THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Thursday, November 27, 2025
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 10:30 a.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; and in camera to consider a draft agenda (future business).
Senator Clément Gignac (Chair) in the chair.
[Translation]
The Chair: Good morning, respected colleagues. My name is Clément Gignac. I am a senator from Quebec and chair of the Standing Senate Committee on Banking, Commerce and the Economy. I would like to welcome those watching us online at sencanada.ca. Before we proceed, I would kindly ask my fellow committee members to introduce themselves, starting with our deputy chair.
[English]
Senator Varone: Toni Varone, Ontario.
Senator Loffreda: Good morning and welcome. I’m Senator Tony Loffreda from Montreal, Quebec.
[Translation]
Senator Henkel: Danièle Henkel from Quebec.
Senator Ringuette: Pierrette Ringuette from New Brunswick.
[English]
Senator Yussuff: Hassan Yussuff, Ontario.
Senator C. Deacon: Colin Deacon, Nova Scotia.
Senator MacAdam: Jane MacAdam, Prince Edward Island. I’m substituting for Senator McBean.
Senator Wallin: Pamela Wallin, Saskatchewan.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Martin: Good morning. Yonah Martin, British Columbia.
[Translation]
The Chair: Thank you, colleagues.
Senators Dalphond and Fridhandler have also just joined us.
Honourable senators, today’s meeting is our second on the new special study 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 welcome our witnesses.
I would like to welcome our witnesses representing the Canadian Federation of Independent Business: Simon Gaudreault, Chief Economist and Vice-President, Research; and Michelle Auger, Director, National Affairs, Trade and Marketplace Competitiveness. Thank you both for accepting our invitation. I encourage you to limit your opening statement to less than five minutes so that committee members can ask questions. You have the floor.
Simon Gaudreault, Chief Economist and Vice-President, Research, Canadian Federation of Independent Business: Thank you, Mr. Chair.
I would like to point out that I will be making my remarks in French, while my colleague will speak in English, but we will be able to answer your questions in either language.
My name is Simon Gaudreault and I’m the Chief Economist and Vice-President, Research, with the Canadian Federation of Independent Business, CFIB. I’m joined today by my colleague, Michelle Auger, Director of Trade and Marketplace Competitiveness.
We’d like to thank the committee for inviting us to appear today.
CFIB is a non-partisan, not-for-profit organization representing more than 100,000 small- and medium-sized enterprises, SMEs, across every industry and region of Canada.
We are here to share the small business perspective on access to credit and capital markets as a foundation for growth and improved productivity in the Canadian economy. The data we will share with you today is from surveys we conduct directly with our members. These results are publicly available at cfib.ca/research.
Small businesses are operating under extremely challenging conditions. The cost of doing business is at an all-time high due to rising taxes, rent, insurance premiums and other operating expenses. Regulatory and compliance burdens continue to grow, taking time and resources away from core business activities.
The ongoing trade uncertainty between Canada and the U.S., including the impact of tariffs, has created another layer. For many SMEs, these added pressures mean higher input costs and tighter margins.
In this environment, reliable and affordable access to capital becomes even more essential to help businesses absorb shocks and continue investing in productivity and growth.
I will now turn it over to Michelle to detail the growing financing needs of small businesses and some of the challenges they face.
[English]
Michelle Auger, Director, National Affairs, Trade and Marketplace Competitiveness, Canadian Federation of Independent Business: The share of small businesses needing financing has grown significantly over the past decade, rising from 35% in 2012 to 58% in 2022, yet access remains uneven. Mid-size firms see an approval rate at around 94% compared to microbusinesses at around 77%. And 52% of small- and medium-sized enterprises, or SMEs, cite that cash flow needs are the main reason for borrowing.
Access to financing also often comes with high personal risk. More than half of businesses that needed to secure a loan had to pledge a personal guarantee, and one in four have used their primary residence as collateral. About two thirds took on a variable-rate loan, leaving them exposed as rates rose from 4.55% in early 2022 to 9.05% by mid-2023.
Even as these rates have now eased, the share of small businesses struggling with borrowing costs has increased from 21% in January 2022 to 30% as of November 2025.
Business size plays a role in access to loans. Mid-size firms generally have a higher demand and easier access to traditional financing, while smaller businesses and microbusinesses often rely on non-traditional options out of necessity.
The sector also matters. Goods-producing businesses such as manufacturing tend to secure traditional loans more easily, whereas service-oriented firms often face higher costs and limited options. Collateral requirements remain a major barrier for a lot of small businesses, particularly for start-ups and service-based businesses with few tangible assets. Administrative burdens and complex application processes place an additional strain on already time-pressed business owners.
Geography further affects access as well. SMEs in rural, remote and smaller urban centres frequently face fewer lending options, higher borrowing costs and stricter limits on loan size. While we see credit unions do help fill that gap, their lending limits often restrict the capital available to growing businesses.
Mr. Gaudreault will wrap us up here with a few final words.
[Translation]
Mr. Gaudreault: Here are the impacts on productivity and our recommendations. Canada’s productivity challenges are long-standing, and SME investment is central to addressing them. When businesses cannot access financing, they delay scaling, purchasing machinery, adopting digital tools and investing in training or innovation. Access to credit is not just a small business issue; it is a core element of Canada’s productivity and competitiveness strategy. Supporting SMEs with fair and flexible financing options will help ensure long-term economic growth across all regions and sectors of Canada.
As such, CFIB recommends, first, that financial institutions actively promote alternative sources of financing beyond traditional bank loans, including angel investing, crowdfunding and venture capital. These options can complement traditional products and help SMEs access the capital they need to grow.
Second, we recommend that the use of the Canada Small Business Financing Program, CSBFP, be closely monitored to ensure small business owners are aware of it, can access it easily and are actually benefiting from it. Special attention should be paid to making sure the program reaches the smallest businesses — not just larger SMEs.
