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Business Growth: From Formation to Scale

Canada has too many small firms that stay small. This matters because larger firms are more productive, pay higher wages, invest more in technology, and export more. The policy environment, from the small business deduction to government lending programs, has in places actively discouraged growth past the thresholds at which preferential support retrenches, and government subsidies too often reward firms for existing rather than for growing. Even where capital is available, many Canadian firms lack the marketing and sales capability to turn it into scale. Reforming business supports to reward growth, not size, is a higher-return use of public resources.

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Business Growth Recommendations Summary

Recommendation Area of Reform Level Source Document
1 Restructure mortgage insurance pricing to reflect default risk, freeing up capital for business lending Expand access to capital to reward growth
Federal
Productivity and the Financial Services Sector – How to Achieve New Heights
2 Expand Business Development Bank of Canada advisory capacity and financial education for recovering firms Expand access to capital to reward growth
Federal
Scaling Up Is Hard To Do: Financing Canadian Small Firms
3 Restructure Canada Small Business Financing program fees for young and growth-oriented firms Expand access to capital to reward growth
Federal
Scaling Up Is Hard To Do: Financing Canadian Small Firms
4 Expand Export Development Canada tools to help exporters manage currency risk Expand access to capital to reward growth
Federal
Scaling Up Is Hard To Do: Financing Canadian Small Firms
5 Open small business lending to more competition, including open banking Expand access to capital to reward growth
Federal
Scaling Up Is Hard To Do: Financing Canadian Small Firms
6 Shift Business Development Bank of Canada seed financing to gender-neutral criteria Expand access to capital to reward growth
Federal
An Economic Strategy for Canada’s Next Government
7 Increase Business Development Bank of Canada investment in high-tier venture capital deals Expand access to capital to reward growth
Federal
An Economic Strategy for Canada’s Next Government
8 Establish a national co-investment fund for early-stage equity Expand access to capital to reward growth
Federal
Scaling Up Is Hard To Do: Financing Canadian Small Firms
9 Open public infrastructure to institutional private equity investment Expand access to capital to reward growth
Federal
Leveraging Private Equity Energy to Fuel Small Business Development
10 Shift tax preferences from small firms to young firms Expand access to business financing
Federal
Mushrooms and Yeast: The Implications of Technological Progress for Canada’s Economic Growth
11 Redirect SR&ED savings toward marketing and sales support Redirect focus from research to selling
Federal
The Missing Ingredient: Solving Canada’s Shortcomings in Growing Large Firms and Increasing Productivity
12 Set clear public objectives and metrics for business growth Redirect focus from research to selling
Federal
The Missing Ingredient: Solving Canada’s Shortcomings in Growing Large Firms and Increasing Productivity
13 Review and reduce business subsidies that do not address market failures Rein in business subsidies
Federal
An Economic Strategy for Canada’s Next Government
14 Cap industrial policy subsidy growth at half the pace of GDP through 2030, saving an estimated $3.3 billion a year Rein in business subsidies
Federal
An Economic Strategy for Canada’s Next Government

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