ABCtech #14 15MARA14 SMEs Struggle to Find Financing

ABCtech #14 15MAR14 SMEs Struggle to Find Financing

AMAZING

We are inviting Editorials to respond to our Survey identifying impediments to the growth of small technology businesses. Pat Meredith has provided a valuable insight into the adequacy of crowdsourcing, angels and listing on the Canadian Venture Exchange for funding small and medium businesses.     – Editor

Small and medium-sized business (SMEs) is very important to the Canadian economy.  In 2011, 99.9% of all businesses were small or medium-sized (have less than 500 employees).[i]  In 2012, over 7.7 million employees, or 69.7 percent of the total private labour force, worked for small businesses and 2.2 million employees, or 20.2 percent of the labour force, worked formedium-sized businesses. In total, SMEs employed about 10 million individuals, or 89.9 percent of employees (Figure 1).[ii] In a recent study, Statistics Canada found that, in 2008, small and medium sized businesses accounted for about 52 percent of private sector GDP.[iii]

One of the most important functions of banks is to support economic growth by using depositors’ savings to finance new and existing businesses.  This is the primary rationale for the regulatory protection (CDIC deposit insurance) the industry enjoys.  Yet, the conservative nature of Canadian bank lending combined with our extremely small venture capital market has made it challenging for small-and-medium sized businesses to grow.  As large businesses and manufacturing fade (largely replaced by robots, 3D printing and outsourcing), job growth must come from technology related information-based products and services.  Without access to adequate funding (no assets to secure the loan), growth of Canada’s information economy will be stunted.

The Canadian banks have not been effective small business lenders for decades (at least since they introduced computerized credit scoring). Their approach to risk management is essentially risk avoidance.  If a business does not qualify for a loan at prime plus 1% or 2% (the lowest risk levels), then it does not get a loan.  According to a CFIB survey, the average SME borrower pays prime plus 1.87%.  Unlike many of its U.S. counterparts, even if the business is willing to pay prime plus 10% Canadian banks are unprepared to accept the risk.  Since small businesses (especially small technology companies) are by nature risky, only those small businesses that do not need the money or could easily raise it elsewhere qualify.  Not surprising, roughly 2/3rds of the Canadian banks’ small business customers are net depositors.[i]  It is also not surprising that a survey released on March 11, 2014 by Alberta Council of Technologies found that banks and financial institutions were not viewed as effective for growing small technology businesses.  FOR MORE

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[i]http://www.ic.gc.ca/eic/site/061.nsf/eng/02715.html

[ii][ii]http://www.ic.gc.ca/eic/site/061.nsf/eng/02805.html

[iii]www.statcan.gc.ca/pub/11f0027m/11f0027m2012082-eng.pdf

EVENT – Energy & Environment – April 15th

Small and Medium-Businesses Struggle to Find Financing by Pat Meredith

For almost 30 years, Pat Meredith has been a director, senior executive and adviser in the financial services and technology industries.  Her current focus on strategy and governance is aimed at helping organizations adjust effectively to discontinuous changes in their industry.  She is a founding partner of Strategy and Governance Associates, a Fellow of the Clarkson Institute for Board Effectiveness and a member of the Board of the Canadian Institute for Advanced Research.

Troy Media Release – ABCtech Survey Points Finger at Banks and Financial Institutions for failing SMEs:

• Most important and where help is needed most: marketing, and manpower, management, networking and internal investment
• Least helpful: banks and financial institutions, multi-nationals and governments
• Most helpful: industry associations, incubators and research agencies, angel & VC Networks, management consulting

PROVOCATIVE ARTICLE – The Illusions of Entrepreneurship … and under-appreciated importance of GROWTH

Register Now – Site consultations to dig deeper for helping small technology businesses grow. Visit the panAlberta SCHEDULE:

• St. Albert – September 23rd
• Edmonton – May 6th
• Drayton Valley – April 25th

Dates Pending:

• Grande Prairie
• Fort MacMurray
• St. Paul
• Additional Edmonton
• Calgary
• Red Deer
• Lethbridge
• Medicine Hat

EVENTS – Management Consulting – April 15th

Join CMC-Alberta and our guests for an evening of networking and challenge. On April 15th CMC will be presenting “Tackling the Tough Stuff”. Special guests at the meeting include Jac Van Beek – CEO of CMC-Canada, Mike Watson – Chair of CMC-Alberta, and presentation by Productivity Alberta. [Tuesday April 15th 5:00pm – 8:00pm,  Fantasyland Hotel, West Edmonton Mall.

Register –  www.cmc-canada.ca

SAVE THE DATE – “Moonlight in the Meadows” – June 12th

ABCtech’s renown all-industry summer networking AGM/BBQ in the heart of Edmonton’s river valley. Electiing ABCtech’s Directors. Announcing ABCtech’s theme for 2015. And featured speaker – Richard Truscott of the Canadian Federation of Independent Business on the role of SMEs in economic diversification. Plus bistros & beverages. Lite entertainment. And a memorable sunset/and full moonrise.

Reserve your hospitality suite now. Contact – pkinkaide@ABCtech.ca