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.
President and Chief Executive Officer, Business Development Bank of Canada
I haven't heard any stories of unacceptable rates of interest, but this committee has been a good reminder that this is something we'll need to look into carefully when this data starts to flow from them to us in the days ahead.
Conservative
James Cumming Conservative Edmonton Centre, AB
If you're providing 80% of the capital, I presume, then, whatever interest rate they set, you're achieving that level of interest.
President and Chief Executive Officer, Business Development Bank of Canada
Correct.
Conservative
President and Chief Executive Officer, Business Development Bank of Canada
Correct.
President and Chief Executive Officer, Business Development Bank of Canada
The banking term for this is pari passu.
Conservative
James Cumming Conservative Edmonton Centre, AB
It just strikes me that if we're really trying to help these small businesses—I'm really looking forward to seeing the data—that's a huge issue for me. Along with what Mr. Julian brought up, you're picking up 80% of the risk. You're riding on whatever premium they've associated with it, but you're willing to take four times more risk.
To me, there's a bit of a disconnect here with the funding model versus the banks adjudicating it. I think the data will be critical to see if we're actually helping these businesses that need the help.
President and Chief Executive Officer, Business Development Bank of Canada
Just as a reminder, we continue to have our direct lending business, which the BDC traditionally does. Again, we've authorized over $2 billion of loans since the year started. The working capital loan component of that is 14 times more than it was in the previous year. For direct lending, we're taking kind of four times the risk of existing banks. That direct lending solution will continue to exist and will continue to be there.
Again, it's a big number. We anticipate its staying big as companies continue to come to us when their needs can't get met elsewhere.
Conservative
James Cumming Conservative Edmonton Centre, AB
Yes, they can't get credit elsewhere, so there is a risk premium on that. Your lending practice on that is a premium over what the commercial rates are, as I used to understand it when we looked at BDC.
President and Chief Executive Officer, Business Development Bank of Canada
Exactly.
Conservative
James Cumming Conservative Edmonton Centre, AB
Okay.
In terms of the data, some of these loans go back to March and April. I know you said there's a month's lag, but it's been several months now. Why the delay on the data for us? Particularly, there should be plenty of data with your direct loans, performance on those loans, the size of loans and those sorts of things. Is that the kind of data the committee can get from you now, or in due course?
President and Chief Executive Officer, Business Development Bank of Canada
With BCAP it's the 15th day of every month. Some credit unions need the time to get the information pulled together. On the 15th day of every month they send their files to us, and that's where we get all the information. Then we fund the 80% that stay with us. Next week will be the first real data flow, because this will cover all authorizations during the month of May.
What we've learned, and what the banks have learned as well, is that having this information flow only once per month, especially now, just isn't frequent enough. We're putting in place biweekly reporting from the banks, which gives us more granularity and more detail. We're not waiting four weeks for each plug of information. That's something that we're putting in place as we speak. It means we don't have to wait until mid-July for the next installment of funding data.
Conservative
James Cumming Conservative Edmonton Centre, AB
I agree with you on diversity. You talked about diversity by client base, to a large extent. I would encourage you, with the oil and gas sector, that the quicker we can get something out there, the more likely we will have diversity of client base. I am deeply concerned that we'll see a massive consolidation and there will be no diversity of client. Thursday or Friday would be better than even Monday.
Thank you.
President and Chief Executive Officer, Business Development Bank of Canada
I hear you.
Liberal
The Chair Liberal Wayne Easter
Thank you, James, for that point.
Mr. McLeod, you shall wrap it up. The floor is yours.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you, Mr. Chair.
I have a couple of quick questions. I was very happy to hear some of the information that was provided, especially on the concern levels across the country going from 83% in March down to 63%. I expect that information is different depending on what region of the country you come from. I'm just wondering, in light of the extensive surveys that were done, what the concern levels are in the north.
President and Chief Executive Officer, Business Development Bank of Canada
That's a very good question. We don't have the data in front of us. We will look into what we have and share what we have. I just don't know whether each survey has enough data from the north for it to be statistically significant, but whatever we can share that's meaningful, I'll make sure we do that.
Liberal
Michael McLeod Liberal Northwest Territories, NT
It can't be extensive if you're leaving a good part of the country out. I'd appreciate it if you could provide me with that.
I'm also very curious to see if there are applications and participation from indigenous companies.
President and Chief Executive Officer, Business Development Bank of Canada
That's a very good question. We've been working hard for the past while through NACCA, an organization you know, to get more funding available for the aboriginal financial institutions. We have our own indigenous business unit, but we've just concluded that the best way for us to reach as many indigenous entrepreneurs as possible is through the network of AFIs, which are tailor-made to do this.
We've been working with NACCA on a deal called the indigenous growth fund, which would set up a permanent facility that could be used to provide capital to the AFIs on an ongoing basis. We continue to work on that with them behind the scenes, but as you know, NACCA was given a funding envelope over the past couple of weeks to, in turn, deploy through the AFIs in this emergency situation.
Our indigenous business unit is active. We're excited about this facility. We've been working on it to get more permanent capital set up to support these AFIs. Again, some of the more intense emergency requirements, I think, from what Shannin has told me, are being met through this government funding via NACCA to the AFIs. That was announced a couple of weeks ago.
Liberal
Michael McLeod Liberal Northwest Territories, NT
That's very exciting news.
I'll ask my last question, if I have time.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Are we seeing applications from the north in general and, more specifically, the Northwest Territories?
President and Chief Executive Officer, Business Development Bank of Canada
One of my good friends, Adeel Moghal, is our business centre manager. You may know him. He's up in Yellowknife. He is busy. We are getting applications from the Northwest Territories through Adeel. We have an office in Whitehorse as well.
Unless Karen can correct me, from what I've read, the levels of activity and demand we're having up there are in the same range, the same zone, as we're seeing nationwide.
Liberal
The Chair Liberal Wayne Easter
Thank you, Michael. We'll have to end it there.
I have a couple of questions.
We've had some concerns raised about personal guarantees with the BDC. How prominent is the personal guarantee side of the lending you do?