What role do small and medium-sized enterprises play in Canada?

Small and medium-sized enterprises (SMEs) are the backbone of the Canadian economy. SMEs are defined by Innovation, Science and Economic Development Canada as businesses with fewer than 500 employees: small businesses have 1 to 99 employees, and medium-sized businesses 100 to 499. SMEs make up about 99.8 per cent of all Canadian businesses, employ about 88 per cent of private-sector workers, and contribute about 50 per cent of Canadian GDP.

Statistics Canada counted about 1.3 million Canadian SMEs at the end of 2023. They are concentrated in services (professional services, retail trade, construction, healthcare, accommodation and food services) and most heavily located in Ontario, Quebec, British Columbia, and Alberta. Indigenous-owned businesses number more than 60,000, women-owned businesses more than 250,000, and businesses owned by visible minorities more than 165,000. SMEs created more than 70 per cent of net new private-sector jobs in the past decade.

Federal programmes support SMEs through financing, exports, and innovation. The Business Development Bank of Canada (BDC, established 1944) is a Crown corporation that provides loans, advisory services, and venture capital, with about $40 billion in committed financing. Export Development Canada (EDC) finances Canadian exporters. Innovation, Science and Economic Development Canada runs the Strategic Innovation Fund, the Canada Digital Adoption Programme, the Industrial Research Assistance Programme, and the Sustainable Development Technology Canada platform.

Tax measures targeted at SMEs include the small-business tax rate (a federal rate of 9 per cent on the first $500,000 of active business income, lower than the general 15 per cent), the Lifetime Capital Gains Exemption ($1.016 million in 2024) on qualified small-business shares, and the Scientific Research and Experimental Development (SR&ED) tax credit for research spending. The Canada Small Business Financing Programme guarantees loans from chartered banks. Provincial programmes complement federal ones, especially in Quebec (Investissement Québec) and Ontario (Invest Ontario).