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SME Investment TrendsSurvey report

Research and Market Intelligence at BDC

June 2019

BDC – SME Investment trends_June 2019 2

Methodology

01Key highlights

02Business acquisitions

06Other survey questions

07Overall investment trends

03

Table of contents

Respondent profile

08Investments in intangible assets

04

Foreign business investments

05

3

Methodology01.


Methodology

▪ Survey methodology: Online.

▪ Respondent profile: Business owners and business decision makers from BDC Viewpoints panel.

▪ Survey dates: April 23rd to May 3rd 2019

▪ Margin of error: The maximum margin of error for a probability sample of 699 respondents is ± 3.7 percentage

points, 19 times out of 20.*

▪ Data processing and analysis were performed by the BDC Research and Market Intelligence team.

▪ Weighting factors: The results were weighted by number of employees and region to be representative of the

Canadian SME population.

▪ Note on statistical data processing: Unless otherwise mentioned, calculation bases exclude respondents

who preferred not to answer the question.

*As this survey is based on a non-probability sample, these numbers should be

interpreted with caution.

5

Key highlights02.


Key highlights

Leaders of future investments (% who expect to increase investments in the next 5 years)

SMEs led in majority

by women

90%

SMEs in existence for

less than five years

94%

SMEs in the

technology sector

94%

Entrepreneur profiles

12%

16%

73%

Improviser

Hybrid

Planner

36%

27%

37%

Advice seeker

Hybrid

Independent

38%

33%

29%

Experimenter

Hybrid

Traditionalist

Most prefer planning everything they do before making a decision and taking action

Just as many turn to advisors or help from others versus doing everything themselves

A slight majority prefer to try new things when it comes to running their business

Perceived evolution of the financing ecosystem (% of entrepreneurs)

Past 5 to 10

years

41%

Next 5 years

54%

Increase access to financing

Past 5 to 10

years

46%

Next 5 years

53%

Increase variety of financing tools

Past 5 to 10

years

42%

Next 5 years

44%

Increase variety of lenders and sources of money

Upward overall investment trend

of entrepreneurs have increased and expect to increase their business investments in the future,

especially in intangible assets and machinery & equipment 74%


Key highlights (continued)

Intangible

assets

Foreign business

investments

Business

acquisitions

% who have increased

investments in the past70% 36% 29%

% who expect to increase

investments in the future71% 46% 46%

Main sources of financingBusiness and

personal funds

Business and

personal fundsBank or credit union

Top reason for main

sources of financingConvenience Convenience Existing relationship

Main types of

external financing

Credit line and

governmentEquity

Loan secured by

personal assets

% who find it very difficult

to obtain financing27% 49% 32%

Top reason for finding it

difficultProcess Personal guarantees Personal guarantees

% who sought help to find

source of financing37% 63% 66%

In light of the digitalization of the economy, demographic changes and past trends, investments in

intangible assets, business acquisitions and foreign business investments were explored in more details.

8

Overall investment trends

03.

BDC – SME Investment trends_June 2019 9Base: Q.5 = All respondents (n=699). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

Q.5 In the past three years, did your business spend money on the following?

In the last three years, most entrepreneurs spent money on intangible assets and machinery and equipment.

91%

71%

61%

15%

7%

6%

7%

9%

All types of investments

Intangible assets

Machinery and equipment

Real estate


Business acquisition in Canada

Other

None of the above

A greater proportion of SMEs in the following

groups invested in the past three years:

▪ ≥ $10 M in sales (99%)

▪ 20 to 99 employees (97%)

▪ Services sector (95%)

▪ Exporters (96%)


On average, SMEs use personal financing for 35% of their business expenses and investments.

Base: All respondents (n=639).

Q.51 To what extent do you use personal financing for your business expenses and investments?

25%

20%

20%

22%

8%

4%

Business loan

Business line of credit

Business credit card

Personal credit card

Personal line of credit

Loan on your personal name

Total business

65%

Total personal

35%*

* Significantly higher

for Small & steady

companies (47%)

BDC – SME Investment trends_June 2019 11Base: All respondents (n=406-661). Those who responded “not applicable” were excluded from the calculation base. * Independents prefer to do everything themselves rather than seek advice or get help from others. Advice seekers are the opposite.

