November 14, 2007 – Toronto – Despite saying it wants to increase service to small- and mid-size business, Canada’s banking sector is making little progress, the latest research from CFIB shows. Banking Matters reveals dwindling satisfaction with major financial institutions, with only two improving their rating since the previous survey in 2003.
“Since the late 1980s fewer and fewer small business owners have applied for bank financing,” CFIB President Catherine Swift explains. Small business loan activity has remained fairly stable since 1988 while loan activity for larger businesses has increased significantly. “This trend shows the banks may be missing opportunities for growth with the small business sector that accounts for 45 per cent of the Canadian economy,” Swift says. “You have to question whether banks are meeting the borrowing needs of small businesses.”
CFIB asked members to rank their financial institution on nine performance indicators, including lending terms, service charges, access to full-service branch, online banking and treatment by their account manager.
HSBC, credit unions and ATB Financial (Alberta Treasury Branches) continue to receive highest marks from their small business clients but their performance is beginning to falter. The big five banks have not shown much improvement in service satisfaction, which remains consistently low. Credit is due to both Desjardins and National Bank for improved satisfaction levels. Overall, however, the banking sector is not making significant strides towards better serving the small business sector.
Among the report’s findings:
- The overall loan rejection rate is high at almost 14 per cent and the smaller the business, the more likely it is to be refused a loan. The corresponding rate for smaller firms (with fewer than five employees) was close to one in five (19 per cent).
- The smaller the business, the higher the cost of bank financing. On average, for example, the smallest businesses paid 2.28 percentage points above the prime rate, while mid-sized firms paid 1.12 points above prime.
- Bank market shares for the small business market have changed. The Royal Bank, CIBC and the Bank of Montreal continue to lose a portion of the small business market. Those experiencing an upward trend in small business market share include: TD Canada Trust, Scotiabank, Desjardins and credit unions.
“Most Canadians work for small- and mid-size business and a strong and competitive banking sector is essential to the future of the country’s economy,” Swift says. “Therefore, small- and mid-sized businesses need access to competitively priced banking services. This report suggests ways to improve that service.”
The full report is available online at www.cfib.ca.
The report is based on survey results from 9,347 owners of small- and mid-sized businesses.
For further information contact Judy Langford at 416-222-8022 [email protected]
CFIB is Canada’s largest association of small- and medium-sized businesses. Encouraging the development of good public policy at the federal, provincial and municipal levels, CFIB represents more than 105,000 business owners, who collectively employ 1.25 million Canadians and account for $75 billion in GDP.
Since 1971 the Canadian Federation of Independent Business (CFIB) has been giving small firms a big voice in the public arena. Best known for high-profile actions with governments on policies like tax, labour laws and public sector spending, we have also achieved many behind-the-scenes changes that have meant real dollars-and-cents benefits to all firms.