Entrepreneurial Success Can Drive Canada’s Economic Recovery If Given A Chance

Small Business Canada

Claudia Dessanti is Senior Manager of Policy at the Ontario Chamber of Commerce (OCC), where she founded and co-chairs the Energy Policy Council, and leads the OCC’s policy and advocacy work around the environment, energy, regional economic development, data policy, housing, diversity and inclusion, and more. Prior to joining the OCC in 2018, Claudia researched mortgage markets for National Bank Financial and measured social impact for Charity Intelligence. She has a Master’s degree from the University of Oxford and a BA from the University of Toronto.

The Ontario Chamber of Commerce just released the latest report Capital is Key: Financing Entrepreneurship in Ontario After COVID-19. Can you highlight a few key findings from the report? 

Financing is a challenge for most entrepreneurs. The pandemic has created a cash flow crisis for many businesses; but even prior to the pandemic, it was often difficult to access the right forms of capital. 

In fact, before the pandemic, 52% of SMEs in Ontario relied on self-financing. The rest accessed a combination of debt, equity, trade credit, leasing, government grants, and other sources.

Challenges included an overreliance on debt, a lack of growth capital, investors’ bias towards knowledge-intensive sectors, and a growing need for working capital.

The pandemic amplified many of these issues. Lenders and investors have taken a slightly more conservative approach in response to new risks. Meanwhile, emergency grants, loans, and tax supports have been a lifeline for businesses that were forced to suspend or restructure their operations – but these programs are temporary.

Looking ahead, 60% of businesses in Ontario believe that entrepreneurship will rebound after COVID-19. That rebound will be fundamental to Ontario’s economic recovery and it will require access to the right forms of capital. 

Our report identifies 8 challenges and 14 policy recommendations to improve the financing of entrepreneurship during the economic recovery. The report was developed with support and expertise from Meridian Credit Union and Innovate Cities.

Why is it important to recognize Entrepreneurial diversity as a powerful strategy for Ontario’s economic recovery and long-term prosperity?

Entrepreneurs are the backbone of our economy. SMEs account for more than 90% of jobs in Ontario, produce competition and innovation and add invaluable character to local communities.

Unfortunately, it can be especially challenging for women, Indigenous, and racialized entrepreneurs to access the capital they need to grow their businesses. For example, women raise just 4% of venture capital funding in Canada, accounting for 28% of entrepreneurs. 

These inequities limit those entrepreneurs, and they also undermine the economic and social well-being of the entire province. Diversity breeds resilience and it gives consumers more choice and innovation.  

What are some policy commendations identified by OCC to improve the financing of entrepreneurship, from loan guarantees to tax incentives?

We offer 14 recommendations that can be implemented immediately. One example is a loan guarantee program in partnership with financial institutions to de-risk lending to new enterprises.

The program could be targeted towards the types of businesses that were disproportionately impacted by the pandemic, including those in the tourism and restaurant sectors.

Another recommendation is focused on improving access to public sector procurement contracts. We know procurement can propel small businesses into new markets and financing opportunities. Policymakers need to address the barriers that prevent small businesses from competing for contracts in Ontario.

Some of the other solutions we propose include tax incentives for investors, modernization of capital markets, and streamlining of government programs. 

What are some key challenges policymakers must navigate as they look for ways to improve financing options and access to capital for entrepreneurs and small businesses?

Small businesses are inherently riskier to finance because they have shorter credit histories, fewer assets, and lower survival rates. The private sector does a good job of supplying capital, but there are gaps that policymakers can help mitigate through incentives and direct support. However, a key challenge for the government is to avoid interfering in a way that distorts the market and fails to adequately price risk. In other words, the government needs to enhance the market, not replace it. Given Ontario’s debt and deficit situation, the government must also ensure it is spending efficiently and generating a strong economic return on its investments.

On a final note, what is your key advice to small business owners during these difficult times?

First, congratulations. Despite the hardship, the resilience demonstrated by Ontario’s business community has been incredible.

Second, I encourage you to make the most of the supports offered by financial institutions, governments, associations, and others. Our report has an Appendix (page 24) listing many government programs you may be eligible for. If you aren’t already connected with your local chamber of commerce or board of trade, they can help you access support. 

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