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Banking and business borrowing in Canada are significantly different than in the United States. That is primarily driven by the fact that our banking system is uniquely different. In the U.S., borrowing finance is driven through various entities, including major 'money center banks', Commercial banks, community banks, and what are known as S&L' (savings and loans). In addition the American landscape is populated by community banks.

The Canadian banking system is different, in that the country has chosen to adopt a smaller ( by competitor ) banking system that is extremely concentrated and dominated by a handful of major players.


Primarily these are:




All of these banks support the Canadian Small Business Financing program sponsored by the federal government.


There is a decent-sized credit union movement in Canada, and many of these credit unions are making forays into Commercial banking and financing. Many people tend to feel these credit unions have not yet accumulated either the talent or the capital pool to properly play in business banking and commercial lending. Some time ago, we would point out that the government introduced legislation to allow foreign banks to lend in Canada. These banks are known technically as ' SCHEDULE B ' banks and are referred to a briefcase bankers in that they do not have the large branch networks that are the domain of our BIG 7 banks as listed above.


Capital for Canadian firms is traditionally much harder to secure in the Canadian banking system. Outside of the aforementioned CSBFL program that is federally underwritten the banks tend to secure small business loans with usually up to 100% of personal collateral. That of course has the customers pledging personal assets, savings, etc. There certainly are no ' templates ' for fast quick borrowing in the Canadian small business banking. Underwriters on a case judiciously adjudicate loan criteria by case basis, and as has been noted, relies heavily on the traditional three C's of credit

- character
- capacity
- capital


As the Canadian banks have emerged from the current world economic crisis, they seem to be focusing on smaller firms. For example, new business banking divisions are being created within some players, seminars and trade shows are being offered, and they often sponsor local events.


In many cases, Larger firms that do not meet the Canadian banks' requirements when it comes to significant borrowing requirements are often forced to consider asset-based lending arrangements with Canadian and U.S. commercial finance companies who have stepped in to play a role in this vital area.


Even though the larger firms may in fact have been in business a number of years their balance sheets and income statements do not meet the borrowing requirements of the Canadian loan committees. During the 2009 world economic crisis and financial meltdown,n the Canadian banks were consistently lauded for being some of the world's best run. However, the downside of this is that ' best run ' in many cases means risk-averse and commercial borrowing in Canada is significantly more difficult than in other countries such as the U.S.


Canadian banks have distinguished themselves by developing software and technologies that have put them at the forefront of commercial lending and borrowing in Canada.




In summary, the Canadian banking system is uniquely structured, and Canadian businesses, both larger and small, should focus on the unique strengths of the system borrowing and banking needs. Not all companies will be successful and business owners should ensure their financial executives or advisors know who can best meet their borrowing needs.



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' Canadian Business Financing With The Intelligent Use Of Experience '

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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil