OTTAWA, January 19, 2009 — The Government of Canada is announcing a $350-million capital investment in the Business Development Bank of Canada (BDC). From manufacturers in Quebec and Ontario to tourism operators in British Columbia and the Maritimes, this initiative is expected to help small and medium-sized businesses across Canada gain access to the financing they need at a time when credit markets are constrained.
This investment will allow the BDC to provide at least an additional $1.5 billion in financing to help small and medium-sized businesses sustain operations and grow. It could mean an immediate injection of funds for over 3700 small and medium-sized businesses, with an average loan amount totalling about $400 000. These funds would help manufacturing, science and technology, construction, tourism, agriculture, forestry and fishing businesses all across Canada.
"Current market developments have resulted in increased demand for BDC financing and services, and the government has taken this action to enable the BDC to help counter the effects of the credit crunch," said the Honourable Tony Clement, Minister of Industry. "With today's announcement, in addition to the recent $1.8-billion increase in the BDC's borrowing authority limit, the bank is in a stronger position to meet the credit requirements of businesses in their time of need."
Out of this $350-million investment, the Government of Canada is providing an immediate $250 million in capital to the BDC to increase its term lending activities. The government will invest a further $100 million in the BDC once the bank has finalized a working capital guarantee program to top up lines of credit from financial institutions for small and medium-sized businesses. It is expected that this new product will be introduced by April 2009.
"This equity injection will ensure that the BDC has the resources needed to help small and medium-sized Canadian businesses through this challenging period," said Jean-René Halde, BDC President and Chief Executive Officer. "We are open for business and ready and willing to finance viable enterprises through this difficult time."
The BDC's role is to provide financing, venture capital and consulting services to help create and foster the development of small and medium-sized enterprises. The bank supports over 28 000 entrepreneurs across the country and maintains a loan portfolio of about $10 billion. This additional funding will enable it to do more in terms of providing services to clients who cannot obtain financing through other means and complementing services provided by other financial institutions.
For further information (media only), please contact:
Pema Lhalungpa
Press Secretary
Office of the Honourable Tony Clement
Minister of Industry
613-995-9001
Media Relations
Industry Canada
613-943-2502
Backgrounder
Business Development Bank of Canada Financing
The Business Development Bank of Canada (BDC) aims to accelerate the success of entrepreneurs and help develop Canadian businesses by providing financing, venture capital and consulting services with a focus on small and medium-sized enterprises (SMEs). The BDC does not offer grants or subsidies; rather, it seeks to earn a return from the business financing it provides, while extending financing into market niches that would not otherwise be served.
The BDC is mandated to be a complementary lender in the market, offering loans and investments that supplement or complete services already available from commercial financial institutions. Its financial activities include secured and unsecured loans; subordinate financing, which incorporates elements of debt and equity financing; direct and indirect venture capital investments with a focus on early stage high-technology ventures; and customized business consulting services.
The BDC's role is magnified during economic slowdowns. Since the start of the credit crisis, the BDC has introduced a number of remedial measures. Since August 2007, it has:
- increased overall financing activity
- extended repayment terms on new authorizations
- offered postponement of capital repayment, which was accepted by 2200 clients
- increased support to manufacturers and dedicated a team to help Ontario auto parts manufacturers in particular
- launched a new working capital loan for expansion projects abroad
In fiscal 2007–08, the BDC authorized $3.1 billion in financing, subordinate financing and venture capital investments. The government's 2008 Economic and Fiscal Statement announced that the government will make an additional investment of up to $350 million to allow the BDC to increase its financing capacity by at least $1.5 billion.
An immediate investment of $250 million will be made for term lending activities. The government plans to invest a further $100 million in the BDC once it has developed a working capital guarantee program to top up lines of credit from financial institutions for SMEs. It is expected that this new product will be introduced in spring 2009.
This investment will lead to financing for between 3000 and 4000 business in Canada, including those in manufacturing, science and technology, construction, tourism, forestry, and fishing. It is expected that a large proportion of this support will be extended to the manufacturing and tourism sectors, which currently represent about 45 percent of the BDC portfolio.
Based on estimates from fiscal 2007–08, this funding could translate into approximately $140 million in BDC activity in support of 345 SMEs in British Columbia and Yukon, $180 million for 455 SMEs in the Prairies and the North, $465 million for 1160 SMEs in Ontario, $540 million for 1350 SMEs in Quebec, and $170 million for 415 SMEs in the Atlantic. However, actual results will depend on demand from viable SMEs, regional economic conditions and other factors.
The BDC holds a loan portfolio of about $10 billion. Broken down by industry sector, this translates into 33.7 percent of its loans for the manufacturing sector, 21.5 percent for wholesale and retail trade, 11.7 percent for tourism, 6.0 percent for construction, 5.3 percent for transportation and storage, 4.7 percent for commercial properties, 4.4 percent for business services, and 12.7 percent for other industries.
The BDC has both a physical and a virtual pan-Canadian presence, serving over 28 000 Canadian entrepreneurs with more than 100 branches in all regions of the country. It provides advice and financing to entrepreneurs from diverse backgrounds, venture capital for start-ups, and working capital to help small exporters bridge the gap between the Canadian market in which they operate and their targeted international market. The BDC is well-positioned to help its clients and will continue to support Canadian entrepreneurs as a whole.