74%

19%

4%

3%

74%

24%

1%

0%

Increase

Remain stable

Decrease

Don't know

Over past 5 to 10 years In next 5 years

Q.48 To what extent have your investments changed over the past 5 to 10 years?

Q.49 To what extent do you expect your investments to change in the next 5 years?

Three quarters of entrepreneurs have increased and expect to increase their business investments in the future.

A significantly greater proportion of Advice seekers* (90%) expect increased investments in the future. Conversely, a significantly smaller proportion of Independents* (63%) say they will invest more in the next 5 years.


groups are expecting investments to either

increase or decrease in the next 5 years:

Expecting investments to increase:

▪ In existence for less than 5 years (94%)

▪ Technology sector (94%)

▪ Led in majority by women (90%)

Expecting investments to decrease:

▪ Ag, forestry, fishing & hunting industries

(18%)

▪ Mining, oil & gas industries (14%)

▪ Prairies (5%)

BDC – SME Investment trends_June 2019 12Base: All respondents (n=308-639). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

Q.49 To what extent do you expect your investments to change in the next 5 years? Those who answered “Increase”.

Those who expect to invest more in the future are more likely to spend money on intangible assets.

71%

59%

51%

46%

46%

Intangible assets


Real estate


Business acquisition in Canada

All types of

investments

74%


41%

30% 23%

5%

54%

30%

11% 5%

Improve Stay the same Deteriorate Don't know

Past 5 to 10 years

Next 5 years

Base: All respondents (n=682-699). Those who responded “not applicable” were excluded from the calculation base.

Q.46 How have the following aspects changed compared to what it was 5 to 10 years ago?Q.47 How do you think the following aspect will be in 5 years from now?

Overall, entrepreneurs are optimistic about the future when it comes to meeting their financing needs.

46%

27%

14% 13%

53%

30%

7% 10%


Past 5 to 10 years

Next 5 years

42%

31%

16% 11%

44%

35%

10% 10%


Past 5 to 10 years

Next 5 years

Access to financing

Variety of financing tools

Variety of lenders or sources of money


Intangible assets

▪ The digital transformation of the Canadian economy means that SMEs must invest more in intangible

assets to reap the benefits of cloud technologies, big data and artificial intelligence, for instance, as well as

to help employees acquire the needed skills through training.

▪ Despite a drop in the share of intangible investments in total investments over the past 15 years, there has

been some pick up since 2014 (share increased from 33% in 2014 to 38% in 2017)1.


▪ Canadian businesses are becoming increasingly international in scope.

▪ In spite of a drop in 2018, foreign direct investments have increased by 120% over the last 15 years 2.

▪ Public data on Canadian M&A of foreign companies also demonstrate an increase in activity, from 560

deals in 2003 to 869 deals in 20183.

Business acquisitions

▪ With demographic changes, 4 in 10 entrepreneurs are likely to leave their businesses without acquiring

another one in the next 5 years4. This creates immense opportunities for other entrepreneurs (or new ones)

for expansion through acquisitions.

▪ Public data on M&A within Canada indicates a slight increase in activity since 20153.

1 Statistics Canada, special calculations.2 Statistics Canada, Balance of international payments, table 376-0102. 3 Thomson Financial, Institute for Mergers, Acquisitions and Alliances (IMAA) analysis.4 BDC, The Coming Wave of Business Transitions in Canada, 2018.

Note: Statistics Canada data includes all business sizes. Thomson Financial data includes only publicly announced deals.

In light of the digitalization of the economy, demographic changes and past trends, the following investments were explored in more details.

15

Investments in intangible assets

04.

BDC – SME Investment trends_June 2019 16Base: Those who spent money on intangible assets (n=501).Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

In the last three years, 7 in 10 SMEs said they invested in intangible assets, mainly in technology and marketing.

79%

76%

56%

40%

7%

Software / Digital products / Cloud-based services

Marketing

Employee training

Research and development (R&D) / Intellectualproperty (IP)

Other

Q.6 More specifically, what type(s) of intangible assets did you spend money on?

