By: Nastaran Roushan
DEI is the Future. Financing Can Help Us Get There
As Canada moves to create more relationships with countries across the globe, it is more important than ever for Canadian companies and workforces to reflect the cultures and groups with whom we want to do business. This can be achieved through robust DEI implementation that is built into a business’s organization from its inception. Doing so is a viable option if we reframe current financing rules and regulations in order to incentivize lenders and companies to start out and grow with DEI as an important objective in providing and receiving funding.
Data Sharing and Publication
The Government of Canada has established various initiatives to help women and underrepresented groups access financing. For example, the Women Entrepreneurship Loan Fund is designed to provide female-led businesses with a loan of up to $50,000. As another example, the Black Entrepreneurship Loan Fund provides Black-owned businesses with up to $250,000 in financing. There are also funding opportunities for Indigenous business owners and newcomer entrepreneurs.
The Government’s efforts have assisted many business owners in obtaining funds that they would not otherwise be able to access. This is because it is traditionally difficult for marginalized groups to access financing from private institutions. For example, a 2021 survey found that access to funding, financing, capital or sales are the top challenges for Black entrepreneurs in Canada. A 2024 report by Women Entrepreneurship Knowledge Hub also cited financing as the top concern for Indigenous entrepreneurs and 2SLGBTQ+ business owners
Financial institutions should not be able to discriminate when approving financing applications. However, it is not difficult for them to do so considering that we do not require financial institutions to collect and publish EDI data of financing applicants. This needs to change. Various organizations have been advocating for the federal government to make EDI data reporting mandatory, as it is in the United States. This makes sense. Obtaining and reporting information (where the applicant consent) allows for a systematic check on the practices of financial institutions. Society can then hold financial institutions accountable for discriminatory practices in financing, thereby making it more difficult for discrimination to continue.
Business Plans
EDI should not just be furthered by approving more financing applications for businesses owned or led by marginalized groups. We also need to ensure that EDI is entrenched in businesses from the first day of creation, regardless of the business’s ownership or management structure. Financing is a powerful tool in overcoming this challenge. Specifically, governments and private institutions should mandate that businesses applying for financing include EDI strategy and implementation in their business plans.
Business plans are generally required for financing, regardless of the source of funds. For example, the Canada Small Business Financing Program is a public-private partnership wherein borrowers can obtain a term loan of a maximum of $1.15 million, and a maximum line of credit of $150,000. The Government of Canada provides the funds through financial institutions which are in turn responsible for approving and administering the loan. In so doing, financial institutions are mandated to undertake the same due diligence and business procedures as they would in respect of a conventional loan, hence the need for a business plan.
The contents of a business plan are subject to the private institution’s discretion. However, the Government has published a helpful “business plan guide” for small businesses. This guide contains a section on the business’s team, which the Government suggests include an organizational layout, biographies of managers, a job description for each position, the skills for each position, and “any other relevant information related to personnel”. The section ends with the note, “It is also a good idea to outline any recruitment or training plans, including the cost and the amount of time required.”
Demographic data, such as race, disability, gender, and sexual orientation are not addressed anywhere in the Government’s guide. Nor is there any requirement that businesses commit to recruiting or training individuals from diverse backgrounds. This is unsurprising, as none of these issues have been traditionally required in business plans.
This needs to change. Both the Government and private institutions need to mandate that businesses address EDI when applying for financing. This will help change the commitment to EDI from an afterthought addressed through lip-service and performative policies in workplaces to a necessary component of a business’s objectives and success.
Conclusion
Both governments and the private sector have an important role to play in ensuring that Canadian businesses reflect Canada’s demographics. Changing financing practices can help businesses owned or led by diverse groups to have equitable opportunities for establishment and growth Furthermore, businesses should understand the importance of EDI by thoroughly addressing the issue in their business plans. Again, equitable financing practises can help this happen. Financing is a process that has traditionally been a barrier to EDI. It can be reshaped to become a promoter of equitable workplaces.
References:
Alhmidi, M. (2021, February 6). Feds should require banks to share race-related data on services, business groups say. Global News. https://globalnews.ca/news/7624600/race-related-data-banks/
Deacon, C. (2021, May 26). Inclusive entrepreneurship: Accelerating the entrepreneurial potential of Black Canadians. The Honourable Colin Deacon, Senator, Canada. https://www.colindeacon.ca/projects/inclusive-entrepreneurship
Women Entrepreneurship Knowledge Hub. (2024, July 31). The state of women’s entrepreneurship in Canada: 2024. https://wekh.ca/research/the-state-of-womens-entrepreneurship-in-canada-2024/
