When small businesses struggle, Canada struggles. Is your bank ready to step up?

Key takeaways:

• Nearly half of Canadian small- to medium-sized businesses (SMBs) aren’t satisfied with their banking services.
• 32% of SMBs cite long wait times for financing as a top banking challenge.
• Banks that elevate financing, cash management tools, and advisory services for SMBs can improve their bottom line and support Canadian economic growth.

Without small businesses, Canada’s economy can’t function, let alone thrive.

Small- and medium-sized businesses (SMBs) represent 99.7% of all Canadian businesses and contribute 48% of the country’s GDP.¹ Yet SMBs continue to struggle with increasing operating costs, labour shortages, and regulatory burdens. Recent geopolitical and economic uncertainties have exacerbated these challenges. Insolvencies have increased three times since the 2021 low,² and fewer people are starting businesses.³

Banks can play a meaningful role in ensuring SMBs can survive and thrive. Yet our recent survey shows only half of Canadian SMB owners are satisfied with their banks.⁴

The case for banks to rethink their business banking services includes benefits for SMBs and banks themselves. SMBs can plan for longer-term growth instead of only focusing on day-to-day operations. Banks can deepen their relationships with SMBs and expand ancillary opportunities to areas like foreign exchange, wealth management, and advisory services.

We’ll cover current challenges SMBs face in their banking, and actions banks can take to elevate their services.

The reality of SMBs and banks today

Our research reveals banks still have work to do when it comes to providing relevant and valuable services to SMBs:  

Historically, Canadian banks have underinvested in the SMB banking segment because serving them profitably is challenging. This has resulted in disproportionately higher interest rates and less favourable terms for SMBs compared to larger businesses. While it’s common worldwide for larger businesses to have better interest rates, the disparity is larger in Canada. In Canada, the delta for small business interest rates compared to large business rates is over double that of OECD countries. On top of higher interest rates, a recent report shows that over 75% of SMB loans backed by the Canada Small Business Financing Program (CSBFP) wouldn’t have been approved otherwise.⁵ The CSBFP also highlights the value banks provide in distributing government financing.

But even when SMBs do qualify for loans, the time it takes them to access that capital (cycle times and speed-to-funding) is often too slow to finance their operational needs. Banks can provide the most value to SMBs by reducing financing cycle times. Over 30% of SMBs reported that they would accept less favourable financial terms if speed-to-funding was faster.⁶

Beyond financing, SMBs also struggle to manage cash flow, especially in an era of trade uncertainty, and urgently need relevant financial tools and advisory services.  

Banks have begun to address these challenges, but progress is slow and bumpy. Legacy processes and the lack of simplified, integrated value propositions encumber investments in digital banking, cash flow forecasting, and new payments capabilities.  

Four ways banks can improve SMB services

SMBs seek modern, accessible banking solutions to help them operate and grow. Banks can transform their experience and value proposition in a few ways:

1. Offer faster access to financing

Many SMBs operate on tight working capital cycles and cannot afford lengthy waits for loan approvals and disbursements. SMBs that encounter financing issues experience devastating effects to their business, like delays in paying their suppliers, employees, and rent. Notably, financing is so hard to come by that SMBs end up drawing on their personal finances to fill the gap.

Canadian SMBs cite challenges obtaining financing from their financial institutions (FIs) that are largely operational in nature:

• Long wait times for decisions (32%)
• Excessive documentation requirements (30%)
• Repeated requests for the same information (24%)⁷

The right tech can dramatically improve financing services when integrated properly, and the bar of what constitutes “fast access to funding” keeps rising. While many Canadian FIs have been offering fast decisioning for small business loans for many years, time to funding still lags. Fintechs and alternative lenders have, also long ago, redefined fast disbursement, with various lenders offering business term loans with funding time of 24 hours in Canada. Catching up with this speed is not impossible for FIs, however. One recent example is a UK bank who introduced access to loans of up to (£)250,000 within 24 hours of applying in 2024, thanks to a modernized tech estate and straight‑through decisioning and fulfilment.⁸

2. Create better tools for cash management

Despite the primary focus on financing, it’s not the only service SMBs require to operate effectively. SMBs typically struggle to manage cash flow and navigate expensive supply chains, as well as protect themselves in a more sophisticated era of fraud. We’ve found that banks can help SMBs manage risk more effectively and improve liquidity with more organized, centralized views of their operations.

