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Canadian SMEs face hard challenges but remain ready for growth: HSBC survey

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Partnering with the right financial institution can make all the difference, respondents say

For the Canadian economy, early 2023 continues to offer a rocky economic landscape, replete with a mix of green shoots, market turbulence marked by continuing inflation, a tight labour market, and supply chain constraints. While larger companies possess the size, scale, liquidity and pricing power to more easily weather those challenges, many small- and medium-sized enterprises (SMEs) are treading a narrower path to greener pastures.

In late February, HSBC Bank Canada and the National Post worked together to produce an online survey, asking leaders and employees at Canadian SMEs to identify the greatest challenges their company faces, and what they need their financial partners to bring to the table in order to succeed.

We all face the same economic situation, but we know that SMEs are most vulnerable to market forces,” says Alan Turner, Head of Commercial Banking, HSBC Bank Canada. “SMEs typically don’t have research teams on the payroll to tell them exactly where they stand and what’s coming down the pipeline. We wanted to provide them with a forum to share their concerns and learn more about how financial partners can best help.

Challenges to profitability

SMEs were asked which factor they believe is most impacting the profitability of their business — inflation; access to capital; supply chain issues; labour and skills shortages; or sustainability issues.

Respondents overwhelmingly identified inflation — a force that touches all businesses — as the key factor affecting their profitability at a decisive 75 per cent. Supply chain issues, access to capital, and labour and skills shortages represented the remaining 25 per cent, in that order.

The need for external expertise

SMEs were asked to identify the areas where their company most needs greater outside support — Most survey respondents were primarily looking for greater access to global market intelligence, followed closely by cash flow management. Respondents further identified sustainability issues, supply chain issues, and access to capital in descending order.

Appetite for expansion

When SMEs were asked whether their company is currently most interested in expanding locally, provincially, nationally or internationally, it’s clear that Canadian companies have an appetite for expanding their market territories. About 43 per cent were most interested in expanding their market territory nationally, while 24 per cent were aiming to grow their footprint locally. A further 19 per cent were set on international expansion while 14 per cent were looking for growth opportunities in their home province.

According to HSBC's Navigator Survey1, higher-growth businesses are more likely to invest in improved product or service quality, customer experience and expansion into new markets.

Is your financial institution providing valuable services?

In terms of the most valuable service provided by their financial institution over the past year, survey respondents made it clear that their financial institution could do more to demonstrate value to their business. Most selected “none of the above”, followed by proactive business advice, relevant business intelligence, and innovative solutions to spur growth.

Partnering with a financial institution

SMEs were asked whether their choice of financial institution has been an important factor in the company’s long-term success.

Not surprisingly, an overwhelming 86 per cent of survey respondents indicated that their choice of financial institution was making a difference. It’s a strong indicator that businesses see financial institutions as partners to their businesses, not simply financial services providers.

“Whether it’s through financial products or simply sharing research and data that can give individual businesses a heads up on what’s coming, a financial institution can play a big role in helping SMEs to weather challenging times and to prosper in good ones,” Turner says. “We believe Canadian SMEs are resilient, resourceful and innovative, but it’s good to know who you can count on. A good relationship manager at your financial institution needs to understand your business so they can offer the products and services that will most help overcome specific challenges.”

This story was created by Content Works, Postmedia’s commercial content division, on behalf of HSBC Bank Canada.

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