Third, we feel that newer online SME lending technologies should also be monitored. While these platforms can provide useful alternatives, it is important to ensure they do not displace traditional lending or charge excessive interest rates that increase financial risk for small business owners.
Finally, and perhaps most importantly right now, reducing the overall cost of doing business through lower taxes — such as with a more competitive small business tax rate — and regulatory simplification would free up capital that SMEs could reinvest in equipment, technology, staff, training and innovation.
We thank you for your time today and remain available for your questions.
The Chair: Thank you both.
Colleagues, we have set aside approximately 60 minutes for our panel discussion. I would suggest that, for the first round, each speaker be given about four minutes, starting with the members of the steering committee and our deputy chair.
[English]
Senator Varone: Welcome. Small business is the heartbeat of the economy. In my mind, it is how I grew up, knowing a lot of the small businesses, but the challenges they face — even with a 9% federal tax rate — are quite cumbersome if you’re a start-up. Ms. Auger, you highlighted that taxes, insurance, the regulatory burden, access to capital, cash flow and collateral are all new things to start-ups which, to a certain extent, push a lot of people to the underground economy. They would rather self-finance than be turned down by a bank. I love what you do as an organization. I have been following you for the last 20 years, and I think the value that you add is tremendous to the Canadian economy. So hats off to you.
What is it we can do to attract the smaller businesses that are part of the underground economy and bring them into the spotlight or shine a light on them to help them get over the hump and transition into the legitimate economy? It’s not just access to capital. It’s all of the above that you highlighted. I would like to hear your comments on that.
Mr. Gaudreault: Thank you, senator, for your question. You are highlighting a very important point. This is a bigger issue than just access to capital.
Making entrepreneurship an attractive choice for individuals is very important for our economy. Obviously, certain data right now are showing that we do have a bit of an entrepreneurial drought and a bit of a succession issue in the entrepreneurship field.
To ensure that people remain interested in entrepreneurship and building companies in the formal economy, one of the key things to achieving that is ensuring we have a sound business environment in Canada. What I mean by that is something that is not too cumbersome or complicated. If you choose to set up a business, we need to make Canada the best and easiest place to start a business — not just start a business but also operate a business — without having to fill out 1,000 forms and without having to pay taxes that are profit insensitive, giving you a chance and a good shot at building a company that’s successful and that you can grow and operate for many years. The business environment is one of the key answers to building that for Canadian entrepreneurs.
Senator Varone: Do you have anything to add, Ms. Auger?
Ms. Auger: We are doing a lot of work on this right now. Looking at business exits and entry, Mr. Gaudreault mentioned this concept of an entrepreneurial drought. Our members are even saying that they wouldn’t recommend to the next generation of Canadians to start a business in today’s climate because of all the uncertainty.
While access to capital is a piece of the puzzle, how do we tackle the cost of doing business and the regulatory tape that is bogging down doing business in Canada? How do we make a sound business environment?
Senator Marshall: Thank you for being here today. Yesterday, we had officials here from Innovation, Science and Economic Development Canada, and we also had representatives from the Business Development Bank of Canada, or BDC. There is a lot of money floating around — billions and billions of dollars. You’re coming here today and saying that’s an issue for small businesses. Why aren’t you able to access all this money? It just seems as if there’s so much money available, and in the budget this year, there are billions more being provided. There is a disconnect there somewhere. Could you just speak to that for a few minutes?
Mr. Gaudreault: Maybe Ms. Auger will want to specify a few things here, but the one thing I can say is, generally speaking, when it comes to small business programs and loans and grants, the experience of the members of the Canadian Federation of Independent Business, or CFIB — and we’ve surveyed them for literally decades — has been quite consistent over the years.
The issue is that we often start with good intentions when we set up a program, but then we tend to forget what is the reality of entrepreneurs, where we mostly have microbusinesses in this country. Half of all our businesses are microbusinesses of fewer than five employees — small operations that don’t necessarily have all the time and resources to fill out countless paperwork and countless forms and try to basically understand sometimes complex criteria.
On top of that, you have programs that too often — and one very recent example is our new tariff support programs that we’ve set up — create barriers to entry for a lot of the smallest businesses. Criteria might be set up at $2 million in sales or above as well as a certain threshold for the number of employees that the business must have on their payroll of 10 employees and more. So right off the bat, we exclude a lot of businesses.
That’s one of the core problems that we’ve seen over the years with so many of these programs, which is why we usually advocate for lower tax rates because this way, we know the money will reach all of the businesses.
Senator Marshall: Your federation is so vocal. I’m really surprised to hear you say that. I’m from Newfoundland and Labrador, and I know individuals who have very small businesses. They’re looking for tariff relief and can’t find it, so they have remortgaged their homes. There is a disconnect there.
What’s the problem in that there is a disconnect there? It has been there for several years, and it’s still there. It has not been fixed.
Ms. Auger: On tariff relief, the programs have been designed in a way where you need to fund a project. If we’re looking at the regional development agencies announcement made on September 5 which is targeting small businesses, as a small business that is now impacted by tariffs, you’re seeing higher revenue and higher costs because of importing goods. You’re not looking to fund a new project. You’re looking to alleviate some of those cost pressures. That’s where the regional development agencies’ programs are missing the mark. Now you’ve got to fund a project, and in addition to that, some of the criteria across the board include having 10 full-time employees just to access some of the money that’s being put through these programs.
It really misses the mark. We have been raising some of those concerns with the government, but we have yet to receive much of a response.
On the remission program that was implemented earlier on, there is such a huge backlog that businesses are still waiting to hear whether or not they will get remission and relief from that program.
Senator Marshall: That’s interesting. Thank you.
