Canada’s small businesses are getting a mixed signal from the lending market this fall. Major banks say they are deliberately pushing more capital toward small and mid-sized firms, while newer data suggests the broader lending relationship between small businesses and traditional financial institutions has been shrinking for more than a decade — a gap that fintech lenders and a federal Crown corporation are now trying to fill.
Bank Numbers Show Momentum
At a Barclays event, Aris Bogdaneris, Group Head of Canadian Banking at Bank of Nova Scotia, said the bank’s small-business lending is growing 10% year over year, part of a broader push into commercial banking that he described as having its strongest deal pipeline in a long time. Bogdaneris said Scotiabank has added sales capacity specifically in mid-market and small-business segments, along with expansion in the prairies, British Columbia and Quebec. He said commercial banking provisions for credit losses have declined for five consecutive quarters and that coverage ratios in the commercial business are at their highest level, which he characterized as evidence of continued underwriting discipline even as the loan book grows.
The small-business push is one piece of a CAD 100 billion commitment Scotiabank has made to Canadian industry, which Bogdaneris said covers both the bank’s existing book and future activity in sectors including oil and gas, defense, trade, manufacturing, commercial real estate and agriculture. He added that a recent reduction in the Office of the Superintendent of Financial Institutions’ Domestic Stability Buffer, which frees up capital for banks, would not change Scotiabank’s lending approach, saying the bank remains focused on demand, customer needs and risk-adjusted returns rather than loosening standards simply because more capital is available.
Bogdaneris also linked the small-business growth to a wider shift in Scotiabank’s lending mix, saying non-mortgage lending, including small business, commercial banking and credit cards, is growing faster than mortgage lending for the first time in two years as the bank looks to diversify away from being primarily mortgage-driven.
A Widening Financing Gap Nationally
That growth at one large bank sits against a starker national trend. According to an OECD report on small businesses and entrepreneurs cited by Calgary-based fintech Woveo, lending to small businesses in Canada fell from 16% to 5.8% between 2011 and 2024. Woveo also said 33% of Canadian small and medium-sized businesses are underfinanced, and that loans under $50,000 face a 50% rejection rate — a gap it argues traditional underwriting models struggle to close, particularly for newer entrepreneurs without an established Canadian credit history.
Small-Business Lending: Bank Growth vs. National Financing Gap
That backdrop is part of what has driven the Business Development Bank of Canada (BDC) to expand its Community Banking Initiative, launched in 2024 with the stated goal of partnering with more than 80 local organizations to grow the number of small businesses in Canada by 10%.
Fintech Partnerships Aim to Fill the Void
Woveo announced this week that it is partnering with BDC on a $10-million microlending program offering loans of up to $25,000 to small and medium-sized businesses across Canada, with the exception of Québec, where the company is still working to meet the province’s French-language requirements before expanding there in 2027. Eligible businesses must have at least $5,000 in monthly revenue, be operating in Canada for more than 12 months, and hold a minimum credit score of 600.
“Our initiative with BDC will help more entrepreneurs build sustainable businesses and create a pathway into the mainstream financial system,” Woveo co-founder and CEO Jonah Chininga said in a statement, adding that as an immigrant entrepreneur himself, he understands how difficult it can be to access financing when traditional systems don’t fully recognize a business owner’s experience or potential. Woveo’s platform combines artificial intelligence with alternative data sources — including real-time cash flow, credit bureau data and business performance signals — to assess lending risk, and the company has set a goal of financing 50,000 small and medium-sized businesses by 2030.
Alternative Lenders Multiply Options
Beyond BDC-backed programs, a broader ecosystem of non-bank lenders has emerged to serve businesses that may not fit conventional bank criteria. Alternative lenders operating in Canada include Driven, which has funded more than 15,000 Canadian small businesses since 2006 through term loans and lines of credit; Lending Loop, a peer-to-peer marketplace connecting small businesses with individual investors; and OnDeck Canada, which offers term loans and lines of credit. Marketplace platforms such as Fundica and Loans Canada match businesses with grants or loan offers from multiple lenders, with financing through some Loans Canada partners reaching up to $800,000.
Other firms specialize in faster, revenue-based funding rather than traditional credit checks. Merchant cash advance providers such as Capify, Greenbox Capital and Vancouver-based Merchant Growth evaluate applicants largely on cash flow; Greenbox Capital has publicly reported factor rates typically between 1.1 and 1.5, while Merchant Growth lists rates publicly between 12.99% and 39.99%. Equipment-financing specialists including Canadian Equipment Finance and Leasing, CurrencyFinance and RBC’s commercial equipment financing arm round out a market that increasingly separates well-documented, larger borrowers from smaller or newer businesses relying on cash-flow-based underwriting.
Taken together, the divergence between a large bank reporting double-digit small-business loan growth and national figures showing a long-term decline in small-business lending share illustrates why government-backed programs and fintech lenders are positioning themselves as intermediaries — aiming to connect entrepreneurs, including newcomers to Canada, with financing options that traditional underwriting has not always reached.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
This article references reporting from:
