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Banking industry

Banks Repent, Vow to Ease Credit for Small-Business Clients

Strategic Insights

— 1 min read

Top executives of Canada's Big Six banks have acknowledged that in the past they have not always met the needs of small businesses seeking access to capital, but are now taking steps to adjust their lending policies and provide better education to branch managers. Holger Kluge, president of personal and commercial banking at Canadian Imperial Bank of Commerce, said that banks need to change their approach to meet the rapidly changing needs of small business customers. The bank has announced new measures to help smaller borrowers, including stopping the requirement of a personal guarantee for companies seeking loans under the federal Small Business Loans Act.

Key Takeaways:

  • The Big Six banks have acknowledged that they have not always met the needs of small businesses seeking access to capital.
  • CIBC has announced a new batch of measures to help smaller borrowers, including stopping the requirement of a personal guarantee for companies seeking loans under the federal Small Business Loans Act.
  • The bank will hold 250 two-day workshops over the next five years to help improve the management skills of small business owners.
  • Brien Gray, vice-president of the Canadian Federation of Independent Business, stated that while the change in SBLA requirements is welcome news, its impact will have a marginal effect on the overall problem.
  • The SBLA loans, 90-per-cent government-guaranteed, are used mainly for term loans and can't be used to finance export sales or working capital.
  • CIBC's SBLA loans were up fourfold in 1993 after Ottawa amended the rules to reduce fees and raise the loan limit to $250,000 from $100,000.
  • Holger Kluge rejected a suggestion that more regulation of financial institutions may be the answer to ease the credit problems facing small business.

Statistics:

  • CIBC has about $250-million in SBLA loans, a tiny percentage of its small business loan portfolio.
  • The SBLA program has been modified to reduce fees and raise the loan limit to $250,000 from $100,000 in 1993.
  • CIBC's SBLA loans increased fourfold in 1993.

Sources:

  • Ottawa Citizen, "Banks Repent, Vow to Ease Credit for Small-Business Clients" (exact date not provided)
  • [Other sources not mentioned in the original text]

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