ONTARIO BUDGET 2026: A CREDIT MARKET PERSPECTIVE

The Government of Ontario’s 2026 Budget introduces a number of measures aimed at supporting business investment and economic resilience. While certain steps align with improving liquidity and competitiveness, the budget does not fully address several structural issues raised by the Canadian Lenders Association (CLA), including in its pre-budget submission—particularly around credit market access, regulatory modernization, and proportionality.

From the CLA’s perspective, the budget reflects incremental progress, but stops short of advancing the broader policy framework required to support a competitive, inclusive, and innovation-ready credit ecosystem.

Where the Budget Gets It Right

1. Supporting Business Liquidity and Investment

The reduction in the small business tax rate from 3.2 per cent to 2.2 per cent, resulting in $1.1 billion in relief over the next three years, and the introduction of accelerated capital write-offs, aligned with federal changes, are positive signals.

These measures improve after-tax cash flow and reduce the cost of investment—both of which are critical for small and medium-sized enterprises that rely on external financing. Strengthening business balance sheets can support borrower quality and improve access to credit across the market.

This aligns with the CLA’s view that policy should enable businesses to grow and access capital more efficiently, particularly in an environment where financing conditions remain tight.

2. Targeted Investment in Innovation and Emerging Sectors

The province’s Ontario Account Investment Fund, amounting to $4 billion, will focus its investment in AI, quantum, and life sciences and reflects a recognition of where economic growth is heading.

However, from a financial services perspective, innovation policy cannot exist in isolation. The ability of firms to scale—particularly in capital-intensive and technology-driven sectors—depends on access to financing models that are adapted to new risk profiles and business structures.

The CLA has emphasized that enabling innovation requires not just funding, but the right regulatory infrastructure—particularly around AI adoption, digital identity, and data integrity.

Where the Budget Falls Short

Limited Progress on Priority Policy Files Impacting the Credit Ecosystem

While the budget introduces targeted economic measures, it does not meaningfully address a number of critical policies directly impacting the efficiency, integrity, and competitiveness of Ontario’s credit ecosystem. The CLA remains engaged with both the Ontario and federal governments to advance priority files and build a more competitive, secure, and innovation-friendly credit system.

In Ontario, the modernization of the Repair and Storage Liens Act (RSLA) remains a clear and actionable opportunity to improve clarity and fairness in the automotive financing market. The CLA advocates for targeted amendments that would better distinguish between essential and non-essential repairs, improve predictability in liens amounts, and protect the integrity of secured lending. Through focused reforms to introduce clearly defined statutory guardrails to the RSLA framework, the system will better reduce dispute risks and meet consumer and industry needs in an evolving lending environment.

Across the lending landscape, CLA members are navigating a growing set of operational, regulatory, and fraud-related challenges that require coordinated policy action. These include rising levels of identity and payments fraud; overly complex anti-money laundering and beneficial ownership requirements; and evolving compliance frameworks affecting non-prime lending and consumer finance.

At the same time, structural issues such as outdated secured lending frameworks and misalignment in housing finance policy continue to create friction in the system.

The Canadian credit ecosystem does not operate in isolation across respective provincial jurisdictions. CLA members are engaged in major regulatory transitions across Canada; including the implementation of British Columbia’s Mortgage Services Act (MSA), consumer protection regimes in Quebec and New Brunswick, and federal reforms affecting non-prime lending, identity verification, and financial crime enforcement. These changes have direct implications for Ontario-based lenders, particularly where inconsistent or overlapping requirements increase compliance and operational costs.

Across all priority files is the need for proportionate, risk-based regulation that reflects how modern lending actually works, particularly in high-volume, digitally enabled, and asset-secured environments. Without it, there is a risk for regulatory changes to inadvertently reduce access to credit, limit competition, or push activity toward less regulated channels.

The 2026 Budget is a call for continued advocacy and action to advance the competitiveness, security, and health of the lending sector in Ontario and all who interact within in. Advancing targeted reforms—whether through legislative modernization, regulatory alignment, or coordinated interprovincial engagement—will materially strengthen the functioning of Ontario’s credit market and improve outcomes for consumers, lenders, and the broader economy.