New Léger study shows accessing business credit and other financial products is slow, complex and chock-full of personal risk for smaller players
Toronto, ON — June 29, 2022: Today at the SME Small Business Expo, Caary Capital announces its official Canadian launch and releases new Léger research in partnership with Xero and the Canadian Lenders Association that paints a picture of a Canadian small and medium-sized business (SME) community struggling to access capital and other key financial products and services.
“Independent business ownership is always challenging and many in this community barely survived the pandemic over the last two years. In fact, 57 per cent are struggling to manage cash flow,” said John MacKinlay, CEO of Caary Capital. “What they need now is better access to financial products and services, but our research indicates that hasn’t traditionally been available for an SME. Caary’s official entry into the Canadian marketplace couldn’t have come at a better time. We look forward to finally and appropriately serving this critical segment of our economy with corporate credit that does not require a personal guarantee.”
Despite there being more than 1.2 million SMEs in Canada, it remains an underserved segment in financial services primarily because of outdated risk assessment practices. The findings from the study speak to this. 70% of SMEs are having to put their personal and family finances at risk to fund their business by either continuing to rely on a personal credit card for business expenses or providing a personal guarantee to access corporate credit. At a minimum this creates inefficiencies, ties up their personal credit and prevents them from building business credit. At the extreme, it puts their personal assets – such as the family home – at risk.
“Clearly owners are carrying risks that really should be the burden of the business,” said Gary Schwartz, president of the Canadian Lenders Association. “The good news is that fintechs are beginning to turn the tides on this for Canada’s smaller businesses by implementing proprietary and non-traditional credit scoring methods. By analyzing a business based on an array of alternative data in an open-banking-style environment, companies like Caary Capital are conducting expedited, nuanced risk assessments and offering products that reduce pressures around cash flow.”
Key highlights from the study include:
- 57% of SMEs say it’s currently challenging to manage cash flow – significantly higher than pre-pandemic (41%).
- 46% of SMEs have had to provide a personal guarantee to access corporate credit.
- 64% continue to rely on a personal credit card for business expenses. 68% say this has created difficulties, most notably due to high interest rates, reconciling expenses at month-end and maxing-out credit limits.
- 37% of those relying on personal cards use it for more than 40% of their total monthly business spend.
- 35% found it difficult to access business credit and 30% found it difficult to access key financial products and services.
- One-third (36%) have experienced delays securing a corporate credit card for their business.
- 40% are familiar with open-banking or consumer directed finance. 54% would consider a provider that used open banking if it meant easier access to corporate credit and nearly half (47%) would exchange more of their data for better access to superior financial products and services.
- 41% of business leaders say that they would consider installment lending to help manage the cash flow for their business.
- Those aged 34 or younger are significantly more likely to find it difficult to access both business credit (46%) and key financial products and services (40%) compared to those aged 35 or older.
“The research suggests that credit access is an issue, as is time consuming expense and cash-flow management,” said Faye Pang, Xero Canada country manager. “As more financial technology companies enter this space with innovative ways to serve the SME segment, we are excited to see more partnerships and integrations that help solve the expense and spend management side of the business. This is a win-win for the SME community and helps create more opportunities for Canadian business owners.”
Caary Capital’s Business Mastercard® and fintech platform gives businesses complete control over their spending and automates expense management. The Caary Business Mastercard comes with 1.5% cash back, no fees (including no foreign-exchange fees), virtual cards for employees or to dedicate to suppliers and there is no personal guarantee required. To enable this, Caary assesses an SME based on cash-flow and assets as opposed to credit history. The company has rolled out its product through key industry partners until today, when it opens its doors to the broad Canadian SME segment.
Click here to download more insights from the study.
About the Leger Study
These are some of the findings of a recent Leger poll, conducted on behalf of Caary. An online survey of 403 Canadian small (1-99 employees) or medium (100-499 employees) sized business leaders (owners/co-owners/operators/senior execs/leadership team members/decision makers) between June 3 – June 17, 2022, using Leger’s online panel.
No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, though, a probability sample of 403 respondents would have a margin of error of ±4.9%, 19 times out of 20.
About Caary Capital Ltd.
Caary is a fintech platform for small and medium-sized enterprises (SMEs) led by the Caary Business Mastercard®. With Caary, SMEs can better control their spending and automate expense management. The Caary platform comes with 1% cash back on all spend, no fees, no foreign exchange fees and self-directed employee and supplier cards. 98% of Canadian businesses are SMEs. Accessible credit cards, capital and fintech products are the tools to help them compete, grow and thrive. Visit caary.com for more information.
About the Canadian Lenders Association
The Canadian Lenders Association (CLA) is an industry association made up of 250+ companies across the financial services spectrum. From banks to FinTechs, the CLA supports innovation across all consumer and commercial lending sectors. All CLA members are committed to servicing the needs of a new generation of Canadian borrowers through the following mandates: principled and professional practices, financial education to the general public; encouragement of individual potential borrowers to take control of their financial autonomy; and to advocate on behalf of and represent the interests of innovative lenders. The association supports lending nationally and internationally to advance sector goals and promote a more equitable and innovative future of lending. Visit www.canadianlenders.org to learn more about the CLA.
Xero is a cloud-based accounting software platform for small businesses with over 3 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data anytime, anywhere and on any device. Xero offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners. In 2021, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. In 2020 and 2021, Xero was included in the Bloomberg Gender-Equality Index and in 2020, Xero was recognised by IDC MarketScape as a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.