By Michelle Arnold, Karen Greve Young and Scott Stirrett | Part of our Special Series: Always Canada. Never 51.
Canada is at risk of losing control over its own economy. A combination of rising U.S. tariffs, a weakening Canadian dollar, and an aging generation of business owners looking to retire has created the perfect storm for a wave of foreign takeovers. Without intervention, many Canadian businesses—integral to our communities and economy—could end up in the hands of American private equity firms or multinational corporations.
The numbers are staggering: 76% of Canadian business owners plan to exit within the next decade, representing $2 trillion in business assets, yet fewer than 10% have a formal succession plan. Without clear pathways for ownership transfer within Canada, these businesses will either shut down or be acquired by foreign buyers. This isn’t a hypothetical threat—it’s already happening. From main streets increasingly dominated by U.S. chains to major resource companies being bought out, Canada’s economic independence is steadily eroding.
At the same time, over the past 20 years, Canada has lost 100,000 entrepreneurs despite adding 10 million new residents. Fewer people are starting businesses, weakening our economy at a time when we need strong domestic ownership to withstand global economic uncertainty.
How do we stop this trend? How do we ensure Canadian businesses remain in Canadian hands? One major solution is Entrepreneurship through Acquisition (ETA), which allows aspiring entrepreneurs to buy existing businesses from retiring owners, keeping jobs and ownership local while injecting fresh energy into the economy.
But for ETA to be a viable solution, we need to fix a major problem: financing. Mainstream financial institutions consider small-business financing to be high risk and often require levels of credit history and collateral that disqualify many entrepreneurs.
The federal government has the tools to fix this. Its Canadian Small Business Financing Program (CSBFP) was designed to provide guarantees to help small businesses secure loans through our mainstream financial institutions. However, its outdated structure compromises its potential impact. With a few targeted changes, the CSBFP could unleash the potential of ETA and secure the future of countless local businesses.
Here’s how. First, the program should follow the lead of the United States’ Small Business Administration 7(a) loan program and allow financing for share purchases, so it’s easier for a would-be entrepreneur to buy into a business. Share-based acquisitions also simplify tax filings and provide favourable capital gains treatment for sellers.
Second, the CSBFP’s maximum loan amount should increase to $5 million from $1.15M to reflect the rising costs of acquiring businesses.
Finally, the program should launch a dedicated “Buy a Business” funding stream and partner with financial institutions to promote ETA nationwide. At the same time, the Business Development Bank of Canada (BDC) should introduce a complementary stream within its new Community Banking Initiative to promote this succession option even more widely.
This would build upon BDC’s current support for young entrepreneurs buying existing businesses through its partnership with Futurpreneur.
These are simple, proven policy solutions that would empower Canadian entrepreneurs, preserve community businesses and strengthen our economy – all without incurring any additional costs. The CSBFP runs on a cost-recovery model that would scale alongside these changes and the BDC does not rely on the federal government for funding.
The federal government has an opportunity to ensure that Canada’s small businesses not only survive the Silver Tsunami and the American economic threats but thrive and grow. Projections from the United States’ SBA 7A loan program indicate that these changes could enable ETA as a succession pathway for nearly 5,000 businesses a year.¹ Younger entrepreneurs, with their fresh ideas and tech-savviness, are especially well positioned to modernize existing businesses. A study from Relay Investments, an American firm that invests in entrepreneurs who acquire firms, found that 88 per cent of firms purchased through ETA create jobs after being acquired, with 46 per cent of these firms more than doubling their head count.
As Canada confronts an unpredictable global economy and an even more unpredictable neighbor, it needs successful, locally owned businesses, led by young ambitious Canadian entrepreneurs – not shuttered storefronts or yet another foreign takeover. We all want a more independent, prosperous economy where we are less vulnerable to threats, and the next generation of Canadian business leaders is ready and waiting to help us build it from the ground up.
Michelle Arnold is Policy Manager at Social Capital Partners. Karen Greve Young is the CEO of Futurpreneur, a national non-profit organization that supports young entrepreneurs across Canada. Scott Stirrett is CEO & Founder of Venture for Canada, a national charity on a mission to foster entrepreneurial skills and mindsets of young Canadians.
¹ This is based on the ratio of SBA 7A loans that go to transfer of ownership as well as projections for increased funding.
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