Why Small Businesses in Canada Are Failing: The Death of Supportive Lending

Canada has long prided itself on being a country that supports innovation, local entrepreneurship, and the “mom-and-pop” businesses that form the backbone of our economy. But that image is quickly becoming a hollow shell. Across the country, small businesses are shuttering at alarming rates—not because the ideas are bad or the work ethic is lacking, but because our financial institutions have all but abandoned them.

There was a time—not even that long ago—when someone with a good idea and a half-decent business plan could walk into a bank, sit down with a loan officer, and walk out with a line of credit. You didn’t need to be a millionaire. You didn’t need a letter from a Fortune 500 sponsor. You needed a vision, some hustle, and maybe a bit of collateral. The bank saw you as a partner in growth. Now, you’re just a liability until proven otherwise.

In today’s lending landscape, that same entrepreneur would likely be laughed out the door.

Banks have raised the bar so high that it’s become impossible for most small businesses to clear it. Want a modest $25,000 loan to expand your catering business or open a second barbershop? You better be making at least $10,000 a month—for the past 12 consecutive months. That’s not an exaggeration. That’s the standard threshold many banks now demand before they’ll even look at your paperwork.

And don’t bother showing up unless your credit rating is not just good—but squeaky-clean, A1-perfect. Carrying a few thousand dollars in credit card debt? That’s a red flag. No property or luxury assets to post as collateral? Sorry, come back when you’re rich. Even if you have some equity to your name, it’s rarely enough. What the banks are really saying is this: we only want to deal with the top 1% of small businesses—the ones who already don’t need the help.

The result is a broken, closed-loop system. The businesses that need capital the most can’t access it. The businesses that could blossom with just a little lift are being forced to stagnate or die out. And perhaps worst of all, the people behind these ventures—family business owners, artisans, restauranteurs, service providers—are being told loud and clear: “You don’t matter unless you’re already winning.”

Let’s get one thing straight: small businesses are the Canadian economy. From the bakery on the corner to the family-owned mechanic shop that’s been servicing your car for years—these are the enterprises that hire locally, reinvest in their communities, and add texture to our neighbourhoods. They aren’t asking for handouts. They’re asking for a fair shot. And they’re being denied.

And so, many are doing the only thing that makes sense: looking elsewhere. More and more Canadian entrepreneurs are taking their talents, their companies, and their future potential south of the border. In the U.S., lending may still be tough, but there’s a broader ecosystem of investors, grant programs, crowdfunding platforms, and state-backed opportunities. Many U.S. cities offer actual tax incentives to small businesses. In Canada, those are rare and often locked behind months of red tape and unclear eligibility requirements.

Let’s call it what it is: Canada is bleeding small business potential. And the banks? They don’t care. Not really. Profit margins and quarterly reports matter more than a neighborhood florist trying to stay afloat after rent hikes. The financial institutions want a no-risk, high-return clientele. That means tech startups with VC money, not a home-based soap company trying to scale.

Is this likely to change? Let’s be blunt. No. Banks have no incentive to shift their lending model. The government talks a good game about supporting local enterprise, but the follow-through is lacking. Programs that do exist often feel like PR stunts—either too restrictive to qualify for or so delayed that they’re useless by the time they arrive. In a fast-moving economy, six-month approval timelines are a death sentence.

And so the system keeps churning, weeding out the little guys, propping up the giants, and blaming “market forces” for the collapse of local enterprise.

But the truth is simpler: Canada doesn’t have a small business problem—it has a support problem. Entrepreneurs still dream big. They still grind. They still build companies out of garages and dining rooms and pop-ups. What they don’t have is a willing partner in the institutions that claim to support them.

Until we rebuild an environment where banks are encouraged—or required—to invest in early-stage businesses, the trend will continue. More closures. More bankruptcies. More dreams deferred. And more businesses saying goodbye to Canada for good.

You can’t grow an economy by pulling the ladder up behind you. But that’s exactly what we’re doing.