Evidence of meeting #35 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was companies.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Mairead Lavery  President and Chief Executive Officer, Export Development Canada
Todd Winterhalt  Senior Vice-President, Communications and Corporate Strategy, Export Development Canada
Carl Burlock  Executive Vice-President and Chief Business Officer, Export Development Canada
Michael Denham  President and Chief Executive Officer, Business Development Bank of Canada
Karen Kastner  Vice-President, Partnerships and Government Relations, Business Development Bank of Canada
Jérôme Nycz  Executive Vice-President, BDC Capital, Business Development Bank of Canada
Clerk of the Committee  Mr. David Gagnon

3 p.m.

Liberal

The Chair Liberal Wayne Easter

I will call the meeting to order.

Welcome to meeting number 35. It's the first panel of the House of Commons Standing Committee on Finance for today.

Pursuant to the order of reference from the House, we are meeting on the government's response to the COVID-19 pandemic. Today's meeting is taking place by video conference, and the proceedings will be made available via the House of Commons website.

We are fortunate to have with us today Export Development Canada. I'll introduce the guests: Ms. Lavery, president and chief executive officer; Mr. Burlock, executive vice-president and chief business officer; and Mr. Winterhalt, senior vice-president of communications and corporate strategy.

You have approximately 10 minutes.

Ms. Lavery, welcome. We'll turn to questions after your presentation.

The floor is yours.

3 p.m.

Mairead Lavery President and Chief Executive Officer, Export Development Canada

Committee Chair Easter, thank you for that welcome. Thank you for the opportunity to speak with you today.

Export Development Canada is uniquely placed to understand the struggles of so many Canadian businesses today. We're privileged to be positioned so that we can make a real difference helping Canada through this crisis.

I'd like to use the next few minutes to help you understand more about what EDC has been doing to help and to describe some of the tools we're employing to help thousands of Canadian companies survive this crisis, be ready for the recovery and return to growth when that happens.

EDC is Canada's export credit agency. In 2019, we served almost 17,000 customers, close to 90% of these being small and medium-sized Canadian companies. We've helped facilitate $102 billion in Canadian business in 147 countries around the world, thus contributing to about half a million Canadian jobs.

Our business, the business of EDC, operates on commercial terms. That is to say, we do not provide grants or subsidies. At the heart of our business is risk management. Our core product offering is a set of financial solutions and knowledge products that give Canadian exporters of all sizes, their supply chains and their bankers the confidence to move forward with international sales.

EDC can insure exporters, for example, against a foreign customer's failure to pay. Our bonding and loan guarantees are another form of risk management, giving financial institutions the confidence they need to furnish exporters with working capital or to secure the cash flow necessary to pursue international opportunities. Another way EDC helps is by direct financing of deals and international projects.

It's also worth noting that a large portion of our business is delivered in partnership with Canada's financial institutions and private insurers. In this regard, EDC is a public sector partner for private sector growth, promoting the success of thousands of Canadian exporters.

That's EDC's role under normal circumstances, but today is far from normal. EDC is proud to be part of the Government of Canada's response to the pandemic and its economic consequences. Our 1,700 employees—all working from home—are working hard to find new ways to serve Canadian companies. We have been helped in this by Parliament's decision to grant EDC an expanded mandate, which has freed EDC to leverage its full suite of tools in support of non-exporting companies.

Our immediate reaction to the current crisis has been to help our existing customers first, implementing payment deferrals for our financial programs, dispersing liquidity under previously negotiated credit facilities, and paying insurance claims in advance of waiting periods. We have also made our solutions more accessible and expanded our risk appetite, and we continue to be agile to the needs of Canadian companies.

Our knowledge products have also provided much-needed guidance during the crisis. Three COVID-19-related webinars attracted more than 10,000 registrants and over 60,000 visits to EDC's web page. We have also contributed to another 23 virtual events with industry associations and partners, sharing with them details of available programs, and we have produced a web-based triage tool to point Canadian companies to COVID-19 resources across government.

Beyond our core business line, EDC has also collaborated in the design and delivery of two new team Canada programs, the business credit availability program, or BCAP, and the Canada emergency business account, CEBA.

