Conditions in the Canadian small business sector appear to be improving, as the credit crunch that followed the global recession appears to be waning.

The Business Development Bank of Canada reported net earnings of nearly $357 million for the 2011 fiscal year. According to the bank, the profits reflect improving confidence and performance among the country's small- and mid-sized businesses.

What's more, borrowing slid over the same period, further indicating that credit conditions are improving for small firms. Specifically, the bank lent a total of $3.3 billion, compared to $4.4 billion in the fiscal year 2010 - the largest credit volume allocated by the bank in its history.

"Close to half of our profitability this year is attributable to the reduction of the amount of money we set aside for potential losses, which means that our clients' financial positions have improved since last year," said BDC president and CEO Jean-Rene Halde in a statement. "We are delighted with what our profitability tells us about the rising financial health of our clients."

The most recent Small Business Barometer from the Canadian Federation of Independent Business showed confidence among the nation's small companies grew substantially in July, stemming months of declines to reach 68.3 points.

But as the recovery progresses, BDC points out, small business owners continue to worry about the state of the credit market and the ability to finance growth and hiring plans. As both public and private credit institutions developed lending programs, the dollar volume of BDC's lending activities began to return to pre-recession levels.

"Private sector financial institutions now have more liquidity available for business financing, which is good news for Canadian entrepreneurs," Halde added. "This also means that BDC did fewer deals this year than last year, when the economic crisis was at its most severe. This is to be expected given our complementary mode of operation."

But despite clear improvements in the Canadian economy, conditions in the U.S. and Europe threaten to throw the global economy back into recession. Debt crises in the Eurozone have shown few signs of resolution in recent weeks, and stalled growth in the U.S. has injected further uncertainty into global markets. As Canada works to maintain its strong recovery from the recession, it will may be unable to escape the turmoil elsewhere.