Repayable contributions portfolio of the Business Development Program

(As at December 31, 2013)

2015 RRP

D


 1 “Closed” represents conditionally repayable contributions for which conditions triggering repayment did not occur.

ACOA’s Business Development Program (BDP) was created on July 25, 1995. From then until December 31, 2013, the BDP provided $1.34 billion in non-interest-bearing, unsecured repayable contributions to small and medium-sized enterprises (SMEs) in Atlantic Canada. These repayable contributions have helped Atlantic Canadians to start businesses, develop new products or markets, and improve productivity or skills in order to grow their businesses.

A repayable contribution is financial assistance that a client is expected to repay. Depending on their nature, they are classified as either unconditionally repayable or conditionally repayable. Unconditionally repayable contributions must be repaid, without qualification. Conditionally repayable contributions become repayable, in whole or in part, only when certain conditions specified in the contribution agreement come into effect.

As at December 31, 2013, a total of $366.5 million in BDP funding was still invested in SMEs, comprising $250.1 million in unconditionally repayable contributions plus $116.4 million in conditionally repayable contributions ($112.6 million for which repayment conditions had not yet been met, plus $3.8 million for which repayment conditions had been met).

Commercial assistance is repayable over an average term of five to seven years. From the BDP’s inception in 1995 until December 31, 2013, the Agency collected $693.3 million of the BDP’s repayable contributions. For fiscal year 2012-13, BDP collections amounted to $54.2 million. For fiscal year 2014-15, collections on the BDP program are forecast to be $48 million.

The annual default rate in 2012-13 was 5.43%, an acceptable performance given the relatively high-risk nature of the funding activities undertaken by the program. In light of the economic situation, the Agency continues to closely monitor its portfolio, especially as it relates to write-offs, which are expected to amount to $23 million in 2014-15 (for all programs).

Risk Mix

All commercial clients are risk-rated based on a five-tier grading system. Accounts are reviewed regularly, and the level and frequency of monitoring is adjusted in accordance with the risk rating. The table below illustrates the targeted risk mix of the BDP’s repayable contributions portfolio for the 2014-15 fiscal years, as well as the risk mix as at December 31, 2013.

The repayable principal outstanding of $253.9 million on December 31, 2013, comprised $250.1 million in unconditionally repayable contributions plus $3.8 million in conditionally repayable contributions for which repayment conditions had been met.
 

Risk Rating of Portfolio
Percentage
Targeted Mix  
2014-15
of Portfolio
Percentage
Actual Mix
Dec. 31, 2013  
Principal
Repayable Outstanding
Actual Mix
Dec. 31, 2013
Low     5%     3% $    7.1 million
Low-medium   20%   23% $  58.9 million
Medium   45%   48% $122.9 million
Medium-high      25%   20% $  49.8 million
High     5%      6% $  15.2 million
Total 100% 100% $253.9 million
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