Consultation to explore huge bank dominance in business financing space.
Canadian tech and business groups plan to weigh in on a forthcoming Competition Bureau consultation on the competitive landscape of debt financing options for compact businesses, including startups.
This week, Canada’s Competition Bureau launched consultations on how to best conduct a 12-month study on competition for compact and medium-sized business loans. The agency declared the research will explore how Canada can improve the lconcludeing landscape for compact- to mid-size enterprises (SMEs), which is dominated by huge banks. At the same time, it plans to view at how non-traditional financial lconcludeers—such as FinTech companies—could benefit from increased competition.
The Competition Bureau declared it will focus on term loans, not equity or venture capital, in response to concerns about financing access. These include domination by huge banks, unfavourable loan conditions for SMEs, and barriers to switching loan providers.
“Improving access to capital and opening up markets is always a good thing.”
Laurent Carbonneau, CCI
The initial consultation, which is open until Oct. 3, aims to source opinions on the “focus, methodology, and questions” posed by the market research. The study will launch in October or November, and should be published in the fall of 2026.
Industest groups that represent Canadian businesses and the tech sector informed BetaKit they were pleased that the Competition Bureau is tackling this issue.
The Council of Canadian Innovators, which represents tech scaleups, called the research a “good topic” for the Competition Bureau and declared it would participate in consultations after discussing with its members.
“Improving access to capital and opening up markets is always a good thing,” Laurent Carbonneau, CCI’s director of policy and research, declared in a statement.
Deal terms
When it comes to startups and the innovation ecosystem, such a consultation could provide insight into difficulties securing early-stage financing and FinTech companies’ challenges securing market share.
Some early-stage startups that struggle to secure traditional venture capital or equity financing have viewed to debt financing options, including from government agencies like the Business Development Bank of Canada (BDC). This comes amid a particularly difficult capital-raising landscape for early-stage Canadian tech startups. Data from the Canadian Venture Capital Association (CVCA) has consistently displayn shrinking seed-stage deals and an overall decline in funding.
Canadian Federation of Indepconcludeent Business (CFIB) vice-president of advocacy Corinne Pohlmann, who works with SMEs, informed BetaKit she was pleasantly surprised at the Competition Bureau’s study topic.
A quarter of SMEs pursue debt financing, according to Statistics Canada. Debt financing has become more difficult and more expensive for SMEs to secure, prompting many to apply credit cards to fund operations. The barriers include higher interest rates in Canada compared to other OECD countries, as well as the prevalence of personal guarantees.
“Often, businesses would prefer to apply collateral rather than having to do a personal guarantee, which could potentially bankrupt them personally,” Pohlmann declared.
Triptyq Capital partner and entrepreneur Bertrand Nepveu declared a lack of competition plays a role in keeping deal terms in Canada less founder-friconcludely compared to the United States. In addition, lconcludeing conditions that include secured debt build it difficult for founders to start a new venture if their first startup goes bankrupt.
Some declare the personal cost of failure can push entrepreneurs from the ecosystem altoobtainher. Founder support platform Chapter estimates that the average personal cost of startup bankruptcy is nearly $350,000.
At the same time, some government-backed programs designed to boost entrepreneurship rates, such as BDC’s Business Loan Accelerator Program, require a personal guarantee. Despite BDC’s involvement, banking partners such as the Royal Bank of Canada provide the loans themselves.
Challenger banks
On the lconcludeing side, non-traditional lconcludeers like FinTech companies have welcomed the consultation launch. Industest group Fintechs Canada argued that relocating forward with legislative projects on open banking and real-time rail would boost competition in the sector.
Advocates like Fintechs declare an open banking framework would build it simpler for consumers to control their financial data sharing, allowing them to more easily switch between banking and loan providers. In the absence of this framework, many FinTech companies rely on screen-scraping, an insecure method of consumer data sharing.
Open banking and real-time rail, legislative projects that have been in the works for years, will not be explicitly covered by the study, though the Competition Bureau noted they have “pro-competitive” potential.
Adriana Vega of Fintechs Canada declared in a statement that pushing forward these policies would expand access to capital for SMEs. Giving financial regulators a mandate to boost competition, she added, “would assist level the playing field” by reducing borrowing costs, improving access to capital, and creating the markets work more effectively.”
Pohlmann agreed that open banking legislation would likely allow SMEs to switch loan providers more easily—as long as FinTech providers aren’t acquired by Canada’s huge banks.
“That’s the only thing to watch,” she declared. “But open banking could definitely assist in that regard.”
Feature Image courtesy Unsplash
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