Total

71%


Base: Q48 = All respondents who invested in intangibles in last 5 to 10 years (n=362) and Q49 = All respondents who expect to invest in intangibles in the next 5 years (n=398). Those who responded “not applicable” were excluded from the calculation base. *Intangible assets = technology, R&D/IP and employee training. ** Traditionalists tend to stick to proven methods of running their business instead of trying new things. Experimenters are the opposite. *** Independents prefer to do everything themselves rather than seek advice or get help from others. Advice seekers are the opposite.

70%

24%

4%

2%

71%

27%

2%

0%

Increase

Remain stable

Decrease

Don't know


Q.48 To what extent have your investments in [intangibles] changed over the past 5 to 10 years?

Q.49 To what extent do you expect your investments in [intangibles] to change in the next 5 years?

Seven in 10 entrepreneurs said their investments in intangibles* increased over the last 5 to 10 years, and will continue to increase over the next 5 years.





▪ Tech sector (94%)


▪ Led in majority by women (85%)


▪ In existence between 5 and 14 years (4%)

A significantly greater proportion of Experimenters** (81%) and Advice seekers*** (79%) expect increased investments in intangible assets in the future.


83%

36%

23%

20%

8%

5%

1%

Your business's own funds

Your own personal money

Bank or credit union

Government institution orprogram

Love money

Angel investors or venturecapital fund

Online lender / crowfunding

Base: Those who spent money on intangible assets (n=376). Those who did not know or preferred not to answer were excluded from the calculation base. For question 9, multiple answers were allowed, therefore total may not equal to 100%. *Intangible assets = technology, R&D/IP and employee training.

Q.9 Please indicate the source(s) of financing you used for your spending.

Entrepreneurs mostly funded intangible assets* with their own funds, either the business’ or their own personal money.

Q.10 Please indicate the main source you used.

70%

19%

12%

11%

3%

1%

Your business's own funds


Bank or credit union

Government institution orprogram

Angel investors or venturecapital fund

Love money


47%

31%

12%

0%

< 5 5 to 19 20 to 99 ≥ 100

Base: Those who spent money on intangible assets (n=17-229). Those who did not know or preferred not to answer were excluded from the calculation base. *Intangible assets = technology, R&D/IP and employee training. Arrows indicate statistically significant differences between a given subgroup vs. the rest of the sample.

Q.9 Please indicate the source(s) of financing [personal money] you used for your spending.

The proportion of those using personal money as a source of funds to invest in intangibles* is significantly greater for SMEs that are small, less mature and led in majority by men.

54%

34% 37%

23%

< 5 years 5 to 14 years 15 to 24 years ≥ 25 years

41%

23%

1%

< 2M 2M to 9.9 M ≥ 10M

42%

26% 28%

Majority men Equal Majority women

# of employees Annual sales

Years in business Ownership


Q.27/33/39 Why did you decide to turn to this source of financing to invest in [intangible assets]?

Convenience is what mostly drives entrepreneurs when deciding to turn to their chosen source of funds to invest in intangible assets*.

Base: Those who spent money on intangible assets (n=57-222). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%. *Intangible assets = technology, R&D/IP and employee training.

47%

37%

30%

17%

17%

12%

5%

4%

11%

The process was easier

The process was faster

They were the only ones who accepted our request

We were already doing business with them

We had enough internal funds

They offered better terms and conditions

They had been recommended to us

They offered us value-added services (advice, contacts, etc.)

No reason in particular


Q.28/34/40 Before you even considered this source of financing, did you seek external help to findthe right source of financing for this project, and for your business?

Two thirds of entrepreneurs did not seek external help before investing in intangible assets*. Those who did mainly turned to an accountant.

Base: Those who spent money on intangible assets (n=57-222). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%. *Intangible assets = technology, R&D/IP and employee training.

