TORONTO, Ontario, June 15, 2009 — The Honourable Tony Clement, Minister of Industry, today announced that the Government of Canada is providing $450 million to the Business Development Bank of Canada (BDC) in support of small and medium-sized enterprises and innovative firms.
The funding will include $100 million to establish the Operating Line of Credit Guarantee and $350 million over three years to help drive venture capital investment in promising Canadian technology businesses.
"The health of the Canadian economy depends greatly on the vitality of Canadian businesses, which often need credit to finance their growth," said Minister Clement. "The Operating Line of Credit Guarantee will allow BDC to work with financial institutions to make it easier for Canadian businesses with strong balance sheets and business fundamentals to access the credit they need to get even stronger. The funding for venture capital will assist growth-oriented firms to get the funds they need to innovate and boost the Canadian economy."
The Operating Line of Credit Guarantee will be delivered under the Business Credit Availability Program as part of the government's Extraordinary Financing Framework announced in Canada's Economic Action Plan, and it will improve access to financing for Canadian businesses during this period of economic uncertainty.
"Working together with Canada's financial institutions, BDC will help ensure that creditworthy businesses have access to the short-term financing they need to remain successful and grow in the months ahead," said Jean-René Halde, President and Chief Executive Officer of BDC. "Innovative firms will also have greater access to funding to bring their innovations to market."
The Operating Line of Credit Guarantee is a time-limited facility that allows BDC to guarantee lines of credit that financial institutions already extend to their clients. This guaranteed portion goes above and beyond what the banks are already committing. Through the program, financial institutions and BDC will share the risk while providing increased support to their clients. The Operating Line of Credit Guarantee applies to operating lines of credit with authorized limits of a minimum of $400 000 and a maximum of $40 million. This funding will have a total market impact of at least $300 million.
The $350 million in funding for BDC's venture capital activities will allow it to make additional direct investments of $260 million over three years in Canadian businesses already in the BDC portfolio, as well as investments in new seed technology companies and later-stage technology companies. It will also allow BDC to commit $90 million over three years to private, independent Canadian venture capital funds. This funding is in addition to the $75 million in venture capital funds allocated in the Government of Canada's Budget 2008, which is being used to support the creation of a privately run venture capital fund.
BDC is Canada's business development bank. From 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs.
To learn more about Canada's Economic Action Plan, visit www.actionplan.gc.ca.
For further information (media only), please contact:
Office of the Honourable Tony Clement
Minister of Industry
Media Relations Manager
Business Development Bank of Canada
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, accepted by 2200 clients;
- increased support to manufacturers and dedicated a team to help Ontario auto parts manufacturers in particular;
- seen a significant increase in referrals from financial institutions; and
- launched a new working capital loan for expansion projects abroad.
In fiscal 2007–2008, the BDC authorized $3.1 billion in financing, subordinate financing and venture capital investments.
The Operating Line of Credit Guarantee will be delivered under the Business Credit Availability Program as part of the Extraordinary Financing Framework announced in Canada's Economic Action Plan. The $100 million in funding for this program was announced in the 2008 Economic and Fiscal Statement, along with the provision of $250 million for additional term lending by the BDC. This total funding of $350 million will allow the BDC to make available at least an additional $1.5 billion in financing for Canadian SMEs.
The funding will lead to financing for Canadian small businesses in all sectors, including 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.
As well, the Government of Canada is providing $350 million to the BDC over three years to help drive venture capital investment in promising Canadian businesses and build an industry that is sustainable over the long term. The funding will allow the BDC to make additional direct investments of $260 million in Canadian businesses already in the BDC portfolio, as well as investments in new seed technology companies and later-stage technology companies. It will also allow the BDC to commit $90 million in investments over three years in private, independent Canadian venture capital funds. Venture capital fundraising refers to funds raised by venture capital firms in order to make investments in companies, whereas venture capital investment refers to the actual disbursements made by the venture capital firms.
Of this $350 million in funding, $125 million will be provided in 2009–2010 and 2010–2011 and $100 million will be provided in 2011–2012. This is in addition to the $75 million allocated in the Government of Canada's 2008 Budget, which is being used to support the creation of a privately run late-stage venture capital fund.
The BDC holds a loan portfolio of about $11 billion. Broken down by industry sector, this translates into 31.3 percent of its loans for the manufacturing sector, 21.5 percent for wholesale and retail trade, 12.4 percent for tourism, 6.9 percent for construction, 5.5 percent for transportation and storage, 5.5 percent for commercial properties, 4.6 percent for business services, and 12.3 percent for other industries.
The BDC has both a physical and a virtual pan-Canadian presence, serving over 28 000 Canadian entrepreneurs through 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.