Senator Fridhandler: We’re talking about availability of capital. One area that I believe is not sufficiently tapped into is the use of inbound immigrant capital, whether it’s direct investment through existing businesses or transition and purchase for successorship of businesses. What are your thoughts about the programs and the knowledge base that exist in that area?
Ms. Auger: That is a good question. When it comes to succession programs, at CFIB, we generally take a look at it from a small business lens. We’re not necessarily focused on what exists for new entrepreneurship.
We did have a report come out last year that looked at that, and I do believe that in this report, they highlighted there were some gaps in supporting new arrivals and new Canadians in getting businesses started up.
Mr. Gaudreault: I would add that this is a form of foreign direct investment. When you have immigrants come in and contribute capital in different forms to the Canadian economy, this is certainly something that has been highlighted recently as one of our core issues in Canada. We need more direct investment. This may be one of the channels in which we can help achieve some of that.
Senator Fridhandler: Could you ensure we get a copy of that recent report for our records as well?
Ms. Auger: I can circulate a copy. I will send it to the clerk.
Senator Fridhandler: In one of your first recommendations, you referred to a group of investors more on the equity side, such as angel investors, crowdfunding and venture capital. So far, we’ve talked more about debt. Do you believe within your federation that we’re doing enough to promote equity investment and that it is sufficiently well understood, or is it too highly regulated? Do we have the framework to make this happen?
Mr. Gaudreault: We can always make more efforts to ensure that entrepreneurs who, quite frankly, lack time can get information on all of the possible topics and all of the possible programs. That’s also one of the issues we’re facing here, let’s be honest. There is a certain complexity. If we can reach entrepreneurs in a more efficient way, making sure that they know all of the available options to them, then they can make the best decision based on their business model.
We are a federation of 100,000 members from across Canada. We have members in every single industry and with very different business models which, by the way, is the essence of entrepreneurship, I think. That’s why you need to have different options available to them. There is no one size fits all when it comes to entrepreneurship.
Yes, we can simplify things, but at the same time, we will probably be left with a suite of tools. They have to be informed about the different options that are available to them so that they can make the best pick.
Senator Fridhandler: Yesterday and in their report — and you’ve mentioned it again today too — BDC advised there has been a decline of 100,000 entrepreneurs in the past 20 years in Canada.
Why? The population increased by 25% at the same time.
Ms. Auger: Yes, again, like I said, we’re deep into a report on this right now. It’s being worked on, and we’re looking at the data. It is quite shocking, in fact, that Canadians are choosing not to start businesses, right? When we look at what our members are saying about being in business today, it’s also that they don’t recommend it because the environment is hard and there is so much uncertainty right now, and the increased costs continue to pile on. Those really are the reasons. What we’re finding with this research that we’re currently conducting is that small businesses really feel bogged down right now.
Senator Yussuff: Thank you for being here, and thank you for the work you’re doing on behalf of your members. I want to get to the issue of productivity and investment in training and equipment. It seems to me that as a country — and this is not my data — the OECD numbers speak volumes about the fact that we are at the bottom of the spectrum in terms of investment in capital and training in this country.
To a large extent, it’s both for large businesses and also for small businesses. As you know, in the budget almost every year, the capital cost has been consistent in trying to get business to invest, and they can write it off much earlier.
From a small business perspective, if they are going to be successful productivity-wise and also be efficient, what are the challenges they are facing in regard to investment around capital equipment and training of their members? Your guys are always more vocal about the Temporary Foreign Worker Program, but a way to eliminate that is to train people who are here who want to work in your industry and your sector. Maybe you could shed some light on this and if you have data, that would be very helpful.
Ms. Auger: I don’t have data with me on training, but we have tons of it with CFIB, so I’ll be sure to follow up with you on that.
When it comes to some of the announcements made in the budget this year, specifically the capital, the immediate expensing and those types of measures are certainly something that we welcomed. It does help businesses looking to write off those investments right away. It’s a bit of a complicated one because obviously a lot of businesses are saying that today they’re still struggling in finding the right people to work in their businesses. When it comes to training — a lot of times it’s that formal training — some of the programs being put in place are not necessarily recognized by provincial agreements or some of the federal-level agreements. Some of the training programs are for none of that informal training, and small businesses are oftentimes the breeding grounds for that informal training.
We have been saying to the federal government that we would love to see more programs that recognize all of the number of hours and time that businesses invest in informal training. That could be one of the ways to meet some of those gaps and also a way for a lot of our youth to be part of these small businesses.
In that sense, that has been a lot of what we’ve been saying, but there is also room to reduce some of those cost pressures where businesses can reinvest and have cash flow to invest in their staff and invest in machinery and capital. I think I said early on that the 52% of SMEs looking for additional money was for cash flow purposes.
Mr. Gaudreault: I would like to add to that, senator. First, thank you for bringing productivity into this conversation because I totally agree it’s a core issue for the economy. We still have small- and medium-sized businesses as the overwhelming majority of our businesses in this country, so they have to be part of the answer. We have to devise solutions for them so that they can contribute to this great task we have in this country to bring up our productivity.
You’ve highlighted correctly that investment is certainly a big part of it as well as modernization and digitization. We’ve done some research on this at CFIB including recently, and we’re seeing good returns on investments. Ms. Auger just talked about training.
I would like to bring up another point which is basically the complexity of the business environment. Specifically to that, I mentioned here red tape, which is the time that is devoted by entrepreneurs to understand and deal with the complexity of the system. When they do that, they are not developing their sales, they are not doing R&D and they are not launching new products. The cost per employee of red tape for a microbusiness is five times what it is for a large business. Here you have a big failure of our system that works against entrepreneurs.
Just for that reason, I think we could probably say that there is definitely a huge area here where we can focus and make sure that businesses have more time, with another one being more access to capital so that they have more resources to improve their productivity.
