On 20 November 2025, the Standing Senate Committee on Banking, Commerce and the Economy (the Committee) was authorized to examine and report on access to credit and capital markets for small- and medium-sized enterprises (SMEs)0F as the basis for growth and improved productivity in the Canadian economy. The Committee held 15 meetings on this topic, featuring approximately 24 hours of testimony from over 35 witnesses that included SMEs and representatives from various facets of the Canadian credit and capital markets.
The Committee is calling for numerous fundamental changes to the Canadian financial system that would address the structural issues currently leading to persistent financing gaps for SMEs, the underinvestment of domestic capital in productive Canadian businesses and the loss of Canadian talent, business and intellectual property ownership. Recent events have dramatically accelerated the need to address this structural choke point in our economy where massive pools of assets remain inaccessible to our most promising growth companies and industries.
SMEs are the backbone of the Canadian economy. As of December 2024, SMEs accounted for 99.7% of employer businesses in Canada, and in 2022, SMEs accounted for nearly half of the gross domestic product (GDP) generated by the private sector. They are the primary source of private-sector employment, the foundation of local economies and a key driver of innovation and growth. Their success is critical to Canada’s long-term prosperity, productivity and competitiveness. When Canadian SMEs succeed, Canada succeeds.
Throughout this study, the Committee repeatedly heard that structural issues in Canada’s economy are preventing SMEs from achieving their full potential. This is because Canadian financial markets do not offer competitive, affordable and timely access to capital and credit. Canada is home to a vast number of SMEs, yet its financial sector is dominated by a handful of large financial conglomerates1F, creating a persistent and increasing disconnect between those seeking credit and capital, and those controlling its allocation.
Designed primarily to promote stability and efficiency at scale, the financial system tends to favour larger, lower-risk, asset-backed transactions. As a result, many promising economic opportunities for SME expansion, innovation and succession are rendered inaccessible due to structural barriers within Canada’s financial sector.
Increasing globalization and the growing role of foreign investment have provided Canadian firms with access to capital from foreign jurisdictions. However, this has also contributed to the premature sale of promising companies and the transfer of ownership, investments in research and development, intellectual property and future economic value outside of Canada.
The Committee is deeply concerned that Canada’s largest institutional investors (financial conglomerates, insurers, pension funds) and pools of capital appear disinclined to finance the growth of Canadian SMEs, thus limiting our country’s ability to capitalize on Canadian talent, our investments in research and development and, ultimately, our ability to retain and grow our most promising innovative businesses.
To tackle the structural deficiencies that have manifested themselves over time in Canada’s financial system and boost access to capital for SMEs, the Committee calls on the federal government, directly or indirectly, to:
- create an SME Office, accountable to a single minister, responsible for accelerating overall business innovation and growth in Canada. Align the policies, services and programs in ways that catalyze investment from the private sector domain and investment experts, and publicly report impact date by program;
- enhance tax competitiveness for both SMEs and investors in SME growth through accelerated changes to tax policy;
- enable and encourage regulatory changes that will expand SME access to capital and credit by creating robustly competitive financial markets and better enabling new entrants in those markets to competitively access the capital they require to increase their investment and/or lending to SMEs;
- encourage the provinces to introduce robust market reforms that will enable Canada’s public and exempt investment markets to once again become globally competitive and a viable alternative for growing Canadian SMEs to create liquidity and raise capital;
- take action to support the Canadian acquisition and ownership of intellectual property and its retention in, and commercialization from, Canada as recommended in BANC’s June 2023 report entitled Needed: An Innovation Strategy for the Data-Driven Economy;
- ensure that Canadian SMEs can reliably compete for timely access to federal procurement opportunities that reward excellence and innovation. The revenue from those projects will increase SME access to both credit and capital; and
- encourage entrepreneurship across our country by recognizing and addressing barriers that demonstrably limit access to credit and capital of entrepreneurs from underrepresented groups and communities.
Time is of the essence. Canada’s innovators and entrepreneurs represent the future of our economy. Competitive access to credit and capital is critical to enabling our SMEs to compete globally, both in and from Canada.
Source: sencanada.ca
