Business Financing Services

The Current Lending Environment in Canada

The current lending environment in Canada does not favour small to medium size businesses. With interest rates at historical lows, Schedule A Banks' rates of return are lower than they have been in the past. In many cases, smaller loans are higher risks for Banks. This is because quite often after a loan is advanced, the collateral on smaller loans erodes more rapidly than on larger loans. In addition, the cost to monitor a $20 million dollar loan is virtually the same as that for a $2 million dollar loan.

Schedule A Banks are also hoping that the Canadian Government will allow bank mergers in the near future. To that end, they'd prefer to keep their loan portfolio clean in preparation for a possible merger. Even a small covenant breach on a loan requires a Bank to establish a loss provision on that loan. In order to avoid this, their lending requirements are becoming much stricter for new clients. For existing clients, they would prefer to lose the client (or even ask them to find another lender) rather than try and work through a problem loan.

As a result, the mid sized lending market (loans of $10 to $20 million) is not being serviced well by Schedule A Banks. The small sized lending market (loans of less than $10 million) is virtually not being serviced at all. Businesses with financing requirements in these markets are left to wonder what their alternatives are to Schedule A Banks.

Aries Advisory Group is well versed in the current lending situation in Canada. Click here to learn about the alternative sources of financing available to you. We can help you through the lending environment labyrinth. Click here to find out how.