22%

13%

12%

12%

6%

5%

2%

1%

5%

63%

An accountant

A consultant

A financial advisor

A peer

A lawyer or notary

A financing broker

Government program contact

Business coach

Other

We did not seek external help

A significantly higher proportion of

larger and more mature SMEs did

not seek external help to find the right

source of financing for intangibles:

▪ ≥ $10 M (82%)

▪ ≥ 25 years (77%)


38%

19%

17%

27%

Very easy(9 and 10 out of 10)

Somewhat easy(7 and 8 out of 10)

Somewhat difficult(5 and 6 out of 10)

Very difficult(0 to 4 out of 10)

Q.12 How easy was it to obtain your main source of financingfor [intangible assets]?

Almost 6 in 10 respondents said it was easy to obtain money to finance intangible assets*.

Base: Those who identified a source of financing for intangible assets (n=208). Those who did not know or preferred not to answer were excluded from the calculation base. *Intangible assets = technology, R&D/IP and employee training. **Planners are those who prefer planning everything they do for their business before making a decision and taking action. Improvisers are the opposite. ***Experimenters tend to try new things when running their business. Traditionalists are the opposite.

A significantly greater proportion of Improvisers** (43%) and Experimenters*** (34%) found it very difficult to obtain their main source of financing for intangibles.


groups found it more difficult (0-4) to find

financing:

▪ Mining, oil and gas industries (66%)

▪ Sought help to find right source of financing

(48%)

▪ Exporters (34%)

▪ < $2 M in sales (29%)


Entrepreneurs who found it very difficult to obtain financing for intangibles* deemed the process complicated, and did not know who to turn to.

45%

41%

38%

35%

21%

18%

13%

11%

The process was more complicated than expected

We didn’t know who to turn to

We had to offer personal guarantees

The process was longer than expected

We didn’t receive the terms and conditions we hoped for

Our request got refused by another lender

We got a type of financing that was different than what we askedfor

Our request was only partially accepted

Q.13 Why did you find it difficult to get financing for your [intangible assets] project(s)?

Base: Those who found it very difficult (0 to 4) to get financing (n=73). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%. Only mentions with 11%+ are presented. *Intangible assets = technology, R&D/IP and employee training. **Advice seekers are those who prefer to seek advice or help from others instead of doing everything themselves. ***Planners are those who prefer planning everything they do for their business before making a decision and taking action.

A smaller proportion of Advice seekers** didn’t know who to turn to (24%) and a greater

proportion of them found the process longer than expected (53%).

A significantly smaller proportion of Planners*** had to offer personal guarantees (30%).


Q.29/35/41 What type of financing did you get to finance this project?

Those who used external funds to finance intangible assets* mainly used a business line of credit, or a government program.

Base: Q.29/35/41 = Those who used external funds for investments in intangibles (n=15-76). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%. *Intangible assets = technology, R&D/IP and employee training.

36%

33%

17%

16%

15%

14%

12%

10%

3%

Business credit line

Government loan, grant, subsidies or non-repayable contribution

Loan secured by personal assets


SR&ED financing

Unsecured business loan

Equity

Loan secured by tangible business assets

Loan secured by intangible business assets

A greater proportion of B.C.

and North respondents got

a business credit line

(56%).

25


05.

BDC – SME Investment trends_June 2019 26Base: All respondents (n=699 total; between 55 and 219 per region). Those who did not know or preferred not to answer were excluded from the calculation base. Arrows indicate statistically significant differences between a given subgroup vs. the rest of the sample.

In the last three years, only a few SMEs invested abroad, with SMEs located in Quebec being more active internationally.

1%

14%

7%

6%

2%

AtlanticQuebecOntarioPrairiesB.C. andNorth

Q5. In the past three years, did your business spend money on [foreign business investments] ?


groups invested abroad :

▪ ≥ 100 employees (26%)

▪ Tech industry (20%)

▪ ≥ $10M in sales (16%)

▪ Established less than 5 years ago (16%)

▪ Exporters (13%)

Total, all regions

7%

BDC – SME Investment trends_June 2019 27Base: Q48 = All respondents who invested abroad in last 5 to 10 years (n=229) and Q49 = All respondents who expect to invest abroad in the next 5 years (n=308). Those who responded “not applicable” were excluded from the calculation base.

