The Competition Bureau is inviting the public’s input on a study it plans to conduct into the lending sector for Canada-based small and medium-sized enterprises.
The market study will examine the state of competition in this sector given four recent concerns raised in this area: the domination of big banks, barriers to entry and expansion for new or smaller lenders, the challenge of comparing loan options and changing lenders, and the increased borrowing costs for SMEs versus large firms. In Canada, the difference in borrowing expenses for SMEs and large firms is greater than in other OECD countries, the bureau said.
The study will concentrate on term loans, a common financial product for business growth investment. The bureau noted that competitive financing access is vital to SMEs’ growth and success since SMEs comprise over 98 percent of Canadian employers.
In 2023, 49.3 percent of SMEs applied for external financing.
“Small and medium-sized businesses are the backbone of the Canadian economy. Increasing competition in Canada’s financing sector would give these businesses better access to the funding they need, support greater productivity, and boost innovation,” competition commissioner Matthew Boswell said in a statement. “Our goal with this study is to provide policymakers with evidence and recommendations to make this a reality.”
The study results will govern the Competition Bureau’s recommendations for improving competition to help SMEs, the financial institutions lending to them, and the Canadian economy overall. Moreover, any evidence of possible Competition Act-related concerns found in the process of conducting the study will be investigated and actioned on.
The bureau has asked interested parties to review its consultation paper and provide feedback on the market study’s proposed terms of reference by October 3. The bureau will then finalize and release the terms of reference, formally beginning the study; the terms of reference will detail the submissions process for stakeholders.