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What Role Does Financing Play in the Success of Immigrant-Owned Businesses?

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Immigrants contribute immensely to Canada’s prosperity, and the country’s economic growth depends greatly on immigrants entering the job market.  Moreover, a higher proportion of immigrants than Canadian-born individuals become entrepreneurs. However, despite the commitment and drive of immigrants, immigrant-owned businesses tend to remain small compared to businesses established by Canadian-born entrepreneurs. This underperformance of immigrant-owned businesses is due to many obstacles, including lack of entrepreneurial experience in Canada, language difficulties, or lack of a social network. Other factors that hinder the success of immigrant-owned businesses include rising costs and limited access to financial resources.

Immigrants often avoid seeking external funding, preferring to rely on their limited personal finances as a source of funding for their businesses. Banks are the main source of funding for small businesses, but do banks consider immigrant entrepreneurs as they would Canadian-born entrepreneurs in their loan approval process? For example, an immigrant lacking a credit history might be considered a higher risk and may face higher interest rates and stricter loan terms. This may discourage immigrant entrepreneurs from seeking financial assistance and may, in turn, impede the growth of their businesses. The extent to which the cost of, and access to, debt financing impacts the growth of immigrant-owned businesses is unclear. Additionally, it is not clear whether the experience of residing in Canada helps immigrant entrepreneurs learn about and seek out external sources of financing. Do well-established immigrants face the same challenges in externally financing their businesses as recent immigrants? A better understanding of the barriers that immigrants face in seeking and receiving external financing could lead to improved interventions by government agencies, including financial programs to support immigrant-owned business success, and consequently, a new way to promote the growth of the Canadian economy. 

What is this research about?

Dr. Anoosheh Rostamkalaei and Professor Mark Freel have received a Social Sciences and Humanities Research Council grant to study immigrant entrepreneurs’ access to bank loans. This study uses a longitudinal approach to examine how access to external financing changes over time and whether the usage and cost of debt offered to recent and well-established immigrants differ over time. 

Project Title: Immigrant entrepreneurs' access to and the costs of debt financing

Who will benefit from this research?

This work will provide a better understanding of how immigrant-owned businesses are financed over time and how this affects business growth. This can help policymakers and government agencies establish better opportunities for immigrants to seek advice and support for the growth of their businesses. Overall, the research will help drive the growth of the Canadian economy by securing competitive business ventures and reliable job opportunities for Canadians.

About the Author

Rania Nasrallah a rejoint le bureau de recherche Telfer en 2019. Elle a obtenu son doctorat en médecine à l'Université d'Ottawa et apporte à ce rôle plus de deux décennies d'expérience en recherche. Rania participe à tous les aspects du mandat du Bureau de la recherche et est responsable de fournir un large éventail de services aux membres du corps professoral et aux étudiants de recherche de deuxième et troisième cycle. Elle gère les subventions internes et les bourses d'études, et participe à la stratégie de communication de la recherche. Elle fournit également un soutien aux chercheurs avant l'attribution des subventions afin de maximiser le succès du financement au niveau national et international. En outre, elle travaille en étroite collaboration avec le Vice-doyen à la recherche pour élaborer et mettre en œuvre des stratégies visant à améliorer le financement et la vélocité de la recherche à Telfer, conformément à notre vision pour créer un meilleur Canada et un meilleur monde pour tous.<br/><br/>Rania Nasrallah joined the Telfer Research Office in 2019. She completed her PhD in Medicine at the University of Ottawa and brings over two decades of research experience to this role. Rania is involved in all aspects of the mandate of the Research Office and is responsible for providing a wide range of services to faculty members and research based graduate students. She manages internal grants, student awards, and participates in the research communication strategy. She also provides pre-award support to researchers to optimize funding success nationally and internationally. In addition she works closely with the Vice Dean Research to develop and implement strategies to enhance research funding and intensity at Telfer following our vision to create a better Canada and a better world for all.

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