A little over a third of entrepreneurs said their investments abroad increased over the last 5 to 10 years, and close to half expect them to increase in the future.

36%

31%

14%

19%

46%

32%

8%

14%

Increase

Remain stable

Decrease

Don't know


Q.48 To what extent have your [foreign business investments] changed over the past 5 to 10 years?

Q.49 To what extent do you expect your [foreign business investments] to change in the next 5 years?





▪ Ag, forestry, fishing & hunting (79%) and

Tech (62%) industries


▪ Quebec (62%)

▪ Exporters (61%)


▪ In existence for 25 years + (15%)

▪ Ontario (12%)

▪ Owner(s) are 45 years old + (10%)


76%

52%

27%

15%

13%

3%

Your business' own funds


Bank / Credit union

Love money (friends, family, etc.)

Government institution / Program

Angel investors / Venture capitalfund

Base: Those who spent money on foreign business investments (n=54). Those who did not know or preferred not to answer were excluded from the calculation base. For question 9, multiple answers were allowed, therefore total may not be equal to 100%. * Planners prefer planning everything they do for their business before making a decision and taking action. Improvisors are the opposite.


Entrepreneurs mostly funded foreign business investments with their own funds, either the business’ or their own personal money.


46%

28%

13%

8%

4%

2%



Bank / Credit union

Love money (friends, family,etc.)

Government institution /Program

Angel investors / Venturecapital fund

Planners* are more likely (86%) to use their business’s funds as one of the sources of financing.


Q.21 Why did you decide to turn to this source of financing to invest [abroad]?

Convenience is what drives entrepreneurs when deciding to turn to their chosen source of funds to invest abroad.

Base: Those who spent money on foreign business investments (n=41). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%. Only mentions with 11%+ are presented.

44%

40%

39%

28%

16%

13%

11%








Greater proportion of

male ownership (54%)


Q.22 Before you even considered this source of financing, did you seek external help to find the right source of financing for this project, and for your business?

Over one third of entrepreneurs did not seek external help before choosing a source of financing to invest abroad. Those who did mainly turned to a financial advisor or an acountant.

Base: Those who spent money on foreign business investments (n=41). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

31%

26%

17%

13%

7%

5%

9%

37%

A financial advisor

An accountant

A lawyer or notary

A consultant

A financing broker

A peer

Other



15%

28%

8%

49%





Q.12 How easy was it to obtain your main source of financingfor [foreign business investments]?

Half said it was very difficult to obtain money to finance foreign business investments, mainly because they needed to offer personal guarantees and the process was complicated and long.

55%

38%

34%

32%

20%

19%

17%

5%

2%

We had to offer personalguarantees

The process was morecomplicated than expected

The process was longer thanexpected

Our request got refused byanother lender



Already had other loans/debt

Our request was onlypartially accepted

We got a type of financingthat was different than what

we asked for

Q.13 Why did you find it difficult to get financing for your foreign business investments project(s)?

Base: Q.12 = Those who identified a source of financing for foreign business investments (n=53) and Q.13 = Those who found it very difficult to get financing (n=25). Those who did not know or preferred not to answer were excluded from the calculation base. Q.13: Multiple answers were allowed, therefore total may not be equal to 100%. Also, sample size is small; please interpret with caution.


Q.23 What type of financing did you get to finance this project?

Those who used external funds to finance foreign business investments said they mainly turned to equity to do so.

Base: Those who used external funds for foreign business investments (n=19). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.Sample size is small; please interpret with caution.

39%

33%

33%

19%

17%

14%

8%

Equity







33

Business acquisition

06.

BDC – SME Investment trends_June 2019 34Base: All respondents (n=699 for total and between 23 and 313 for # of employees and 63 to 432 for sales). Those who did not know or preferred not to answer were excluded from the calculation base. * Traditionalists tend to stick to proven methods of running their business instead of trying new things. Arrows indicate statistically significant differences between a given subgroup vs. the rest of the sample.

In the last three years, only a few SMEs have spent money on a business acquisition project; larger SMEs have done so more.