EDC currently offers two forms of BCAP financing guarantees. In simple terms, a guarantee is a promise made by EDC to a company's bank, co-op or credit union to repay all or a large portion of that institution's loan to a Canadian company. EDC's BCAP guarantee, launched in late March, is geared primarily to small and medium-sized companies, supporting loans to a maximum of $6.25 million, with a guarantee of 80%.

Our second guarantee is called the mid-market guarantee and financing program. It offers expanded support for medium-sized businesses, companies earning revenues of between $50 million and $300 million, and supports loans in the $16-million to $80-million range with a guarantee of 75%.

Our first BCAP guarantee was designed to get liquidity quickly to smaller companies with limited financing sources. While the initial uptake has been slower than anticipated, the pipeline is significant, and we anticipate greater demand through the summer and into the fall. EDC is now working with more than 120 commercial financial institutions across Canada to deliver this program.

Early feedback from customers and bankers shows a common theme. Small business owners today are reluctant to take on additional debt. This is primarily due to the uncertainty of the timing and nature of the recovery. They have, however, signalled more openness to the program when their future costs and customers are better understood.

With this feedback, we have changed the tenor of the guarantee from the initial two years to five years, to provide to Canadian companies a longer repayment horizon. This appears to have worked. Our banking partners are currently processing more than 400 loans with supporting EDC guarantees. We will continue, of course, to monitor the program and its parameters.

EDC also helps to deliver the Canada emergency business account. Our role in CEBA is a supporting one, working with Canadian financial institutions by providing funding, validation checks and administration. Since its launch, the enhanced and expanded program has delivered over $26 billion through 233 financial institutions, providing essential liquidity to more than 660,000 companies.

While the BCAP and CEBA programs remain our priority, our core business offerings continue to have an important impact for Canadian companies. Our accounts receivable credit insurance is helping companies remain competitive, giving them access to working capital without taking on additional debt. From March to May of this year, EDC signed 218 new policies, with another 215 policies pending, compared to 99 policies in the same period last year. This represents a fourfold increase, and an increase in just eight weeks of more than $1 billion dollars U.S. in risk exposure, in support of sales for more than 3,000 Canadian companies.

On the bonding side of our business, to date our solutions have helped support $3.8 billion in trade, a year-over-year increase of 81%. Further, in our financing program, we have issued 25 commitments and 17 offers valued at $3.8 billion U.S., directly linked to providing support for companies impacted by COVID-19.

What these numbers demonstrate is the counter-cyclical nature of EDC. When crisis threatens liquidity and elevates risk beyond the tolerance of other market players, EDC is able to lean in, mitigate risk and deliver that liquidity.

EDC is but a part of a large, coordinated team Canada effort to sustain our nation's economy during this crisis. Global Affairs Canada, the Department of Finance, as well as Innovation, Science and Economic Development and so many other agencies through government are working side by side with EDC, BDC and our financial institutions.

This effort has required agility and creativity from each and every member of the team. I'm proud of all these efforts, not just our own at EDC. I believe that the steps we're taking today will sustain Canadian companies for recovery and return to growth.

Of course, I look forward to the day when EDC's focus will return to its original mandate of helping Canadian companies go, grow and succeed internationally. Until then, we remain dedicated partners in helping serve all Canadian companies in this extraordinary time of need.

Thank you for the opportunity to lend our voice to this important conversation.

My team and I look forward to answering any questions you may have.

3:10 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Ms. Lavery.

We will now turn to a six-minute round. I'll give you the list of the order, folks. Mr. Cumming is first, followed by Mr. Fraser, Mr. Ste-Marie and Mr. Julian.

Mr. Cumming.

3:10 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

Good afternoon, and thank you for appearing today.

I agree that you have the potential to add some value to the business community.

I want to start with this relationship with the CEBA loans. We've been prodding for some time now about the changes that were proposed several weeks ago, and we have business after business after business asking us when those changes will be implemented. Can you shed some light on a date when businesses can expect those changes to be put in place?

3:10 p.m.

President and Chief Executive Officer, Export Development Canada

Mairead Lavery

Todd, would you like to respond?

3:10 p.m.

Todd Winterhalt Senior Vice-President, Communications and Corporate Strategy, Export Development Canada

Thanks, Mairead.

Thanks, Mr. Cumming.

