08/27/2013 03:10 EDT | Updated 10/27/2013 05:12 EDT

Canada ranked among top 5 best places to start business

Canada’s climate for entrepreneurs is improving, with management consulting firm Ernst & Young ranking Canada among the top five places in the world to start a business.

"Canada has emerged as a real leader in fostering an entrepreneurial culture," says Colleen McMorrow of Ernst & Young after releasing the 2013 Entrepreneurship Barometer, a report that studies conditions for business startups in the G20.

The report relies on interviews about business conditions from 1,500 entrepreneurs in the G20 countries. They were asked about their tax burden, access to financing and intangibles such as attitudes towards entrepreneurs in their community.

"There's an emphasis on research and innovation in this country, and we value the role of entrepreneurs in job creation. Canada also offers a supportive tax and regulatory environment for entrepreneurs,” McMorrow said.

The Ernst & Young report ranked Canada behind the U.S., U.K. and China on conditions for entrepreneurs, but found the cost of starting a business has been cut in half since 2003.

The cost of starting a business in the country is among the lowest in the G20, while entrepreneurs spend fewer hours on their tax affairs than their peers in most other nations, enjoy lower labour costs and benefit from better access to funding, McMorrow found.

As a result, Canada is near the top among G20 nations in numbers of entrepreneurs starting new businesses.

“Entrepreneurs are the backbone of economies around the world – economies grow when entrepreneurs grow,” says CBC business commentator Nisha Patel.

“They grow their personal wealth and grow the wealth of the economy. It also sparks innovation if you have new ideas at the table,” she said.

But McMorrow said Canadian entrepreneurs report difficulty accessing capital. Access to startup money from private equity and venture capital are improving, but bank financing remains a challenge, they said.

And because they have high expectations of success, the risk of failure weighs heavily on them and they fear it will affect their ability to continue innovating in future, the report says.

“While Canada has the lowest insolvency costs in the G20, 36 per cent of local entrepreneurs say business failure is a barrier to future business ventures, also above the overall average,” McMorrow said.

She credited the federal government with improving the climate for entrepreneurs with its low corporate tax policy and other measures.