For many small business owners, the thousands of dollars they are paying in bank fees are biting into the bottom line.
"We seem to turn around every day and there's something else that we were charged for," says Tim Gardner, co-owner of a Massage Addict franchise, a provider of registered massage therapy, in Brampton, Ont.
Since opening less than a year ago, in July 2014, Gardner says he has paid almost $7,000 in fees.
Most of those fees were connected to a small business loan, which was provided by Scotiabank under the federal government's Canadian Small Business Financing (CBSF) program
Gardner, who worked in banking himself before opening his business, says Scotiabank charged him a $2,150 application fee.
"Which I don't get," he says. "Because after 23 years of taking applications myself, it doesn't take a lot to adjudicate an application."
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Gardner was also charged a monthly account fee of $25 for the 10-year length of the loan, which amounts to $3,000.
Scotiabank also charged him $971 for a letter of credit, stating he had at least $50,000 of his own funds accessible to his landlord in the event of a default, he says.
The landlord required the letter be good for two years. But Gardner says Scotiabank would only make the letter good for one.
"Earlier this month, I was looking at our bank account and noticed they had taken out another $971 for the renewal of that letter of credit," says Gardner.
"So it's like, 'Whoa, are you kidding me?' I don't get it. It's literally a piece of paper that's addressed to the landlord saying these funds are available in the event we default."
In an email to CBC News, a Scotiabank representative said: "We are working directly with the customer in this case. Our employees work with our customers to provide the best advice and solutions that best suits our customers' needs."
It also said that all banks participating in the CSBF are required to charge a two-per-cent application fee, based on the loan amount, which is collected on behalf of the lender, Industry Canada.
And that: "Our fees are in line with our competitors."
As for the $1,942 for the letters of credit, Scotiabank says that is required because the letter "creates a contractual liability, which the bank must cover in the event we are called upon to remit payment under the agreement."
Scotiabank did not explain how providing access to its customer's own money creates a liability for the bank.
Government takes on the risk
Under the federal government's Small Business Financing act, the government guarantees 85 per cent of the outstanding loan.
Industry Canada, the federal department responsible for the CSBF program, told CBC News that financial institutions are responsible for all credit decisions, and "lenders may elect to charge lending fees in an amount no greater than what they would charge for a similar conventional loan of the same amount."
The loan fees, though, seem to be just the beginning.
Gardner says he is also paying monthly account fees (which cover transactions) of between $225 and $275.
"There's no day-to-day interaction with anyone at the bank. Everything's electronically done. So, I just don't understand the fees," he says.
The Canadian Federation of Independent Business periodically polls its members on how banks serve the financial needs of small- and medium-sized businesses.
In its most recent report, CFIB members ranked Scotiabank second overall in terms of performance, tied with BMO. But there was one glaring exception.
"In terms of fees, Scotiabank does pretty poorly," says Queenie Wong, senior research analyst at the CFIB.
When it comes to the level of fees, and whether or not small businesses feel they get value for the money they pay, CFIB members gave Scotiabank a rating of 2.1 out of 10.
Fees, Wong says, are among their members' biggest complaints.
Low rates means more focus on fees
Today, many of the Canada's big banks are raising their fees for both business and personal accounts.
TD's increase took effect in March, BMO is hiking its fees in May, and Royal Bank says its fee increase will kick in June 1.
Scotiabank raised some of its fees earlier in the year.
Marvin Ryder, an assistant professor of marketing at the DeGroote School of Business at McMaster University, says banks are focusing on fees because of lower interest rates.
"Banks have shifted the source of their profit-making from the spread between the rate they charge when they loan money versus the rate they charge when people buy interest-bearing securities, to fees," says Ryder.
"Whether it is a fee to use a passbook or cash a cheque or withdraw money from an ATM, or receive a printed copy of a bank statement or exchange currency or get a letter of credit, etc., etc., it all adds up," he adds.
However, Ryder says fees are not the only reason bank profits keep growing. Bank revenues are also coming from growing diversification, into insurance, wealth management and brokerage services, foreign exchange services, and consulting.
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