Evidence of meeting #118 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was contract.
A recording is available from Parliament.
Liberal
Ramez Ayoub Liberal Thérèse-De Blainville, QC
Okay.
Thank you for asking. I'm going to transfer my question to Yasmin.
Conservative
The Chair Conservative Tom Lukiwski
That's fine. We'll go to a second round, then, with seven-minute interventions, starting with Madam Ratansi.
Liberal
Yasmin Ratansi Liberal Don Valley East, ON
I probably won't need seven minutes. All I want to ask is, I'm curious as to your suggestion that you guarantee loans that the small or medium-sized enterprise gets from a bank. What happens if they default? Is the government on the hook?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Yes, and we do it this way. We can guarantee loans up to $5 million U.S., and we will put a guarantee of 75% to 80% on that loan. That leaves some skin in the game for the banks to do very good underwriting because they are responsible for 20% to 25% of that loan, and they have to reserve losses accordingly.
We make sure that our banks that are participating are constituent with our rules and regulations. We have a 17-point underwriting process that the banks have to go through to award our guarantee, and if they don't then we will mitigate our 75% guarantee accordingly.
I can tell you that our default rate is not very big.
Liberal
Yasmin Ratansi Liberal Don Valley East, ON
Do you have a percentage or a dollar value for your default rate?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
I don't.
Acting Director, State Trade Expansion Program, Office of International Trade, U.S. Small Business Administration
The default rate is usually dependent upon the type of program it is and the population that we target. It's a rate of about 8%.
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Yes. It's very low. It's not even in the double digits.
Conservative
The Chair Conservative Tom Lukiwski
I do not see any other questions coming from our committee. On behalf of our committee, thank you so very much, Mr. Cornelius and Mr. Parker.
The testimony you have given today, at least from my personal standpoint, has been illuminating. I think that our government—not just the current government but all governments, past, present, and future—could learn a lot from the approach you have been taking in your dealings with small businesses and your attempts to promote small business in the United States. It has been fascinating.
Should you have any additional information you wish to provide that you think would be of benefit to our committee, I would recommend that you contact our clerk directly. Obviously, we don't want to get into a cross-border dispute about which government approaches its dealings with small business better, but it has been helpful. I can guarantee you that.
I wish we could have had the video portion of this conference for the benefit of all our committee members, but your testimony has been well received. Once again, thank you so much.
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Thank you. It's been our pleasure.
Conservative
The Chair Conservative Tom Lukiwski
Colleagues, we'll suspend for just a couple of minutes and then go into committee business.
[Proceedings continue in camera]