of our economy. One reason why we have so many small companies is the size of our country and the size of the land on which we live. Without having small businesses here and there to serve many communities, some communities would disappear.
It is for good reasons that we have a high percentage of SMEs, but in recognizing this, we need additional efforts to make capital accessible to that category of companies.
Senator McBean: Does that make us vulnerable or strong?
Ms. Hudon: I think it makes stronger communities, but at the same time, it can give a high level of vulnerability.
Senator McBean: Thank you. The other question was about upcoming trends, but that came within the answers to Senator Yussuff.
The Chair: I will use my privilege as chair to ask the final question. You compare the U.S. and Canada on access to capital, but we have many provinces. In Quebec, I know the ecosystem is quite different. Quebec has the Fonds de solidarité FTQ, Investissement Québec and major BDC penetration. Do SMEs have easier access to capital in Quebec than in other provinces, or is that not the reality?
Ms. Hudon: There is slightly better access, but it is not that significant, senator. I have to say that in Quebec, the partnership between financial institutions to have our businesses succeed is way better than in any other province. There are so many players with their eyes on the same ball: the success of SMEs. Many of my colleagues are asking, “How can we replicate elsewhere what is happening in Quebec?” It is very difficult.
Senator Loffreda: You need the Quebec bankers elsewhere.
Ms. Hudon: You need the Quebec bankers, but you need the Quebec institutions also. In working with Investissement Québec, the Fonds de solidarité FTQ, Fondaction and the Caisse de dépôt et placement du Québec, we are not competing against each other. We are just there for the success of —
The Chair: For the last question, you can send me a written answer. The Office of the Superintendent of Financial Institutions, or OSFI, has tightened the rules in a significant way. Is there any relationship between the big banks looking like they are less present for SMEs and the OSFI rules — or is there no relationship at all? I don’t want to put you in a difficult situation, but you can send a written answer.
Ms. Hudon: From what I read, some of the big banks are showing collateral effects between increasing obligations from OSFI to decreasing capital to SMEs.
The Chair: They are mitigating the risk in that. We will invite them here so that we can figure it out.
Ms. Hudon: It is an easy way out. That’s what I would say.
The Chair: Next time, we will invite you for one and a half hours. One hour is not enough. We want to thank you.
[Translation]
Thank you very much, Ms. Hudon and Mr. Cléroux, for your insight and for your work at BDC. It is very useful and important to us. Thank you for the good work.
That concludes our meeting. We will meet next tomorrow, November 27, at 10:30 a.m.
(The committee adjourned.)