Will OSFI’s New Lending Rules Actually Save Small Business?

Cheaper Loans are Coming—But They Won’t Stop the Rent Crisis

Starting in 2027, Canada’s federal banking regulator (OSFI) plans to make it cheaper and easier for big banks to lend to small businesses like yours. They are lowering the “risk weight” on SME loans, which essentially means banks don’t have to hold as much cash in reserve to lend to you.

This is a significant win for BWA members and all of Canada’s small businesses.

In plain English: they’re making it cheaper and easier for big banks to lend to you. OSFI Superintendent Peter Routledge notes that the old rules often made it more expensive for banks to lend to a local shop than to a mortgage holder. This change is exactly what we’ve been asking for – but it comes with a massive caveat.

The Elephant in the Storefront

At the Better Way Alliance, we’ve spent the last years tracking what is actually crushing Canada’s businesses. Our Fixed Cost Crunch Report found that while policy talk often focuses on labour, the real crunch is often occupancy and fixed costs.

• The Rent vs. Wage Gap: Between 2019 and 2024, minimum wages rose 23%. In that same period, Toronto retail rents spiked 142%.

• The “Default Cliff”: A typical micro-business now pays $5,534 more annually in rent alone – costing them 1.4 times more than recent wage increases.

• Cumulative Impact: When you add up rent, insurance, and electricity, a typical 3-employee micro-business has seen an annual cost spike of $51,890 over five years.

Why This Matters for Your Bank Loan

OSFI is lowering capital requirements because they want to support “productivity and growth”. But if your business is haemorrhaging cash to an unregulated commercial landlord, that bank loan isn’t being used for training or new equipment. It’s being used to pay for a rent increase that arrived as a “shock” at lease renewal.

Our Position: We support OSFI’s move to lower risk weights. But we are telling the regulator – and the government – that this policy needs to be paired with a stable commercial rent market. Otherwise, “easier lending” just means we’re letting small businesses borrow their way into bankruptcy to keep their landlords afloat.

Why BWA is Taking This to OSFI

We submitted a formal position to the federal government – read the PDF here. Our message is simple: We support making it easier for banks to lend, but if that capital is immediately sucked up by unregulated, triple-digit rent hikes, the loan isn’t helping the business – it’s just subsidizing the landlord.

We are calling for a Commercial Renter Bill of Rights and rent stability so that these new bank loans can actually be used for what they’re meant for: training your staff, buying equipment, and growing your business.

• Read Our OSFI Submission: See how we’re using bank regulations to fight for rent reform.

• Read the Fixed-Cost Crunch Report: The data proving rent – not labour – is what’s crushing Main Street businesses

• Secure Your Space Canada: Send a message to your local rep and help local entrepreneurs move from being renters to owners