Canadian SMBs are sinking under big bank fees and fine print—and it’s dragging the economy down
In July, bank regulators released a troubling report on bank-branch mutual fund representatives. The findings aren’t subtle. One in four reps admit they sometimes recommend products not in clients’ interests; one in three say clients get incorrect information.
That should set off alarm bells for anyone with a chequing account. In that report, the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) flag high-pressure sales cultures, limited range of products and poor advisor knowledge as contributing factors. But it’s not just everyday consumers who are affected. Canada’s small and medium-sized businesses (SMBs) face the same outdated practices and limitations, plus even more damaging barriers.
SMBs account for 98% of all businesses in Canada, employ two-thirds of the private sector labour force and contribute to about half of Canada’s GDP. Yet major financial institutions still treat them like personal banking clients. Despite their contributions to the economy (and prevalence in big bank marketing campaigns), they struggle to access the working capital required to start, maintain and scale businesses.
Float’s 2024 survey found that 25% of all SMBs have a hard time accessing bank loans. For newer businesses, that number is closer to 70%. Many are denied loans altogether unless they can provide collateral worth triple the loan value, usually in the form of their personal home or any value their business has managed to build up. And for many early-stage entrepreneurs, that’s simply not an option.
For the minority that do manage to access a bank loan, it’s likely not enough. Andrew Spence’s book Fleeced: Canadians Versus Their Banks cites a CFIB report where the median loan is just $156,000. Too small to make a difference, but large enough to carry steep interest rates. SMBs pay up to 2.5% above prime, six times the same gap in the US.
Even worse, these loans come with strings attached. Banks insert restrictive clauses into credit agreements—especially venture debt—that block companies from using modern financial tools like virtual cards and automated cash flow platforms. These tools improve visibility and speed up decision making, yet banks are quite literally barring their use. That’s not just market inertia. That’s intentional lock-in, a deliberate strategy to deprive Canadian businesses of choice and force them back into outdated financial systems and products. We’ve seen this first-hand at Float. Happy customers forced to close their accounts, not because they lacked value or chose another option, but because their bank decided for them.
In the absence of affordable bank loans, SMBs and entrepreneurs are pushed into another trap: high-interest credit cards. The CFIB also found 30% of SMBs rely on credit cards to finance their business, cards that often carry interest rates around 20%, originally set in the 1980s when prime rates were similarly high. But while prime has hovered near zero for over thirty years, credit rates have barely budged. Banks justify this wide margin by citing risk. In reality, that risk is passed to investors through credit card trusts, which allow banks to move credit card debt off their own balance sheets and bundle it into investments they can then sell. The risk is gone. But the 20% rates remain.
These costs aren’t just painful for individual businesses. They compound into a national disadvantage. While US businesses are being incentivized to turn away from foreign goods and build up domestic industries, Canadian SMBs face borrowing costs so high that they can’t bridge cash flow timing gaps, or match prices of foreign imports, or place large orders that lower per-unit costs. Canadian businesses, priced out of buying Canadian. By Canadian banks.
Instead of addressing these structural disadvantages through open banking reform—a framework that would give businesses secure, real-time access to their own financial data—Canada’s banks lobby for delays. They implement technical barriers to block data-sharing, even when customers explicitly ask for it.
Canada’s banking system is often called a bastion of stability. But all of this leads to the real question, stability for whom?
At best, that stability is a symbol. At worst, it’s a mirage, one that conceals a system designed not to grow small businesses but to preserve profit margins twice those in competitive markets. Banking should be about building: strong financial futures for Canadians, strong businesses for entrepreneurs. Instead, banks are putting their own profits over customers and the Canadian economy, just as international pressure demands that we build faster, more self-sustaining companies.
Imagine what would be possible if banks prioritized outcomes over fees. If they provided tools that helped businesses grow, instead of contracts that restricted them. If they built financial systems for the country’s most vital economic engine—not just its most profitable one. What would that do for the Canadian economy?
Because we know what it looks like when they don’t.
Confident SMBs are 2x as likely to expect >10% profit growth
See how they’re doing it.