Regarding the Temporary Foreign Worker Program, the only thing I would say here is I wouldn’t put the two things at odds because, again, you have different business models. It’s not possible for every single business to automate everything tomorrow. I’ll leave it there.
The Chair: Thank you, and if you want to share with the committee some data that you referred to, Ms. Auger and Mr. Gaudreault, it would be welcome.
[Translation]
Senator Henkel: Thank you for your insightful comments. What you are saying is extremely important. I hope that this special study will provide a little more clarity, but also responses from our governments.
Your organization proposes increasing the small business deduction limit from $500,000 to $700,000 with annual inflation indexation. Because this threshold has not been revised since 2009, businesses have effectively absorbed 15 years of inflation without any tax adjustment.
First, in your opinion, to what extent would such an action tangibly improve the financing capacity of SMEs, particularly in terms of liquidity and investment?
Second, how has your proposal been received, if you’ve submitted it, by the federal government so far? Have you had any formal discussions with the relevant ministers, and what were their reactions?
Mr. Gaudreault: Thank you for your question.
This is an important element of the Canadian tax system that helps many businesses develop and grow.
The CFIB is very active on this issue, not only on the rate itself, but also, as you rightly mentioned, on the eligibility threshold. This is a factor that ensures that you have larger businesses, such as larger SMEs — medium-sized businesses that are in a growth phase. They can access this rate, which enables them to fuel their growth. We are closely monitoring what is happening in different provinces. Some provinces have already raised this threshold, namely Saskatchewan and Nova Scotia, which recently announced an increase in their rates. I believe that, in Saskatchewan, the threshold has been $600,000 for some time, and in Nova Scotia, it is $700,000. We are very active and do a lot of advocacy work.
I’ll let my colleague talk about that.
[English]
Ms. Auger: In terms of representation, we have certainly been actively asking for the indexation for at least a year and a half, I want to say. It has been part of our key lobbying asks for all MPs and ministers to consider. Generally, when we are speaking with MPs about it, it’s received well and seems logical that would be done. Unfortunately, we didn’t get that within this budget, but we’ll certainly continue to push for it because we think it is something that certainly needs to be achieved for small businesses.
[Translation]
Senator Henkel: Everyone knows that the BDC plays a public policy role in supporting Canadian entrepreneurs, especially small- and medium-sized businesses. We heard from the BDC yesterday. In that role, it offers many financing programs.
Can you tell us about the BDC’s mechanisms that really work for small- and medium-sized businesses and those that no longer meet current needs?
Are the BDC’s thresholds, time frames and risk tolerance adapted to the reality of growing SMEs, or are they becoming similar to those of chartered banks?
[English]
Ms. Auger: When it comes to the products, our members would not necessarily know what product they’re applying for. They’re applying for a loan.
We have seen an increase in demand for BDC loans. In our last report, it went from 9% in 2012 and jumped up to about 13% of small businesses relying on BDC loans.
When it comes to the interactions with BDC, generally they’ve been quite positive. They really like the opportunity of getting the consultation services. However, there were some negative comments from members: Sometimes they didn’t necessarily get a BDC portfolio manager who had the experience or the understanding of how that business was run. There were some mixed reviews there.
Senator Loffreda: Thank you, Mr. Gaudreault and Ms. Auger, for being here.
Does CFIB believe Canada currently has adequate real-time SME credit market data, including loan approval rates, collateral requirements, interest spreads and regional differences, or is greater transparency from lenders needed to support evidence-based policy-making?
I ask this question because we’ve all heard a million times that what you measure improves, but to design effective policy, we need a clear and accurate picture of what SMEs are experiencing on the ground. If data doesn’t exist, it becomes difficult to target solutions and find proper remedies to what they are experiencing.
We hear from many that there are gaps when it comes to access to credit if we compare to other countries around the world. I think we can do better on that front.
Do we have data, and what is your take on that?
Mr. Gaudreault: Thank you, senator, for that question. As the head of research at CFIB, a data-driven organization, I would certainly agree that data is a core tool that we need to make informed decisions.
We have been conducting surveys with our members on that topic of financing and banking for decades now. Every three years, we do a major survey. Our last one was done in 2022. Again, all of this information is available publicly in our reports on our website.
The reason, quite frankly, we’ve been doing this for decades and we keep doing this is because we feel there is still a need for that information. There are other possible sources of information, including public sources of information on that topic, but sometimes what is missing is the small business angle to that question, making sure that we understand that for small- and medium-sized businesses, the game is different than for larger businesses.
That’s what we’re, quite honestly, trying to do with our resources. We’re trying to put here in the spotlight the fact that there are different experiences.
Often, the experience when it comes to credit and lending will vary by business size a great deal, and that’s what we’re showing. I think we probably need more information on this that would inform the public to a larger extent about the different realities that businesses will face depending on their size.
Senator Loffreda: If we have more information, we would be able to put together a better policy.
What’s the next step? Are you contacting the local banks and saying you need the information? I understand there are privacy concerns, but it could be anonymous. We’ve all heard the percentages of approvals in the banks. I was surprised yesterday by BDC that the percentage seemed fairly high based on the experience I’ve known and the discussions I’ve had with entrepreneurs. What is the next step there, and how can we remedy that weakness, if we call it a weakness?
Mr. Gaudreault: For us at CFIB, we will continue to release our reports, making sure that updated information is available to the public and we’re communicating it with the key stakeholders, including the policy-makers, but we’re also always in contact with the banks and the different financial institutions.
Senator Loffreda: You are in contact with the banks?
Mr. Gaudreault: Absolutely. They are well aware of our reports, and they are actually really interested in knowing the details of our findings.
We’re also seeing approval rates vary, again, by type of business and by business size. This is something that we release in our reports and that we’re taking a close look at.
Ms. Auger, I don’t know if you want to say more about this.