One prime example of this is Banco Santander in Spain and how they have tailored offerings to the small business segment at scale.⁹ The bank provides SMBs with access to cross-border trading services, payments solutions, training for startups, and other tailored services to help them grow.

AI advancements can help banks access the data needed to provide SMB customers with:

• Cash forecasts
• A clear financial snapshot
• Personalized recommendations to improve

3. Collaborate with fintechs to fill gaps

Fintechs bring cutting-edge technology and innovative business models that can improve credit availability, reduce costs, and increase service speed. Banks partnering with fintechs is nothing new, but our survey suggests that SMBs are becoming even more receptive to these partnerships and the conveniences they offer: 82% would be willing to share the same or more financial data with a fintech to obtain the best financing offer.¹⁰

A notable example in Canada is the collaboration between Scotiabank and Pocketed, an intelligent platform that helps businesses access grants in one place. So far, Canadian businesses have used Pocketed to access over $200 million in funding.¹¹ The good news is we’re seeing Canadian banks begin to explore these partnerships; however, there’s room for a more concerted effort and holistic set of services that cover SMBs’ financing and non-financing needs.

Fintechs don’t have to be competition to banks. Instead, they can represent collaborative partnerships to deliver innovative solutions to SMB customers.

4. Offer relevant advisory services (beyond banking)

SMBs frequently seek advice from their banks on topics that go beyond banking, such as navigating trade uncertainties, grants, regulatory compliance, and workforce management.

50–70% of SMBs have obtained non-financial advisory services from their primary banks.¹²

However, satisfaction is mixed. SMBs say that advisory services aren’t always easily accessible or relevant enough to support long-term growth for SMBs. SMBs need advisors that truly understand the nature of their business and the nuanced hurdles they face. This requires:

• Talent development for advisors
• Tools that improve advisory services
• Better coverage models across in-branch, virtual, and digital channels to meet customers where they are

Banks need to explicitly determine what they will and will not advise on. Specifically, they should focus on areas where they have genuine expertise (not areas they’re less versed in). For example, HSBC’s (global) experience in international commerce naturally leads to SMB advisory services in areas like currency risk management and cross-border trade.

But not all banks share the specialized knowledge to deliver the same advisory services. For example, Starling Bank specializes in scalable cash management tools; however, the bank does not offer bespoke advisory services but provides referrals to other resources instead.

Other areas of expertise to consider in your advisory service include:

• tax optimization & legal services;
• fraud mitigation; and
• grants and government resources.

How Deloitte can help

Deloitte has a deep understanding of SMB needs that we continue to inform with regular engagements and research into the industry’s latest trends and challenges. Our banking and business specialists bring years-long, nurtured relationships with fintechs, big tech, financial crown corporations, regulatory bodies, and the banks themselves.

These relationships and experiences help us design and engineer advanced solutions across the entire SMB and customer journey. We support banks in the following areas to drive loyalty, growth, and impact:

• Client journey
• Product innovation
• Partnership strategy
• Digital transformation
• Operating model design

Modernize your SMB services today

Banks will continue to be an important partner for SMBs as they navigate economic challenges today and plan for the future. While banks have traditionally assumed little profitability in serving the SMB sector, we see a growth story for banks when they modernize technology to automate processes and leverage new business models in their SMB service offerings.

With a coordinated strategy that reduces friction, supports financing and cash management, and introduces holistic, beyond-banking solutions, banks can:

• Improve the value proposition for SMBs
• Nurture customer loyalty
• Contribute to top- and bottom-line growth
• Drive productivity and growth for the Canadian economy

If you’re ready to elevate your SMB offerings, we can help. Connect with a leader below to discuss your strategy.