Ontario Chamber report calls on government to explore financing reforms for small business
WITH THE ACCELERATING vaccine rollout offering hope and optimism on the horizon, ambitions of economic recovery, navigating debt, cash flow and access to capital are going to be pressing concerns for many companies. And a new report released Wednesday by the Ontario Chamber of Commerce is calling on the provincial government to develop policies aimed at improving financing options for small businesses.
“Ontario’s small business owners are armed with grit and creativity, which proved instrumental as they adapted to public health restrictions,” reads the report, titled Capital is Key: Financing Entrepreneurship in Ontario After COVID-19.
“However, managing cash flows and debt became a challenge as the crisis forced many businesses to suspend, adapt or restructure their operations,” the report continues. “Recognizing that newer and smaller businesses are inherently riskier to finance, Ontario must develop policies to bridge gaps for entrepreneurs who will be in greatest need of support as they rebuild and grow in a post-pandemic world.”
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The report focuses on a set of policy recommendations, aimed at both the provincial and federal governments, that they suggest will promote a stronger entrepreneurship economy as the pandemic eases. Among them are some of the usual suspects — recommendations to create investment tax credits, red tape reduction, and improving access to public procurement opportunities — as well as more specific recommendations, such as recommending a pathway to permanent residency for international graduates who are investing in small businesses or making childcare an eligible business tax deduction.
It also suggests that the Ontario government look at implementing loan guarantees, aimed at lowering collateral requirements for borrowers, and based on similar programs that have had success in Nova Scotia, Australia and the U.S.
“We know that Ontario’s economic recovery will have to be driven by entrepreneurs that launch and scale their enterprises,” says Rocco Rossi, president and CEO of the 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.”
Moreover, in reforms to financing programs the Chamber sees a chance to level some of the inequities, social and otherwise, that the economy carried into the pandemic.
“Although financing challenges are ubiquitous for small businesses, women and visible minority founders are even more likely to report difficulties with managing cash flows and obtaining new financing,” the report suggests.
The findings are broadly familiar: women raise just four per cent of venture capital; Indigenous entrepreneurs are, on average, charged higher interest rates; and lower-income and young entrepreneurs lack personal assets that can be used as collateral.
“Addressing these inequities is critical for both social and economic reasons,” the report reads. “When entrepreneurs from diverse backgrounds succeed, not only to they benefit, but consumers gain more innovation in the products and services offered to them.”
“Entrepreneurial diversity should be recognized as a powerful strategy for Ontario’s economic recovery and long-term prosperity,” says Claudia Dessanti, senior policy manager at the Ontario Chamber of Commerce and the author of the report. “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.”
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These kinds of reforms and policy planks, the report concludes, can be a central part of Ontario’s recovery plan.
“Ontario’s small business community is expected to bounce back,” says the report. “Government’s role should be to accelerate this process, not by competing with the investment market buy by supplementing it with targeted incentives and investments.
“Ultimately, productive partnerships between government and the private sector will allow Ontario’s small business community to emerge stronger than ever.” Kieran Delamont