Ms. Auger: Specifically, when we take a position on a subject, it comes directly from our members. The issue of privacy and data could be something that some of our members would be against, but when it comes to aggregate data that we are able to share anonymously, obviously this is what we refer and use. As Mr. Gaudreault said, we have data by bank and by sector as well on behalf of our members. It reflects their experience in acquiring loans and rejection rates. We do have all of that information.
Senator Wallin: Two sides of the same coin here: In yesterday’s testimony, we heard that through loans and grants and projects and legacy banks, there are billions of dollars available for people to apply. So there are questions, I guess, of access, but the flip side of that coin is this: I read just this morning, for example, at the Canada Infrastructure Bank, a huge majority of money goes to salaries and bonuses, about tenfold what actually goes to recipients in need of cash.
How big is that problem? My fundamental question is this: Is there really as much money in the system as it seems?
Mr. Gaudreault: Thank you, senator, for this question. In our view, at CFIB, we believe — as an order of priority — the first thing would be to ensure we have a competitive business environment and we lower taxes because that’s one way you can return money to businesses without it costing too much to the system. If you have programs, you have to administer those programs. No matter how well that’s being done, the fact remains that you have to have people to approve the applications and process them, whereas a tax cut is a tax cut. It’s done, and it’s quickly sent. It’s kind of like a direct injection of capital into the system, which is why it has always been our preference at CFIB as a way of supporting small businesses. And our members tell us in our countless surveys that it’s their clear preference. Maybe the money is available and maybe that is what the numbers show, but the experience on our members’ side is that they can’t access it.
Senator Wallin: Thank you for saying that so clearly.
You reference this, and most everyone who appears in front of us references this: the red tape, the stranglehold, the admin. Can you just give us a couple of examples?
We know people spend hours filling out paperwork. We all have horror stories that we can tell. I’m sure you have a couple that might shock us about red tape.
Ms. Auger: Specific to banking, even just in our report, the amount of time invested in getting a loan application filled out is several months for a lot of our members. It’s not a quick and easy process. If there is a way to reduce that timeline and the amount of paperwork, I think that would be a way to tackle some of those applications on that one.
Senator Wallin: What other things do you see?
Mr. Gaudreault: When it comes to red tape, sometimes it’s just doing things in a smarter way. If you ask things twice, three times and five times, and if you already have the information, why don’t you just centralize it?
At CFIB, we do take an absolutely breathtaking amount of time thinking, for example, about how we communicate the information with our members so that it’s straightforward, concise and straight to the point. That’s what entrepreneurs want.
We need a language and a format and a way where they can quickly get to it without having to go through hoops and spend countless hours understanding where they need to fill out any details. That’s what concretely reducing red tape can mean: streamlining things.
Senator Wallin: Thank you very much.
Senator Martin: Thank you for being here and for your excellent reports. I have been looking at the report on the cost of regulation to small business, which we just talked about, as well as the January 2025 report on removing roadblocks. I have a few questions related to that. But first, in regard to this SME category, the bulk of it are small businesses, but within small business, there are microbusinesses. I would love to see a separate category for them specifically.
In terms of access to government funding specific to microbusinesses, there are very few. They’re usually lumped in with small businesses. Because of the paperwork involved, and if it’s only one to four employees, it would be next to impossible.
These are the challenges that I have seen, and I would love to see a separate category for microbusinesses, but what are your thoughts and experience on microbusinesses?
Mr. Gaudreault: It’s an excellent point. I will mention again: Half of all businesses in this country are considered microbusinesses according to our official statistics, which are businesses with fewer than five employees. If they are the majority of our businesses, there should be considerable effort put into making sure that they can succeed.
For us, that comes mostly as a priority: It means having a simpler business environment. Because, quite frankly, beyond any new programs and anything you can put in place, if you make things simpler for those two-person or three-person business models, that will greatly increase the chances that their businesses will be successful. That’s what they’re telling us. They need things to go faster to be simpler.
But you’re also right in saying that the reality of those businesses is not the reality, in many cases, of larger businesses with 50 employees or 500 employees. There certainly needs to be an increased understanding of the nature of entrepreneurship in this country. This is not a country predominantly with medium-sized or 50-employee businesses; we have a microbusiness economy. So let’s put them at the top of our priority list.
Ms. Auger: I would also add to that. When we survey our members about reducing costs — however the cost of doing business is reduced, whether it’s with reduction of red tape or reduction of taxes, et cetera — we ask what would be the first thing they would do. At the top of the list, business owners have said that they would reinvest in their business, invest in their staff and invest in machinery. Businesses are not looking to hold on to that money. They’re looking for ways to make their business better — better for their staff and better investment — and continue to grow.
Senator Martin: Whether it’s the federal government or BDC or banks, there needs to be targeted financing programs for microbusinesses, but there are not very specific targeted programs like that, correct?
Mr. Gaudreault: I don’t think we’re seeing a lot of those programs. Quite frankly, what we would be worried about is saying, “Okay, we have a problem. There are programs but they are complicated. Let’s launch a new program.” We need to ensure what we’re hearing from small business owners: There’s already a lot of different options which, quite frankly, do not seem to work very well for a lot of them. The first order of priority in our view at CFIB should be to streamline things and make things simpler. This will free up some resources to channel through to businesses.
Ms. Auger: When it comes to program design, I would avoid picking winners and choosing losers. That’s what we’re seeing right now with some of those tariff programs. It just seems like we’re picking and choosing who is going to get some of the funds and the program access. Just make it easier across the board for small- and medium-sized businesses and make it easy to access.
Senator C. Deacon: I’m going to keep building on this as it relates to where the bulk of wealth is created in the world which is in intangible assets, yet we have a lending system that focuses entirely on tangible assets. Rather than trying to fix systems that don’t want to be fixed, our banks are very happy being low in the ranking of CFIB for 20 years because they stay there. That’s the reality of the results that I’ve seen year after year. The banks seem to be happy with that. My view is, okay, let’s figure out who wants to be at the top of that list competing with credit unions and others who are really serving our small businesses.
What I’m seeing is there are private debt lenders and financial technology lenders that are looking at different types of data like customer acquisition, customer retention and the return on investment in the cost of customer acquisition, as well as the lifetime cost and lifetime value of a customer and looking at how successful a business is at creating value for those that it serves. Those sorts of data are very reliable for a lender because they can see how cash flow will be growing if they keep investing in what is making it work.
We’re finally moving toward open banking after seven years of waiting not too patiently. Can you speak about the opportunity with non-traditional lenders because I think that’s where we’ve got to focus our time.
Mr. Gaudreault: Absolutely. Ms. Auger, you might want to add to that, but I will just say one thing. You are absolutely right in highlighting this in the sense that more choices and more options will obviously lead to better options for businesses, lower costs and more access to financing, and that’s part of the solution. You have the traditional banking sector and you have credit unions, but you can have more modern options, as I would put it, or additional options that, quite frankly, other countries have developed well ahead of us. As a business organization, we would certainly welcome that kind of entrepreneurial spirit in the financial industry as well, and our members would welcome more options and more choices.
Ms. Auger: Just to add to that, we’ve certainly been supportive of open banking as a way to add more competition and reduce the cost of banking fees for small business owners, but also maybe make it more competitive and ensure that customer service standards increase with the banks.
You’re probably aware the Competition Bureau is doing a consultation right now. One of our remarks to them was that as they’re looking at access to financing for SMEs, I don’t think the Competition Bureau can exclude taking a look at how open banking could impact the possibilities. Right now, their terms of reference do not include taking a look at open banking. That would be one of our recommendations to them to ensure that other products that are not necessarily part of the banking world today are part of this study to ensure that it opens the door and makes it more competitive.
Senator C. Deacon: The other thing I’ve really noticed is: When I did a study a year or so ago on the blended programs from government and support programs, we found 134. One had key performance indicators, or KPIs; that was a program that was cut. There are KPIs based on outcomes, which is what actually happens when the money is put in, and it’s in a way that helps the business and does not necessarily achieve a government objective.
If we turned that around and had the programs focus on what helps the business — if the business decides that — that’s really the biggest problem we have right now. The program is to satisfy a government objective, not a business objective.
Mr. Gaudreault: That’s something we’re also seeing. First of all, in the first place, what we’re missing most of the time when the KPIs are there is they are more like effort KPIs rather than outcome KPIs. Definitely the needs of businesses have to be placed at the core of those programs. You’re right in highlighting that having clear objectives in terms of outcomes for business owners is a great way of achieving that.
Senator C. Deacon: Thank you very much.
The Chair: Based on that exchange, be prepared to receive another invitation when we announce the budget implementation act on open banking. We want your insights.
Senator Ringuette: My question is: What seems to be the range of loan that is most difficult for your members to acquire? There must be a range there that you can identify in your data.
Ms. Auger: You mean an amount?
Senator Ringuette: Yes.
Ms. Auger: I don’t know that we have that.
Mr. Gaudreault: What our data is showing is that for smaller businesses, the approval rate is lower than for medium-sized businesses. If it’s smaller loans, usually the rejection rates will tend to be higher at least for the small businesses. Here I correlate the amount of the loan with the size of the business. We would probably see a correlation because a lot of those microbusinesses are, as we were highlighting, service businesses that don’t have collateral, so for them it will be tougher to secure a loan for their growth.
That’s also one of the important market failures we’re seeing right now. We have a lot of service-based businesses in the economy, and they’re having difficulty accessing capital.
Senator Ringuette: From my conversation with the business community around me, their first lending choice would be the bank or the local co-op — the caisse populaire — but then yesterday, we had Innovation, Science and Economic Development Canada here which has a slate of programs, and then you have BDC which has a slate of programs, and then different provincial governments also have programs.
To me, it doesn’t seem like there is a lack of money, as Senator Marshall has said. It seems to me that when an entrepreneur is looking for a loan, the first option will be the local lender, whether it’s a bank or others. If that doesn’t work, then they have to look at the entire slate of possibilities.
Let me phrase it this way: In regard to potential federal loan programs, would it not be better and more efficient to have BDC be the federal business loan entity rather than have loans spread out in different departments, just to start?
From the conversation we had with BDC yesterday in regard to small businesses and microbusinesses, they seemed to be really streamlining the process so that it’s efficient time-wise because when you want a loan, you want it in a timely fashion too.
What is your opinion?
Mr. Gaudreault: Just to address government efficiency, there is no question that if the resources are spread out among a larger number of organizations, there will be more inefficiencies in a way because all of these organizations need to do their own admin.
You want, as an entrepreneur, to build a project and get supported. Then you’ll be told at that institution that the highest amount is that much, and then you need to go to another organization. It’s kind of like a patchwork. How is that really efficient as opposed to something that would be simpler?
I think that’s why we’re calling for some kind of streamlining. In our assessment, there are a lot of different organizations that are devoted to financing a lot of programs, so perhaps if there are fewer, you have more efficiency. Not only is it easier for businesses to understand which door they can knock on, but they can also be more efficient in the delivery of those supports.
[Translation]
Senator Dalphond: I welcome our witnesses.
There were financing issues. When you conducted the survey, the Bank of Canada’s interest rate rose from 0.25% to 4.50%. Right now, it’s much lower. The next survey will be in 2026. Based on the information you have, is there some relief in terms of financial pressure?
Mr. Gaudreault: We conducted a monthly follow-up survey on the health of businesses and business conditions called the Business Barometer®, which contains data on ease of access to credit. We have seen the peak surpassed recently, as credit conditions have eased with the drop in interest rates. However, a significant percentage of businesses, including in recent months, still report that access to credit is a challenge for them.
