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Or sign-in if you have an account.With a high bar for entry into the defence space, the BDC plays an important advisory role to SMEs in “demystifying” the procurement process. Photo by Jakub Porzycki/NurPhoto via Getty ImagesCanada needs to overcome a “three-speed” growth divide among small- and medium-size enterprises (SMEs) as it ramps up spending to build its defence industrial base, according to a new study.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorA report released Thursday by the Business Development Bank of Canada (BDC) and The Icebreaker, an SME defence innovation network, said there is a “rare window of opportunity” for Canadian companies in the defence ecosystem but their growth is uneven due to the sector’s high barriers to entry and complex requirements.BDC surveyed 642 business owners and decision makers who are active in the defence sector. Their companies were categorized into three groups: defence-heavy and actively growing; defence-light and expanding cautiously; and in “exploration mode” and interested in joining the sector.Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againSMEs are the “backbone” of Canada’s defence industry, said Peter Dawe, BDC’s vice-president, defence strategy and a retired major-general in the Canadian Armed Forces. According to BDC data, SMEs make up 92 per cent of businesses in the sector and account for 40 per cent of employment.But companies looking to enter the defence space face the steepest barriers compared to more established ones, the report said.“If you’re new to the defence business, it can appear pretty daunting,” Dawe said. “It’s hard to decipher. And the hurdles to gain access seem pretty significant.”The report said each of the three groups face different challenges depending on their level of involvement in the defence sector, including long sales cycles, maintaining sufficient cash flow and difficulty hiring or retaining skilled workers.But firms already active in the space do share a commonality: 29 per cent of defence-light and 28 per cent of defence-heavy firms said meeting “defence-specific requirements” is limiting their growth over the next 12 months.“There are specific certifications that need to be met, like cyber, for example,” Dawe said. “Secondly, as warfare and military-related technologies continue to evolve, we’re seeing a greater requirement for security classifications to be able to operate in this space, and that too tends to be difficult to secure.”With a high bar for entry into the defence space, Dawe says BDC plays an important advisory role to SMEs in “demystifying” the procurement process.“Having a better understanding of what those requirements are and proactivity by SMEs is especially important because you don’t want that to be the constraint,” Dawe said.Accessing capital is also a challenge, as “financial institutions remaining cautious about the risk profile, limited customer base and unstable cash flows of the sector,” the report said. BDC’s survey found that half of defence SMEs looking for financing over the next 12 months think it will be difficult.“The challenge in many cases is that (the companies) don’t necessarily have a contract in hand, but they see the demand coming, and in order for them to be able to meet that demand and participate in supply chains, they need to be able to scale,” said Dawe.Seventy-six per cent of businesses surveyed by BDC are involved in international trade, a necessity given Canada’s relatively small defence market. For companies to “thrive and survive” in the long term, Dawe said they need access to other countries.“Historically, that’s primarily been south of the border, which will continue to be a very important market to us,” he said. “But as we’ve seen recently, it’s important to have a variety of opportunities. It’s clear that our government is leaning towards a closer relationship with Europe.”Dawe said BDC is pursuing a “matchmaker initiative” to help source SMEs and connect them with government defence projects. He said opportunities could include a mix of traditional domains like land, air and sea, and emerging ones such as cyber and space.“We have the relationships with the (primary contractors). We have the relationships across government,” he said. “We have a pretty clear line of sight in terms of what the broader governmental aspirations are looking like.” Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.