Fast facts

  • Banks represent about two thirds of the business lending market and roughly one-quarter of the overall business financing market in Canada
  • Banks are prudent lenders and continually work to make credit available to credit-worthy businesses in Canada. This prudent approach is a key reason why banks in Canada avoided the financial difficulties that plagued banks in other countries.
  • Banks will continue to be there to support their business clients, just as they were during the global financial crisis.

The bottom line

Canada’s banks remain open for business and committed to providing financing to Canadian businesses.

Banks are a key source of credit for Canadian businesses

Banks represent almost 70 per cent of all lending supplied to businesses through business loans, short-term promissory notes known as bankers’ acceptances, non-residential mortgages and other lending products. Considering the financing market more broadly, including the capital markets, banks represent roughly one-quarter of the total business financing marketplace.1

Banks will continue to be there to support their business clients, just as they were during the global financial crisis.

Demand for business credit rebounding

During the economic downturn, many businesses reduced their borrowing because of the economic and market uncertainty.

Business financing has been increasing in response to the gradually strengthening economy and steady growth in confidence since the end of the financial crisis. These conditions are becoming broad-based throughout the Canadian economy and are bolstered by:

  • the solid financial positions of Canadian firms. The Bank of Canada recently noted that businesses have healthy balance sheets with low levels of leverage.
  • the improved economic outlook and low government bond yields that have underpinned the strong investor demand for corporate bonds and equities.

In fact, as of December 2015 total authorized lending was nearly $1 trillion and total outstanding loans reached close to $400 billion.

Authorized lending to small and medium sized businesses (defined as authorized loans under $5 million) reached $209 billion as of December 2015, and loans outstanding reached $130 billion.2

How lending decisions are made

Bankers look at the total business package when making financing decisions and the ability to repay a loan is determined by factors such as the business plan, cash flow projections, asset base, sales and marketplace analysis and business viability.

Banks make all lending decisions on a case-by-case basis. The terms of the loan are based on the financial situation of the individual business within the context of financial market conditions more broadly. For example, if economic difficulties have a negative impact on a business' financial situation, then the risk to the bank of lending to that business could increase. In situations like this, the bank may require more security before providing the loan or the loan may be more expensive. But if the business is creditworthy and the bank thinks it has the ability to repay the loan, then the credit would be granted.

Banks remain prudent lenders

While banks understand the importance of providing credit businesses, they also have a responsibility to protect their depositors’ money.

Banks continue to make lending decisions on a case-by-case basis, extending credit to those for whom it would be beneficial and who have the capacity to repay the loans. This prudent approach is a key reason why banks in Canada have largely avoided the financial difficulties that have plagued banks in other countries.

Maintaining these sound, fundamental principles of prudent lending is important to Canada’s banking system and also in the best interest of all Canadians. The banking industry annually contributes tens of billions of dollars to Canada’s GDP, directly employs more than a quarter of a million Canadians in addition to providing financing for businesses across the country.

Canadian businesses benefit from Canada’s strong banking system

Canadian banks did not require the taxpayer-funded bailouts that occurred in many other countries around the world. Emerging from the economic turbulence of the past few years, Canada’s banks have remained strong, contributing substantially to the economic recovery.

1 Bank of Canada, As at December 31st, 2015
2 CBA Business Credit Statistics, December 2015, figures from nine banks