Published Articles

Mico-firms in Need of Capital Too (in Business Vancouver Island)

The federal government injection of $13 billion to funding programs through the Business Development Bank of Canada and Export Canada were announced last fall to assist companies in accessing capital. As were further funding increases allocated through increases to the Small Business Financing Program . However, given the nature of the program, it is most likely that these funds will assist Small and Medium-size Enterprises (SMEs) and larger companies. They may offer little opportunity for businesses with more modest financial needs, particularly micro-business with less than less than 50 employees and even less for micro-business, with 4 or less employees.

So what do Island small businesses owners do for capital?

We have certainly heard from small business that access to capital is tight or more expensive than it was up until recently. Although lenders have indicated that they are still lending to businesses with smaller financial requests, the fact that the needs of small or micro businesses are often less than $100,000 means that they are considered as personal rather then commercial loans. So the borrower has to have a significant amount of personal asset to back the loan request, which for a number of borrowers, is difficult.

Yet, the fact that money is more difficult or more expensive to get, is really a function of the free enterprise system that capitalism supports. And the conservative approach of Canadian banks has been lauded around the world as superior to any others – it’s the reason why our lending institutions are in better shape than anywhere else on the planet.

There is an ongoing debate in the business community as to whether there is a role for the provincial government to play in addressing the challenges of small business in BC. 

Ninety eight per cent of business in BC is small business, and 83% of those are micro-businesses. If those companies are having a hard time keeping solvent due to less access to capital, we could have a ground swell of small business collapse. The ripple effect of that throughout our economy would be substantial.

Innovation inherently brings with it a certain amount of risk when those ideas are brought to market. Yet without innovation and risk, business loses the potential for exponential growth and provincial productivity deceases. We all lose a bit when there is not appetite for risk.

Perhaps there is a role for the provincial government in shoring up the financial environment for small BC businesses. That certainly does not mean bail-outs of any sort. But perhaps there is a role for government to create an environment through a short-term targeted program of loan guarantees to soften the risk associated with access to capital for innovators and mico-businesses with small capital needs. Government assurance to get small and micro-business over the hump of the recession and keep the economy on track is an option to be explored.

Articles - 2010

Articles - 2009