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Are There Canada-U.S. Differences in SME Financing?

  • Danny Leung
  • Césaire Meh
  • Yaz Terajima

Previous surveys of Canadian and U.S. business owners suggest that access to financing in Canada may be more problematic than in the United States. Using the 2003 Survey of Small Business Financing in the United States and the 2004 Survey on Financing of Small and Medium Enterprises in Canada, this paper examines whether this perception can be better quantified. Compared to U.S. SMEs, Canadian SMEs are found to have greater reliance on loans from individuals (family, friends and others) and less reliance on loans from financial institutions. This result can be interpreted either as indicative of lower availability of formal credit in Canada, or a lower need for formal credit. Furthermore, while evidence validating the perception that Canadian financial institutions are less likely to approve loan application of risky SMEs cannot be found, there is evidence that supports the notion that Canadian financial institutions are following a more uniform pricing policy than U.S. financial institutions.

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Paper provided by Bank of Canada in its series Staff Working Papers with number 08-41.

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Length: 35 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:bca:bocawp:08-41
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