In recent years, I have been saying that entrepreneurs have had to run a series of marathons. Now we are congratulating ourselves because we think the economy has been resilient. However, what we may not see beyond that is a certain fatigue and erosion of entrepreneurs’ financial resilience. Our major surveys on financing show that, every three years, the proportion of companies seeking financing increases. This is a long-term trend. Will this be the case when we conduct the survey in 2026? We are a little afraid to find that out, actually.
Senator Dalphond: So, the financial pressure to repay debts has decreased, but the problem is access to loans. Has the rejection rate remained high or has it decreased?
Mr. Gaudreault: We haven’t measured it. In our 2026 report, we will measure the loan rejection rate.
Regarding the financial condition of businesses, in our monthly follow-up survey, we are seeing a record number of businesses saying that demand for their products and services is insufficient. This means that their ability to generate revenue and finance their growth and operations is diminished. In some cases, they are carrying significant debt from the COVID period. This cannot be denied. All of this represents baggage that businesses continue to carry. We are hopeful that things will return to normal, but our figures show that some financial weakness remains.
Senator Dalphond: You had suggestions at the end of the third report, including that the government should ensure that banks comply with the code of conduct on banks’ relations with small- and medium-sized enterprises. Has there been any progress in discussions with the government and the regulator?
[English]
Ms. Auger: I think those conversations came up a lot when we met directly with the banks to talk about how they interact with their clients, specifically small businesses.
We haven’t seen much change within the code itself since this last report came out, but there is always room for improvement, making sure that SMEs are better understood within the banking code.
[Translation]
Senator Dalphond: Thank you.
The Chair: That concludes the first round. I also have a question for you. Would you be able to give us an extra 10 or 15 minutes? I can see that there is interest in a second round of questions. Thank you very much for your time.
We are conducting our study on access to credit and capital markets for SMEs, again in relation to productivity. Do you see any differences among provinces? Do some provinces have easier access to capital? There is one province I know more about, as I am from Quebec, where there are tools such as Investissement Québec and others. Is access to credit and capital markets for SMEs similar from one province to another?
Mr. Gaudreault: That’s an excellent question.
Ms. Auger: That’s an excellent question.
I was trying to see if we had the details by province. We don’t have that with us today. I can certainly follow up on that.
However, what we do have in our report is by bank, and even by bank, there is still some information. We can see that Desjardins has a rejection rate of 7%, which is quite low compared to other banks. If we look at ATB, which is available only in Alberta, their rejection rate is 34%. So, we see regional differences rather than provincial differences.
The Chair: You mentioned earlier that you much prefer tax cuts to new programs, since it’s up to businesses to decide. Do you have an opinion on the productivity super-deduction in the latest budget, which is similar to what is done in the United States — that is, spending immediately rather than amortizing — thereby accelerating growth? Is this a measure that can help increase productivity?
Mr. Gaudreault: Yes. I think these are measures that we have supported and that we at CFIB like to see. It’s part of the set of tools we have in the works to improve our tax competitiveness.
You wisely compare this to the United States, which has a very competitive system. I think that in terms of taxation, there are certainly things we should follow. We are pleased to see what is in the budget.
[English]
Senator Varone: Again, I go back to my introduction to CFIB, which came in the late 1990s. In 1998, you led the charge against the provincial government changing its realty tax regime from a category-style system to a current value system.
To explain to my colleagues, what that meant was a business in North York and a business down in the city of Toronto doing the exact same thing had two different property tax bases because now they were based on the value versus the category.
You started a petition that I remember caught wildfire, and then we all lost that battle. CBAs are now part of the landscape in Ontario. One of the things that struck me about CFIB — and it goes to your advocacy side — is you started doing workshops on how to appeal property taxes.
I’m looking at access to capital. You do have a substantial database in terms of helping small businesses, whether it be with HR forms or other items.
Do you do that with respect to access to capital? Do you conduct workshops to allow them to understand? You’ve got the data and the database, and you know where the money is in terms of the banking. Is that something that you are pushing?
Ms. Auger: Within CFIB, you’re absolutely correct that we offer a sort of helpline as a resource for small business owners. If you’re a member of CFIB, you can call in and reach one of our business counsellors and get advice on anything from HR to the financing programs available in your province or what would be available to your sector. Our business resources will do the research and send them that information. That is one of the benefits of being part of CFIB as a small business owner.
In addition to that, we host webinars and have done a series of webinars on various topics, from learning how to import to program availability. I will say that when it comes to learning about new programs in the federal government or at the provincial level, those are never highly attended.
While we have tried a various range of subjects, if the program does not meet the needs of that specific business in terms of the specific time and need, they won’t take the time out of their day to come and learn about it.
Senator Martin: As a B.C. senator, I couldn’t help but notice your report from January 2025 about removing roadblocks and the impact of the sales tax on capital investment. That was a very interesting section. You make a recommendation for the British Columbia, Saskatchewan and Manitoba provincial governments. Can you talk more about this specific point?
Mr. Gaudreault: Yes. This is one research report that was put together by our Western colleagues. The central point of this report is the productivity issue that we have in Canada, and you need to address it through various ways. One of the core ways is investment and making sure that there is enough private investment.
Here you have an issue with the tax system in those provinces where basically businesses in those provinces are being penalized compared to businesses in other provinces when it comes to investment for the growth of their business.
What we recommended at CFIB is that provincial governments address those sorts of gaps or inefficiencies in the tax system so that businesses from those provinces are not at a disadvantage when it comes to investing for their business.
Again, that’s part of the efforts at CFIB that we’re making in ensuring there is a sound business environment, not just at the federal level but at all provincial levels. That’s why we have colleagues across the country. We’re proud to say we have regional teams and teams in all of the provinces working closely with the governments.
