Canadian credit unions: unlock small business lending with Open Data

Canadian credit unions have long championed the small business community, through business chequing accounts, working-capital facilities, and startup lending. Yet when it comes to lending, many SMEs remain underserved, not because credit unions lack appetite, but because traditional underwriting makes small business loans expensive to assess and slow to deliver. As Canada moves toward Consumer-Driven Banking, that’s about to change.

The problem: good businesses, poor data

Small businesses are the backbone of the Canadian economy. With 98% of all Canadian businesses classified as small enterprises, they employ over 5.8 million people; almost half of the private sector workforce. These businesses need credit to grow, manage cash flow, and seize opportunities. Yet according to the OECD, only 11.4% of total outstanding business loans in Canada go to small businesses.

The challenge isn’t risk appetite. It’s information asymmetry. Small businesses often lack the detailed financial statements and established credit histories that traditional underwriting demands. A restaurant owner with five years of steady cash flow through their business account may have a thin credit file. A contractor with seasonal revenue patterns looks risky on paper despite consistent profitability. The entrepreneur who left a salaried job to launch a consultancy has no business credit history at all.

For credit unions, assessing these applications manually is time-consuming and expensive. When the same effort goes into evaluating a $100,000 line of credit as a $500,000 commercial loan, the economics don’t work. The result? Worthy businesses are declined or face lengthy waits, and credit unions miss an opportunity to deepen member relationships.

Acquire and grow

The prize for credit unions that solve this problem is substantial. Canadian small business lending stands at CAD$140 billion outstanding, yet demand far outstrips supply. Credit unions currently participate in this market but often only at the larger, more established end. The real growth opportunity lies with younger businesses, newcomer entrepreneurs, and sole proprietorship, exactly the members credit unions exist to serve.

Consider a simple strategy: offer new business members a chequing account with an embedded line of credit, sized using real-time cash flow data. Rather than waiting for businesses to seek financing elsewhere, credit unions can make proactive, data-evidenced offers at account opening. The member gets working capital when they need it most, at the start. The credit union gains a sticky, multi-product relationship from day one.

This approach transforms member acquisition. A business chequing account alone generates modest revenue. A chequing account paired with an appropriate line of credit – one that grows as the business grows – creates a relationship worth nurturing for decades.

Open Data changes everything

Consumer-Driven Banking, launching in 2026, unlocks business account data with member consent. For the first time, credit unions see how cash moves through the business account: revenue patterns, payment reliability, seasonal fluctuations, and cash reserves. This isn’t a credit score derived from limited inputs, it’s a much richer picture than bureau data alone.

In the UK, NestEgg has spent seven years helping credit unions turn Open Data into lending decisions. By combining Open Data from business accounts with bureau information and internal member records, UK credit unions can make confident SME lending decisions in minutes rather than days. Faster approvals, higher acceptance rates for creditworthy applicants, and dramatically reduced cost per decision.

This isn’t about loosening credit standards. It’s about seeing the evidence that already exists.

A business that pays suppliers on time, maintains consistent revenue, and manages cash flow responsibly is creditworthy, even without a lengthy credit file.

Getting ready for 2026

Credit unions that prepare now will have a significant advantage when Consumer-Driven Banking launches. The technology exists. The regulatory framework is being finalised. Credit unions must be ready to turn business account data into lending growth and avoid members taking their business elsewhere.

NestEgg’s Decision Engine already combines Open Data, bureau information, and institutional records for UK credit unions. As Consumer-Driven Banking arrives in Canada, that same proven approach can help Canadian credit unions unlock responsible SME lending growth, starting with every new business chequing account you open.

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