We are now entering version three of the CEBA program, as you point out. The first version was launched in March. Subsequent amendments saw the 2.0, which expanded the eligibility in April. The third version, which I believe is the one you're referring to, will look at companies with a payroll of $20,000 or less from 2019, or companies that have non-deferrable eligible expenses from that same period, to allow them to qualify.

EDC, as the agent for the government on this program, is currently working with all our financial institution partners, about 230 of them at present, to make sure this rolls out in the very near term. Currently, we're working towards a delivery date of June 15.

3:10 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

What's the holdup? The concern I'm hearing is.... Granted, the criteria are different, but there could be an attestation around those criteria. No one understands why it has taken.... It will be over three weeks from the date of the original announcement.

As you've heard from many of these businesses, they need certainty. And they need the cash. Every week puts another person closer to bankruptcy.

3:10 p.m.

Senior Vice-President, Communications and Corporate Strategy, Export Development Canada

Todd Winterhalt

Thank you for the follow-up.

I think everyone is working very stringently and as quickly as possible to get us through to that solution.

Again, when you're working with north of 230 financial institutions, many of which have different platforms and different programs, the desire to get this out as quickly as possible in a considered and consolidated way so it's standardly delivered across the country has taken the time it has to this point. The team is confident we are moving toward being able to deliver on that through our financial institution partners, as I said, as early as the beginning of next week.

3:15 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

What's the total allocation the government has put forward for the CEBA loans, and what kind of headroom do you have left?

3:15 p.m.

Senior Vice-President, Communications and Corporate Strategy, Export Development Canada

Todd Winterhalt

We're currently at a $55-billion notional cap for the program. As of noon today, we have disbursed $26.2 billion. There's roughly $30 billion in headroom from the notional cap of the program, but certainly we would be open to considering negotiating an increase, should that prove necessary.

3:15 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

I want to move to the BCAP funding and the loan guarantees. Can you tell me how many loan guarantees have been granted since March?

3:15 p.m.

Liberal

The Chair Liberal Wayne Easter

Who's taking this one?

3:15 p.m.

President and Chief Executive Officer, Export Development Canada

Mairead Lavery

Mr. Burlock will take this question, Mr. Chair.

3:15 p.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Burlock, go ahead.

3:15 p.m.

Carl Burlock Executive Vice-President and Chief Business Officer, Export Development Canada

To date, we don't have a number we can report. We are getting periodic reporting. By the end of the week, we will get a report on actual guarantees signed.

In terms of the BCAP guarantee, we're working with 120 financial institutions that are implementing or have implemented the guarantee in their systems. Over 2,000 Canadian companies have registered their interest and eligibility with us. The institutions we're working with tell us they currently have about 400 applications going through the approval process.

As we start to get reporting on signed applications, we will be able to come back and confirm numbers, hopefully as soon as the end of this week.

3:15 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

Given the size and scope of business across Canada, 400 sounds like a pretty narrow number to me. Does that meet expectations, or are you surprised by the low uptake? Four hundred across Canada is very small.

3:15 p.m.

Executive Vice-President and Chief Business Officer, Export Development Canada

Carl Burlock

I think what we've seen.... We've done some sounding with the institutions. We've done some surveying with some of the companies that have registered with us. What we're seeing is that a number of companies that had shown interest in this BCAP solution went to some of the other government solutions that were available, such as the wage subsidy and the CEBA.

What we're hearing is that as companies were looking at what was happening in the economy, they were hesitant to take on debt right away, so now we have a program that is ready and stood up. It's in 120 financial institutions. As companies gain confidence and start looking at debt solutions, we believe that with an 80% guarantee behind the financial institutions we will see more flow. You know, with 400 in progress now, we're starting to see some of that flow.

Those facts would explain, perhaps, the decisions companies have made in terms of the types of programs to use initially.

3:15 p.m.

Liberal

The Chair Liberal Wayne Easter

You have time for a quick question, James.

3:15 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

From date of application to approval of guarantee, what kind of time frame is that? Have you added staff to deal with the additional requirements that EDC is now under?

3:15 p.m.

Executive Vice-President and Chief Business Officer, Export Development Canada

Carl Burlock

Yes, we do have the staff necessary to deal with what's coming through on these guarantees. In fact, part of what we've done is work very closely with the financial institutions to put in a streamlined approval process so that we could run these at scale. We're confident that we're going to be able to deliver for Canadian companies.