3%

8%

12%

21%

˂ 5 5 to 19 20 to 99 ≥ 100

# of employees

Q5. In the past three years, did your business spend money on [business acquisitions] ?

A greater proportion of Traditionalists* (10%) invested in business acquisitions.

Total

6%

4%

12%

17%

< $2 M $2 M to $9.9 M ≥ $10 M

Annual sales

BDC – SME Investment trends_June 2019 35Base: Q48 = All respondents who invested abroad in last 5 to 10 years (n=288) and Q49 = All respondents who expect to invest abroad in the next 5 years (n=429). Those who responded “not applicable” were excluded from the calculation base.

3 in 10 respondents said their investments in business acquisitions increased over the last 5 to 10 years; close to half expect them to increase in the future.

29%

38%

17%

16%

46%

30%

8%

17%

Increase

Remain stable

Decrease

Don't know


Q.48 To what extent have your investments in [business acquisitions] changed over the past 5 to 10 years?

Q.49 To what extent do you expect your investments in [business acquisitions] to change in the next 5 years?


group are expecting investments to decrease in

the next 5 years:

▪ Owner is 45 years old + (9%)


Source: Survey of active population. *Active population may include entrepreneurs but they were not the main target of this survey. Base: All respondents (n=1,000). For questions to those who intend to make an acquisition, n=222. For question to those who are not intending to buy a business, n=778. Those who did not know or preferred not to answer were excluded from the calculation base. This survey was conducted between March 1st and 7th, 2019 and Delvinia (AskingCanadians) was the panel provider.

22%

78%

Yes No

Do you intend to buy an existing business in the next 5 years?

In the active population*, one in five respondents said they intend to buy a business in the next five years; half of which would be first-time entrepreneurs.

▪ 19% of respondents said “Maybe” and only 3% said

“Certainly”.

▪ Results are similar across regions. A greater

proportion of men and younger respondents (25 to 34

years old) said they would be willing to acquire a

business (29% and 35% respectively).

▪ Of those who intend on making an acquisition:

‒ Just over half would be first-time entrepreneurs

(52%)

‒ Over half would rely equally on their own funds

and/or a loan from a financial institution to

finance the purchase (55% each)

‒ The majority would request help to find the best

way to finance the purchase (59%)

‒ Two in five do not know which industry to target.

Of those who do know, only 6% would be

interested in buying a tech business

▪ Top-3 reasons for not intending to buy a business

‒ This is not what I want to do with my life (42%)

‒ I don’t have the financial capacity (31%)

‒ I’m too old for that (21%) (87% of them were 55 +

years old)


60%

40%

38%

25%

13%

6%

1%

Bank / Credit union



Government institution / Program

Love money (friends, family, etc.)

Angel investors / Venture capitalfund

Online lender / Crowdfunding

Base: Those who spent money on business acquisitions (n=61). Those who did not know or preferred not to answer were excluded from the calculation base. For question 9, multiple answers were allowed, therefore total may not be equal to 100%. * Independents prefer to do everything themselves rather than seek advice or get help from others. Advice seekers are the opposite.


Entrepreneurs mostly turned to banks and credit unions to fund the acquisition of another business; their own funds (personal or from their business) were often used as additional sources of funding.


50%

18%

13%

8%

7%

5%

Bank / Credit union


Government institution /Program

Love money (friends, family,etc.)


Angel investors / Venturecapital fund

A significantly greater proportion of Advice seekers* turn to government institutions or programs as their main source

of funding (26%), whereas a greater proportion of Independents* would turn to love money (17%).


Q.15 Why did you decide to turn to this source of financing to invest [in business acquisitions]?

The main reasons why entrepreneurs turned to the identified sources of funding to acquire a business are because of an existing relationship and an easier and faster process.

Base: Those who spent money on business acquisitions (n=55). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

49%

47%

40%

39%

17%

17%

13%

2%








No reason in particular


Q.16 Before you even considered this source of financing, did you seek external help to find the right source of financing for this project, and for your business?

Over a third of entrepreneurs did not seek external help before choosing a source of financing to acquire a business. Those who did mainly turned to an accountant.

