ABSTRACT
Much has been written of late about the ‘new economy’. In the new economy, knowledge and skill-based work is the locus of economic activity, displacing both the resource sector and low-skill, labour-intensive manufacturing. Much has also been written about what the banks can and cannot do in financing firms that are participants in the new economy. This chapter addresses the role of the banks in financing innovative enterprise. The message is straightforward: banks are low-risk lenders. There are severe constraints on the extent to which banks can finance businesses lacking either collateralizable assets or receivables. While (as Paul Toriel makes clear in his chapter) all of the major Canadian banks have taken great strides in lending to the innovative (or ‘high tech’) sector, it seems doubtful that the banks will ever be in a position to lend to small, start-up enterprises lacking a proven product and a healthy record of sales (and hence receivables to finance interest payments and to provide collateral for the loan).
