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Loans CBA

Cost-Benefit Analysis of the Canada Small Business Financing Program
- Daniel Seens
Citation: Seens, D. (2015). Cost-Benefit Analysis of the Canada Small Business Financing Program.
Small Business Research and Policy (Industry Canada).
The study uses cost-benefit analysis to validate the need and sustenance of the government funded
program CSBFP designed to provide access to finance to Canadian small and medium-sized
enterprises (SMEs). Improvements in Pareto efficiency was the main criteria of evaluation to infer net
benefits to society. Both direct and indirect benefits of the program on economic activity, were
measured by changes in GDP.
Key Benefits, Costs
Key benefits of CSBFP included in the study are Administrative expenditures by lenders, Interest
revenues on loans; Salaries and wages paid by borrowers; Direct GDP impacts; Indirect GDP impacts;
and Administration and registration fees collected by Industry Canada. Costs considered in the study
were Program administrative costs (salaries, wages, operating and maintenance costs, and capital
expenditures); Direct program costs borne by Industry Canada (payment of claims); and Loan default
costs to lenders.
Quantification of Benefits, Costs
The monetization of benefits and costs was seemingly direct as all the values were in Canadian USD.
NPV denotes net present value,
Bt and Ct denote the benefits and costs respectively for the year t and r denotes the rate of discounting.
The area under study was the nation of Canada. The time frame under consideration was 2003/2004 to
2011/2012. Sensitivity analysis was conducted by using different discounting rates of 8%, and 3.5% .
Additionally, Employment displacement rate of 75% and 25%; variation in incrementality and
employment generation was also carried out in sensitivity analysis.
The table below enlists the variables used and their sources
Salaries and Benefits of Staff Administering the CSBF Program
Direct Operating Expenditures of the CSBFP
Capital Expenditures
Number of Claims and Claims Paid on Loan Default
Loan Default Cost to Lenders
Interest Revenues on Loans- Interest rate data
Interest Revenues on Loans- Calculation of cost of funds to
Small Business Financing
Directorate financial
management system
Internal CSBFP Database.
CSBF Program Database
CSBF Program Database
Internal CSBFP Database.
CSBF Program Database
5-year Government of
Canada benchmark bond
Profits for CSBFP Borrowers
Employment Creation and Salaries and Wages paid by Borrowers
Direct GDP Impacts of Expenditures by CSBFP Borrowers
Indirect GDP Impacts of Expenditures by CSBFP Borrowers
Administration and Registration Fees Paid by Borrowers to
Industry Canada
yields, obtained from the
Bank of Canada
Industry Canada’s 2014
Economic Impact Study
CSBF Program Database
Statistics Canada
Canadian Input-Output
Statistics Canada
Canadian Input-Output
CSBF Database
Scope for Analysis
The similar analysis can be extrapolated to include the years after 2011-12. This exercise can help in
ascertaining if the CSBFP still plays a significant role in recent years.
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