Base: Those who spent money on business acquisitions (n=55). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

36%

20%

19%

11%

10%

3%

34%

An accountant

A consultant

A financial advisor

A peer

A lawyer or notary

A financing broker



25%

25%

18%

32%





Q.12 How easy was it to obtain your main source of financingfor [business acquisition]?

A third of respondents said it was very difficult to obtain money to finance business acquisitions; entrepreneurs need to offer personal guarantees and the terms and conditions offered were not ideal.

71%

66%

58%

52%

44%

39%

25%

17%

We had to offer personalguarantees


The process was morecomplicated than expected

Our request got refused byanother lender

We got a type of financingthat was different than what

we asked for

The process was longer thanexpected


Our request was onlypartially accepted

Q.13 Why did you find it difficult to get financing for your business acquisition project(s)?

Base: Q.12 = Those who identified a source of financing for business acquisitions (n=61) and Q.13 = Those who found it very difficult to get financing (n=17). Those who did not know or preferred not to answer were excluded from the calculation base. Q.13: Multiple answers were allowed, therefore total may not equal to 100%. Sample size is small, please interpret with caution.


Q.17 What type of financing did you get to finance this project?

Half of those who used external funds to finance the acquisition of a business used a loan secured by personal assets.

Base: Those who used external funds for business acquisitions (n=44). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%. Sample size is small, please interpret with caution.

49%

32%

29%

29%

19%

15%

7%







Equity

42

Other survey questions

07.


Entrepreneur profiles - Definitions

Plannersprefer planning everything they do

for their business before making

a decision and taking action.

Improvisersare the opposite of Planners.

Independentsusually do everything themselves rather

than seek advice or get help from others.

Advice seekersare the opposite of Independents.

Traditionaliststend to stick with proven methods of running

their business instead of trying new things.

Experimentersare the opposite of Traditionalists.


Planners are more or less likely than other

entrepreneurs to be found in the following groups :

More likely:

▪ Traditionalists (34%)

Improvisors are more or less likely than other


More likely:

▪ Indigenous person (8%)

Less likely:

▪ Have seen an improvement in the past or be

optimistic about future improvements in

access to financing, types of financing tools

and sources of financing (29 to 41%)

Entrepreneur profiles: Improvisers vs. Planners

Q.45a I prefer planning everything I do for my business before making a decision and taking action.

12%

16%

73%

Improviser(0 to 4)

Hybrid(5 to 6)

Planner(7 to 10)


Most entrepreneurs say they prefer to plan everything before making a decision.


Just as many entrepreneurs say they turn to advisors or help from others versus doing everything themselves.

Q. 45b I usually do everything myself rather than seek advice or get help from others.


36%

27%

37%

Advice seeker(0 to 4)

Hybrid(5 to 6)

Independent(7 to 10)

Entrepreneur profiles: Advice seekers vs. Independents

Independents are more or less likely than other


More likely:

▪ < 2M in sales (69%)

▪ Traditionalists (40%)

▪ Ontario (37%)

▪ Retail trade (20%)

Less likely:

▪ Growth higher than peers (35%)

Advice seekers are more or less likely than

other entrepreneurs to be found in the following

groups :

More likely:

▪ Experimenters (52%)

▪ Exporters (38%)

▪ Quebec (30%)

▪ ≥ $10 M in sales (12%)


A slightly higher proportion of entrepreneurs say they prefer to try new things when it comes to running their business.

Q.45c I tend to stick with proven methods of running my business instead of trying new things.


38%

33%

29%

Experimenter(0 to 4)

Hybrid(5 to 6)

Traditionalist(7 to 10)

Entrepreneur profiles: Experimenters vs. Traditionalists

Traditionalists are more or less likely than other


More likely:

▪ Planners (83%)

▪ Independents (50%)

▪ Services sector (39%)

▪ In existence 25+ years (39%)

▪ Quebec (32%)

Less likely:

▪ Higher growth than peers (33%)

▪ Exporters (26%)

Experimenters are more or less likely than other


More likely:

▪ < $2 M in sales (86%)

▪ Advice seekers (50%)

▪ Higher growth than peers (47%)

▪ Exporters (39%)

▪ Improvisers (19%)

▪ Tech industries (18%)

BDC – SME Investment trends_June 2019 47Base: Q4 = All respondents (n=696 for total, between 54 and 179 for regions, and between 23 and 312 for the number of employees). Those who did not know or preferred not to answer were excluded from the calculation base. Arrows indicate statistically significant differences between a given subgroup vs. the rest of the sample.

