Entrepreneurial Success Can Drive Canada’s Economic Recovery if Given a ChanceMay 26, 2021
(Toronto, May 26, 2021) – The COVID-19 pandemic is creating a cash flow crisis for many entrepreneurs and small business owners across Ontario who represent 98 percent of all Canadian businesses and contribute close to half the GDP generated by the private sector. Recognizing the critical role of entrepreneurship in Canada’s economic recovery, the Ontario Chamber’s latest report – Capital is Key: Financing Entrepreneurship in Ontario After COVID-19 – offers practical solutions to support small businesses as they fuel Ontario’s economic advantage.
“We know that Ontario’s economic recovery will have to be driven by entrepreneurs that launch and scale their enterprises,” said Rocco Rossi, President and CEO, Ontario Chamber of Commerce. “Even in good times, small business owners encounter challenges at various stages of growth. Real progress can come from redoubling efforts to eliminate barriers and advancing creative solutions to improve access to capital and other resources.”
“Entrepreneurial diversity should be recognized as a powerful strategy for Ontario’s economic recovery and long-term prosperity,” said Claudia Dessanti, Senior Policy Manager, Ontario Chamber of Commerce “Equal opportunities for women, Indigenous, racialized, and other diverse groups in the entrepreneurial ecosystem is necessary for both their own recovery and that of the entire province. For example, closing the gender gap in entrepreneurship alone could add up to $81 billion to Canada’s GDP.
“All champions of small business and entrepreneurs − government, credit unions, banks, Chambers of Commerce and others − must collaborate to make access to capital easier and help find solutions to remove other barriers to growth,” said Wade Stayzer, Senior Vice President, Business Banking, Meridian. “We all need to work together to help implement the recommendations and ideas in this report to get Ontario’s economy firing on all cylinders again.”
“We are thrilled to join forces with the Ontario Chamber of Commerce on this policy brief on the importance of access to capital for economic growth. Canadian start-ups have difficulty scaling because they are unable to gain access to capital,” said Hugh O’Reilly, Executive Director, Innovate Cities. “Innovate Cities is working with innovators to help solve the problem through the creation of marketplace that will bring innovators and consumers together. By adding customers and revenues, Canadian innovators will more easily be able to attract capital.”
The OCC’s latest policy brief identifies 14 policy recommendations to improve financing of entrepreneurship, from loan guarantees to tax incentives, capital market reforms, procurement policies, and more.
The report also addresses eight key challenges policymakers must navigate as they look for ways to improve financing options and access to capital for entrepreneurs and small businesses:
- RISKY BUSINESS: Small businesses (particularly start-ups) are generally riskier to finance than larger ones because they have shorter credit histories, fewer assets, and lower survival rates.
- SCALE-UP FIRMS: Although Ontario excels at producing start-ups, the province has been less successful at turning high-growth firms into global competitors.
- DIVERSITY: Barriers to accessing capital are uneven across demographic groups, which limits opportunities for some entrepreneurs and undermines broader social and economic outcomes.
- DEBT: Despite relatively low interest rates, debt is not always the right solution for small businesses, particularly those with less collateral and/or irregular cash flows. Loans often require personal guarantees, and not all entrepreneurs have sufficient assets to provide as collateral.
- WORKING CAPITAL: Over the past decade, Canadian businesses have signaled a growing need for external capital to cover day-to-day operating expenses. Working capital is especially important for start-up firms that may lack adequate cash flows to reinvest in their businesses in the first several months. However, in Canada, most government-supported loans and grants are designed for other uses, such as technology adoption.
- INDUSTRY BIAS: Private equity and venture capital investors tend to have more appetite for sectors that are considered knowledge-intensive, such as information technology and biotechnology. As a result, more traditional brick-and-mortar businesses (such as restaurants and retail stores) may have limited access to equity investments.
- PANDEMIC PRESSURES: As temporary grant and loan programs expire, many small businesses will need access to new financing or refinancing to grow, restructure, or simply keep their doors open.
- SUCCESSION: Ontario’s aging population has implications for small business succession. By 2030, the number of seniors aged 65 and over is projected to almost double to 23 percent of Ontario’s population.
We would like to acknowledge and thank Meridian Credit Union and Innovate Cities for their collaboration on this policy brief.
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About the Ontario Chamber of Commerce
For more than a century, the Ontario Chamber of Commerce (OCC) has been the independent, non-partisan, indispensable partner of Ontario business. The OCC’s mission is to support economic growth in Ontario by defending business priorities at Queen’s Park on behalf of its network’s diverse 60,000 members.
For more information, please contact:
Ceara Copps – Edwards
Manager, Public Affairs
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