Industry Committee on Oct. 19th, 2016

[Susan Rohac]

I would say that our book is growing in both cases. If you look at the10-year trend for our start-up manufacturing, we are increasing what we are doing for that cohort of start-up manufacturing; but if you look at existing manufacturers that have sales and revenues, we are also increasing our book there. If the question is about repeat business, we absolutely do repeat follow-on with companies that continue to grow or need additional financing.

[Jérôme Nycz]

One of the strategic vectors of BDC is to make our services available. We've opened a number of service centres. We have also developed a new way to do business with us. You can now go online and apply for a $50,000 loan. The ceiling is at $50,000. The hope is to move that up. So people can actually go online and access the financing that they need as a very small business. The average loan size is about $300,000. Of course, clients who have been with us for a long time have recurring needs, so we do have repeat business, but we're really trying to make our services available via a number of channels.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Do you partner your loans, or couple them together with credit unions? I know FCC does this with credit unions. Do you do that with credit unions, and do you also work with the big banks to put money from both sides together to help manufacturing businesses along?

[Jérôme Nycz]

In GTC, growth and transition capital, 90% of the transactions we do will be with another financial institution because we'll take the junior tranche. When there's a project, the financial institution or BDC will take the senior tranche, and we will take the junior tranche.

In terms of the rest of the lending, often when there is a project, there will be an operating line of credit involved. We'll work in collaboration with the bank to make sure that the company bringing on additional debt won't be in violation of the ratios. We work with other partners including Futurpreneur Canada and SRDC and we will co-lend with them to the entrepreneur.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Is the growth of your business in any particular sector? Is it in auto? Where are you seeing the growth? I guess the growth is coming from the banks, maybe not participating at the same level. For loans, is it in the small auto sector?

[Jérôme Nycz]

As I mentioned, we're seeing manufacturing as a growing sector for BDC. Twelve per cent is in manufacturing.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Is there any specific industry inside manufacturing?

[Jérôme Nycz]

We have the numbers for the auto sector. We've been quite active with tool and die, particularly for a recession. Metal is a big sector. We do it as a supplier to the auto sector or as a supplier to the aerospace sector.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I have one last quick question. If you didn't have to pay the dividend—I understand you pay the dividend to the Conservative government, the Liberal government, or what have you—what would you use that money towards? Is there anything else you could use the dividend for to really kick-start the economy?

[Jérôme Nycz]

It's a question of capital base. We have an economic capital formula through which we try to lend and then we calculate the risk. I think the lending books are increasing. Venture capital is also an area where there are big investments. We have areas like women in tech that we see as an underserved market that we would like to get more involved in. We would like to continue to support some of the graduates from accelerators, so there is a combination of venture capital. We're already investing heavily and increasing the advisory services to be able to support the reach to smaller loans.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to go to Mr. Arya.

You have five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Nycz, you mentioned 1,800 start-ups with $270 million for a period of 10 years. Is that correct?

[Jérôme Nycz]

That's correct.

[Chandra Arya, Liberal, Nepean, ON]

That's an average of about $150,000 per start-up. In 10 years, it means just about $27 million per year.

[Jérôme Nycz]

That's for manufacturing.

[Chandra Arya, Liberal, Nepean, ON]

Ms. Rohac, you mentioned last year that you lent $1 billion to manufacturing.

[Susan Rohac]

That's correct.

[Chandra Arya, Liberal, Nepean, ON]

Out of the loans of $1 billion, BDC informed the committee that $24 million went to start-ups last year.

[Jérôme Nycz]

That's for manufacturing start-ups.

[Chandra Arya, Liberal, Nepean, ON]

That is just 2.4% of the total lending.

[Jérôme Nycz]

A start-up is defined as something having been in business for less than two years.

[Chandra Arya, Liberal, Nepean, ON]

Basically within start-ups, we can still drill down to what is actually a start-up.

[Jérôme Nycz]

This is the lending side. As I mentioned earlier, we also do it via equity investment.

[Chandra Arya, Liberal, Nepean, ON]

We'll come to that. On the lending side, basically you're saying that 2.4% of your lending went to manufacturing start-ups last year.

[Jérôme Nycz]

That's correct.