21%

67%

3%

9%

YesNo

Got all $ Got some $ Didn't get $

33%

Q4. Have you ever applied for a business loan online?

One third of SMEs have applied for a loan online. A greater proportion of Quebec entrepreneurs did it, and the smaller the business, the more likely it is to use the online channel.

27%

48%

30% 30% 24%

Atlantic Quebec Ontario Prairies B.C. &North

37% 32%

16% 18%

< 5 5 to 19 20 to 99 ≥ 100

Regions

Number of employees


84%

83%

65%

13%

17%

28%

1%

6%

Real estate


Software / Digital products / Cloud-based services

Purchased Leased Not sure

SMEs prefer to purchase rather than lease their assets. Leasing is more popular for intangible assets. Lack of capital and increased flexibility are the top reasons why SMEs decide to lease.

Q.7 For each of the following categories, please indicate if you either purchased or leased.

Base: Q7 = Those who spent money on real estate, machinery and equipment and / or software / digital products / cloud-based services (n=130 to 463) and Q8 = those who leased in at least one of the categories of spending (n=140). Those who did not know or preferred not to answer were excluded from the calculation base. Multiple answers were allowed, therefore total may not be equal to 100%.

53%

43%

39%

36%

22%

19%

19%

6%

It provided us with more flexibility

We didn't have enough capital tobuy

The leasing offer was morefavourable for us (terms and

conditions)

It was easier

We had no guarantees to offer fora loan

It was faster

It reduced the burden ofupkeeping our assets

We will not use these assets inthe long term

Q.8 Why did you decide to lease rather than purchase?

49

Respondent profile

08.


12%

B.C. and North

22%Prairies

8%Atlantic

32%Ontario

26%Quebec

Region



Number of employees and company’s age

Base: All respondents (n=697 to 699).

32%

42%

15%

6%

4%

12%

32%

26%

30%

1 to 4 employees

5 to 19 employees

20 to 49 employees

50 to 99 employees

100 or more

Less than 5 years

5 to 14 years

15 to 24 years

25 years and over

Number of employees

Company’s age


Sector of activity


33%

16%

14%

12%

10%

8%

3%

3%

Services

Manufacturing

Retail trade

Technology

Construction

Wholesale trade

Mining, oil and gas

Agriculture, forestry, fishing andhunting

Sector of activity

67% of those who did not choose

technology as their main sector of

activity said that their company also

had a major or minor technology

component


Owner’s age and ownership by gender

Base: All respondents (n=658 to 688).

0%

4%

17%

32%

34%

14%

43%

9%

29%

15%

4%

Less than 25 years old

25 to 34 years old

35 to 44 years old

45 to 54 years old

55 to 64 years old

65 years old and over

100% male

100% female

50% male and 50% female

Mainly male

Mainly female

Owner’s age

Ownership


Respondent’s diversity profile

Base: All respondents (n=699). Note: Multiple mentions were allowed, therefore

total may exceed 100%.

18%

10%

8%

3%

64%

1%

Immigrant (first generation)

Visible minority

Immigrant (second generation)

Indigenous person(North American Indian or member

of a First Nation, Inuit or Métis)

None of the above

Don't know

Diversity profile


Business annual sales and growth


Annual sales

13%

14%

17%

19%

8%

10%

10%

9%

13%

8%

22%

20%

16%

21%

0%

Up to $249,999

$250,000 to $499,999

$500,000 to $999,999

$1 million to $1,999,999

$2 million to $2,999,999

$3 million to $4,999,999

$5 million to $9,999,999

$10 million or more

Negative

0%

From 0.1% to 4.9%

From 5% to 9.9%

From 10% to 19.9%

20% or more

The business did not exist last year

Annual sales growth

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