Lending In Canada

Over the last few years, at various times we’ve gone to the banks and looked at government grants or financing to help grow the business. It’s not that we need the money to survive, but capital (loans, etc) help us take risks to grow that we might not be able to / willing to do so without that back-up of additional capital.

In the last 6 years, the amount of external capital funding we’ve received through countless hours of applications and research? $0

Grants in Canada

I’ve mentioned before that unless one falls within very specific boudaries; receiving a grant is extremely unlikely.  The grants out there are created to either:

  • aid what is considered a disadvantaged class
  • provide employment and business growth for ‘high value’ businesses

E-commerce businesses and game stores do not fall into that category.  Instead, you need to be in a ‘sexy’ category to get a grant, which is why there are a ton of people chasing high tech dreams of social media / technological success and few actual e-commerce businesses.

Banks, They Are Not Your Friends

Perhaps its just an external point of view, but it seems banks in the US are much more willing to broker actual loans for businesses than Canadian banks.  Worst, what banks and the government want you to take loans out on or are willing to finance have very little to do with what is good for your business; but what is good for them.

As an example – it’s easier for me to get a loan to purchase a commercial warehouse than it is for me to get a loan to pay my rent.  In the first case, the bank feels they have an asset they can take in the event of a default; so they are happier to make the loan.  My ability to repay the loan is secondary in this sense and any inventory assets are not part of this equation.

Best Not Be Sensible

Another strange aspects of getting a loan from a bank is the need for personal assets.  More importantly, they desire personal assets that are not in RRSPs / TFSAs.  Both of those savings instruments are shielded by law from a loan guarantee; so even though it makes the most personal sense to conduct your investing / savings in those vehicles; if you need to see a bank for a loan it’s actually more sensible to have your funds in a non-secure account.

Dear Government…

Banks aren’t really here to help grow the economy.  Their goal is to make as much money as possible, which means reducing the total risk.  So, yes, even if a business is potentially worth investing in, if there aren’t any capital assets banks don’t want to deal with them.  Worst, in my view is the fact that our Canadian banks are happy to continue with the status quo since there just isn’t any competition for them.
This is where the government and government programs are supposed to come in.  Yet, there really aren’t any out there in Canada, or if there are, it’s nearly impossible to locate.  Changes in our tax rates, hiring credits (that appear, at best a year later) and super restrictive grants (e.g. the Get Youth Working Program) make great headlines, but do very little to stimulate business growth.

And we wonder why Canada is consistently behind the US and other countries in terms of innovation and business investment.