Quite honestly, the task is so big in our view that it needs to be addressed not just at the federal level but also at the provincial level and even — as the senator was pointing out earlier — at the local level as well when it comes to the local level of taxation.
Senator C. Deacon: Since we’re talking about the tax, and you have mentioned the tax quite a bit, I’ve seen a number of posts recently about the fact that small businesses tend to choose to push sales into another year when they’re getting close to the marginal tax rate or next-level marginal tax rate. I don’t understand that as a former small business person because, yes, you’re paying a larger amount on that next marginal tax rate, but it doesn’t affect the previous level of income. Can you explain the reason for that?
Mr. Gaudreault: Without speaking too specifically about the various strategies that businesses will put in place to address that, we were talking about the threshold earlier and everything it will put in place — again, raising the threshold would address some of that kink that we’re seeing when it comes to the small business tax rate statistics; it tends to kink. But one important point I should add about that, which is often overlooked, is there has been extensive analysis of that kink and, supposedly, that’s why a small business tax rate is not the most efficient.
What people always overlook is this kink is so small that when you look at the line chart, you see that this is a very small proportion of all small business claimants who end up in that situation.
There was also research recently by Statistics Canada that showed that some businesses — and you’re right in saying this — may push their sales. At the same time, you have certain businesses that would probably make investments earlier. That’s counterbalancing this effect.
Our opinion is that, overall, it comes down to something that is not significant enough to challenge the notion of having a small business tax rate.
Senator C. Deacon: That’s my sense, but I wanted to clarify. Thank you.
Senator Loffreda: I have a rapid closeout question. You had a lot of discussions with your federation members. You have a significant, important federation. If we can recommend one action to immediately improve access to capital for SMEs over the next 24 months, what would CFIB rank as the highest priority based on the discussions we’ve had today and the data that you told me you have? We can always use more data. You seem to have sufficient data, and you are doing a good job on that. What would you suggest we recommend?
Mr. Gaudreault: I would say leave more money in their pockets in the first place. That will address part of the financing needs of several of them.
Senator Loffreda: So less taxes?
Mr. Gaudreault: Exactly.
Senator Loffreda: Yet in certain provinces, we have the most competitive environment when it comes to corporate taxes. Individual tax is another story. For corporate taxes, we’re pretty competitive. Am I not correct on that?
Mr. Gaudreault: Senator, you give me an opportunity to mention another one of our research pieces that we did this summer where we compared the tax environments of a small business and a microbusiness. We had two case scenarios. We used all 10 Canadian jurisdictions compared with 20 select U.S. states, which are the ones closest to our economy that trade the most with us. There was a 20% gap in competitiveness.
I would challenge the fact that we have such a competitive business environment. I would also point out that even in those provinces — because quite a few have moved to a lower small business tax rate, to their credit — they still pay 9% at the federal level. We haven’t made much progress on that front.
Senator Loffreda: So that is the one. Thank you.
The Chair: Thank you for sharing your studies with us. It could be very useful because this is where we are concerned.
[Translation]
Senator Henkel: It’s not talked about much, but it’s very important. A recent study conducted in Canada shows that 41% of entrepreneurs say they will close their businesses within the next five years. What do you think are the most critical obstacles preventing new owners from taking over? What do you think the consequences could be if nothing changes?
Ms. Auger: When it comes to new owners, there seems to be a shortage of Canadians willing to take over businesses. We see this in our data sources. We also see that other mechanisms are being put in place for succession, but with regard to employee ownership trusts, we see that some mechanisms will disappear, so this format will not work or has no advantages even if the entrepreneur takes all the risk.
[English]
When it comes to succession, there seems to be a bit of a disconnect with the number of businesses currently exiting and Canadians coming in to take over as well.
[Translation]
Mr. Gaudreault: We also produce research reports on the issue of business succession. We see this as a fairly significant challenge. The title of our latest report was Succession Tsunami: Preparing for a decade of small business transitions in Canada. It’s great to start new businesses, but capital and value have been created in our existing businesses. If we could preserve that, it could give us a head start from an economic standpoint. In these reports, CFIB members are asked what the issues are. We also work with entrepreneurs to ensure that they have a succession plan, that it is discussed well in advance, and that it is clearly communicated internally within the business. It is important to consider these issues.
On the government side, as Ms. Auger mentioned, we need to have the right tools. In the past, the CFIB has worked on the issue of family business transfers. We were penalized on the tax side. I am sure that the committee chair is familiar with this issue. Quebec dealt with it extensively at the time, and progress was made in this regard. However, what Ms. Auger is saying about employee ownership trusts is another very important element that must continue to be supported.
Senator Henkel: To clarify, are you saying that this fund is at risk of disappearing or is disappearing?
Ms. Auger: No, there are financial mechanisms that employers —
[English]
— the business itself takes on a lot of risk, and right now there is a $10,000 capital investment that is about to expire, but this type of planning takes a lot of time. It takes several years to put these types of structures in place, and if we don’t give the business owner the ability to take on that risk while taking advantage of some of these mechanisms, they won’t put employee ownership trusts in place. It’s a great way to keep Canadian businesses in our communities.
[Translation]
The Chair: Thank you.
I will use my privilege as chair to give Senator Loffreda 30 seconds to speak on a subject that is important to him.
[English]
Senator Loffreda: On employee ownership trusts, I’ve been advocating for that for years. Has that been communicated to the government?
Ms. Auger: Yes, we have communicated in a formal letter.
Senator Loffreda: I’m sure you have.
Ms. Auger: We’ve been working with Employee Ownership Canada.
Senator Loffreda: I don’t understand why it has not been renewed. Thank you. I do appreciate it.
[Translation]
The Chair: The message has been conveyed. Thank you both very much for your testimony. Something tells me that we will see each other again soon during another study.
We will now suspend the meeting and go in camera.
(The committee continued in camera.)