Lending a Little can Mean a Lot
Local entrepreneurship is a key facet of economic growth and job creation in Saskatchewan. According to the 2020 Saskatchewan Small Business Profile, 98.9 per cent of businesses operating in the province have less than 50 employees. Small businesses are responsible for over 25 per cent of Saskatchewan’s payroll, with a similar share of contribution to GDP. What is often overlooked is the important role that entrepreneurial service providers and developmental lending agencies play in preserving this vital ecosystem.
When observing Canada’s Big 5 banks, it is often more lucrative and efficient for them to pursue larger clients needing sizeable amounts of credit. Microbusinesses and start-up entrepreneurs may be seen as too risky, or not worth the effort to approve small loans. Additionally, Indigenous entrepreneurs, women and young people face obstacles to accessing lending such as fewer assets to pledge as security, no options for cosigning, discrimination, or a lack of banks within the community. The good news is that specific lending agencies exist in Saskatchewan to address these barriers.
Indigenous Lending
Aboriginal Financial Institutions (AFIs) such as the Clarence Campeau Development Fund, the SaskMétis Economic Development Corporation, and the Saskatchewan Indian Equity Fund (SIEF) develop close relationships with their clients by actively listening to client and community needs and opportunities. Distinct programs are available for both Métis and First Nations entrepreneurs. By building close relationships with communities and entrepreneurs, AFIs can identify opportunities and risks and work with projects that would likely be turned down by traditional banks. AFIs can provide productive lending to create new technologies, products, and services that create local jobs, and diversify local economies. When loans are provided to small business owners, the real economy grows and directly benefits the community as new products and services are introduced into the economy. This also acts as a tool to combat inflation, as real goods and services increase in supply.
Furthermore, entrepreneurial support programs such as the Pathways for Entrepreneurship program at the Gabriel Dumont Institute remove barriers to Indigenous entrepreneurs by providing access to training, business planning, networking, and professional services supports to maximize the chances of successful business creation.
Women in Entrepreneurship
Women have long been underrepresented in the Canadian entrepreneurial ecosystem. According to the 2014 Survey on Financing and Growth of Small and Medium Enterprises, only 15.7 per cent of small and medium sized businesses were owned by women, while 64.6 per cent were owned by men.1 Financing inequities are represented by the fact the nearly 66 per cent of women business loan applications are rejected compared to only 25 per cent of men. Although there has long been a gender gap in business ownership, that gap is closing in an accelerated fashion.
Statistics show that women entrepreneurs spend money differently and invest in areas different than men. Investments in education, healthcare, and insurance highlight the importance of investing for future generations and signify a shift towards sustainability.2 One of the largest exchange traded funds in the world is managed by Cathy Wood, a woman entrepreneur who focuses on investing in disruptive innovations and businesses that have a strong connection to building a stronger global future.3 Women entrepreneurs also thrive by working together, leading by example, and learning through mentorship.
Organizations such as Women Entrepreneurs of Saskatchewan (WESK) empower women by providing business resources and delivering networking and community events to embolden women in business. WESK also provides unique financing and lending options to women entrepreneurs to assist in removing barriers. Other programs such as the Saskatoon Open Door Society’s Women’s Business Hub provides newcomer women with access to workspaces and other resources to help create small businesses.
Youth in Business
The majority of businesses in Canada owned by baby boomers and this massive generational cohort is swiftly nearing retirement—if not already there. There is an opportunity for youth-owned businesses to fill the void left from baby boomer businesses and to create transformative, more-efficient, tech-focused businesses. Youth owned businesses are often big in research and development, export oriented, and have a high growth potential.4 Youth may face lending barriers such as not having sufficient credit history, carrying a significant debt load (such as student loans), minimal credit history, or fewer assets to pledge as security or collateral. Lenders may also view non-traditional business models as riskier (such as tech-focused companies) and may not be willing to support high growth companies that do not realize profit for several years. Over 50 per cent of Canadian youth entrepreneurs support aggressive growth plans.5
Futurpreneur Canada provide access to lending options, business planning templates, mentorship, growth accelerator programming, as well as networking events to engage youth entrepreneurs and assist them in accessing capital. Industry specific incubators such as Co.Labs in Saskatoon and Cultivator by Conexus in Regina support the tech ecosystem by providing networking, accelerator programming, and mentorship to build a strong product-market fit. There are supports to assist in growing revenues, accessing capital networks, and scaling up.
The Bottom Line
With small businesses making up 98 per cent of all businesses in the country and employing 69.8 per cent of the private sector labour force, lending to small business is critical for the entrepreneurial ecosystem.6
There are many more incredible entrepreneurial supports organizations in Saskatchewan that cater to a wide variety of entrepreneurs and demographic groups. Check out these great programs:
Entrepreneurs with Disabilities Program: edpsask.ca
Awesome Food Program: beawesome.ca
Ideas Inc.: space.ideasyxe.com
Audacity YQR: audacityyqr.ca
Square One Sask: squareonesask.ca
Cultivator by Conexus: cultivator.ca
Innovation Sask: innovationsask.ca
Aboriginal Financial Institutions: nacca.ca/aboriginal-financial-institutions/
BDC Canada: bdc.ca/en
Co.Labs: co-labs.ca/
References
1Women-owned Enterprises in Canada, Statistics Canada, https://www150.statcan.gc.ca/n1/pub/11-626-x/11-626-x2018083-eng.htm
2Will Gen X Women Rule the World? Further.Net, https://further.net/gen-x-women/
3‘Go For It’: America’s Richest Self-Made Women On Founding Businesses After 40, Forbes Magazine, https://www.forbes.com/sites/hayleycuccinello/2020/10/13/american-self-made-women-founders-over-40/?sh=2196057275d3
4Small Business Financing Profiles, Government of Canada, https://www.ic.gc.ca/eic/site/061.nsf/vwapj/youthprofile_eng.pdf/$file/youthprofile_eng.pdf
5GEM Canada Report on Youth Entrepreneurship, The Centre for Innovation Studies, http://thecis.ca/wp-content/uploads/2018/11/GEM-Canada-Report-on-Youth-Entrepreneurship-FINAL-2.pdf
6Financing SMEs and Entrepreneurs 2020: An OECD Scoreboard, Organisation for Economic Cooperation and Development, https://www.oecd-ilibrary.org/sites/f639657b-en/index.html?itemId=/content/component/f639657b-en
