BMO’s $3-billion fund for women-owned businesses taps into segment growing faster than any other
A year into its three-year initiative, BMO Financial Group has already funded a third of a planned $3 billion to women-led small businesses and entrepreneurs.
Carleton University, BMO Financial Group and consulting firm The Beacon Agency had released a study in February 2018 that found women entrepreneurs largely go unrecognized and rules around grants and incubators that could help often exclude them.
According to the report, small to medium-sized businesses owned by women in Canada account for 15.6 per cent of the total in 2017. Women-owned businesses are also more prevalent in retail trade, accommodation, food services and tourism.
The bank followed up the study with an announcement in June of 2018 that it’s earmarking $3 billion for female entrepreneurs.
“We’re doing this for a number of reasons,” said Andrew Irvine, BMO’s head of Canadian business banking. “One is that we’re very conscious that women are starting more businesses. Globally and certainly in Canada the number of women-owned enterprises is increasing at a faster than other business strata.”
The BMO report also showed women-owned businesses are less than half as likely as their male counterparts to seek financial support and bank loans. Further, in the last five years, only 11 per cent of publicly announced investments went to companies with at least one woman cofounder in them.
BMO’s women-led small business clients have grown by almost 10 per cent since the initial funding announcement.
Elisia Neves, the owner of FABRIK Architects Inc. in Cambridge, Ontario, was introduced to the program through a friend and is now cash positive after two and a half years running the business.
“I put my own money into the business at the beginning which was fine because the clients were small but as it went on it was larger sums of money,” said Neves. “Cash flow is still a bit of an issue but its more manageable than it was a couple months back when I needed that support.”
Neves was set up with a BMO ‘relationship manager’ who explained her situation and according to Neves, provided alternative solutions should she secure larger clients. The manager continued to set her up with an operating line of credit and business banking.
Not every business owner involved with BMO gets a relationship manager, as Irvine says, “it depends on the complexity of their needs.”
BMO’s initiative helped solidify the ground underneath Neves’ feet and support her, two project managers and a subcontractor, apart from renting office space.
According to Statistics Canada, women-owned small to medium-sized enterprises (SMEs) have grown faster than their men-owned counterparts. The share that requested external financing increased to 40.6 per cent in 2017 compared to 20.7 per cent in 2007. Women-owned SMEs with an annual sales or revenue growth rate above 10 per cent over the past three years increased to 18.5 per cent in 2017 from 16.5 per cent in 2011.
Neves is part of GroYourBiz, a group of Canadian women entrepreneurs for businesses of all sizes, including a BMO representative.
“In that group there’s every level, young startups and very mature businesses,” said Neves. “Even with the mature businesses it was very surprising to see access to cash flow be a persistent problem for women in business.”
Another pair of women business owners, not part of GroYourBiz or BMO’s initiative, faced similar problems starting out. Fiona Stevenson and Shelli Baltman started the Toronto-based Idea Suite, a boutique innovation agency in 2013 and now count The Canadian Imperial Bank of Commerce, Tim Horton’s, Scotiabank and others among their clients.
“We were fortunate to not need access to massive capital; we chose a business where we were able to shed capital and we basically worked for a year for free,” said Baltman. “We may have turned down decisions that could have been logical extensions of our business or new lines of business that would have required that access to capital.”
Stevenson and Baltman both frequently attend business conferences around the country, and regularly find themselves as one the few women in the room.
“There’s this underlying, very subtle and unintentional bias that pervades some of the funding conversation,” said Stevenson.
There are several government funding programs available to women entrepreneurs both federally and provincially.
There’s this underlying, very subtle and unintentional bias that pervades some of the funding conversation
Some are restricted to technology-focused businesses, STEM — science, technology, engineering and mathematics — or those entrepreneurs aged 18 to 39. There’s also the Women Entrepreneurship Fund, which gives up to $100,000 to women-led businesses. In June of this year the federal government added $10 million to the fund, bringing the total to $30 million to support more than 100 projects. Of these, $2.5 million will be dedicated to project proposals by Indigenous women.
Scotiabank also recently announced its own $3-billion commitment to funding women-led businesses with the Scotiabank Women Initiative over three years.
In the midst of running their businesses, Neves, Stevenson and Baltman found themselves too busy to seek funds out.
“It’s been three years and it’s just that so much is happening, you keep going with the flow,” said Neves. “I understood from my meeting with (the relationship manager) that there were some options out there, but I hadn’t checked.”
With BMO well on pace to complete their initiative as announced, Irvine says there are no definitive plans to cap the funding.
“We put the goal out there as an audacious goal and if there’s more opportunity in the market I don’t think we’ll constrain the amount of dollars we’re prepared to fund,” said Irvine.