3:15 p.m.

Liberal

The Chair Liberal Wayne Easter

Okay. We'll turn to Mr. Fraser, who will be followed by Mr. Ste-Marie.

Sean.

3:15 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

Thank you so much, Mr. Chair.

Thank you to our guests for being with us.

I was actually going to go down a path very similar to that of my colleague Mr. Cumming on the timing issue. When I first looked at the numbers, I would have said the same thing. It does look like a fairly limited early uptake. From your testimony, though—and frankly, from the business owners I've spoken to in my own community—it's clear that there is a real frustration with the sense that debt seems to be one of the few options available in certain circumstances.

I think you eloquently outlined the fact that perhaps business owners were going to the CERB for personal income; for fixed expenses like utilities, CEBA seemed to provide the fix; the wage subsidy for wages, and so on. I think you're right to say that business owners are availing themselves of these other, potentially more generous measures first. There is a great difference between the time of application, I take it, and the time the program was opened, because business owners need to figure this out for themselves.

I'm curious, though. What information are you relying on when you say that you project this to pick up over the summer? Do you have numbers you're looking at that you anticipate to see in terms of what would look like success?

3:20 p.m.

President and Chief Executive Officer, Export Development Canada

Mairead Lavery

Mr. Easter, I can take that one.

We did participate in what's called the BCAP steering committee, which includes members of commercial banks, the heads of small business banks at most of the major financial institutions, together with the Credit Union Association, etc. We used that forum to help guide us: not only to give us the data on what's coming through the financial institutions—because that's really where the loan must originate—to give us some qualitative data on what they see coming through, but also to talk to us about what they're hearing from their customers.

When I talk to them and when I reach out to Canadian companies, what they're telling me is that job number one was to reduce their operating expenses in whatever way they possibly could. The first thing their bank told them was to reduce their operating expenses and really make sure they were managing their own expense profile. Job number two was sitting down with their bank and looking at what they could do with their bank specifically.

Many banks have issued waivers and consents or adjusted the payment profile of some loans, and all of this was done in the context of not understanding when the economy would open up. Back in March, many of the companies we talked to were planning a three-month assumption as to when they would see the economy opening up. As things got worse, they weren't really sure that was the assumption they should plan under.

Now what the banks are telling us is that the companies perhaps have line of sight to the economy opening up. They're starting to understand what they would need to do with their inventory. They may be recalling employees. They have a better understanding of their costs. Equally, they may be talking to their customers about when orders will be coming in. Starting to build those scenarios and understand their business is then allowing them to start building confidence in whether they can take on debt and how long they will take to repay that debt. It's truly been, I would say, different reactions at different times.

3:20 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

One of the things that keep coming up when I speak to business owners locally is that businesses are running out of money. We tend to call it liquidity in Ottawa and on this committee; we tend to call it money at home. There's a short-term and a medium-term crunch. I think in the long term people have faith that Canada is strong enough and we're going to get back on our feet. Everyone's optimistic that, five years from now, the economy will look roughly the way it would have looked had this not happened. The intervening period could come with a lot of pain if we don't have an effective policy response.

It sounds like some of the programs you're discussing today are great to solve the medium-term liquidity crunch, but while we're waiting for a $6.25-million loan or a wage subsidy, for that matter, do you have advice on what kinds of programs would support those businesses that are just trying to get that bridge between now and when these bigger allotments of funds to help with their liquidity or money come in?

3:20 p.m.

President and Chief Executive Officer, Export Development Canada

Mairead Lavery

In fact, we encourage companies to talk with their financial institution. That's their primary partner. All of these companies have a financial partner. We encourage them to reach out to their associations, which may be able to help them more quickly triage different programs that are available federally, provincially or municipally. There are many, many different programs available. Understanding all of that is some of the challenge that small companies face in knowing where to turn next. We encourage them to work with their existing financial institution. In some instances, that is EDC.

I mentioned credit insurance in my opening remarks. That's not a debt solution, but it is a solution that's recognized by the banks in helping with working capital needs, and it ensures that companies get paid for the products they are putting into the market. So there are other mechanisms. Honestly, at this time, working with your financial institution is the best way to understand what's available to you.