Evidence of meeting #28 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was steel.
A recording is available from Parliament.
Vice-President, Growth and Transition Capital, Ontario and Atlantic, Business Development Bank of Canada (BDC)
That's correct. Again, but that's in dollar amounts, possibly not in numbers, because for smaller start-ups, we limit the amount to a smaller amount—
Liberal
Chandra Arya Liberal Nepean, ON
Let's take the numbers. Out of 1,800 start-ups you financed in the last 10 years, that is an average of 180 per year. Right now you have 6,500 manufacturing clients, right? When you look at that, the number is still quite small.
As we know, for us to have one big manufacturing company, we need to have hundreds and hundreds of small manufacturing companies. We have talked to other regional economic development agencies from FedDev here to Western Economic Diversification there to the Atlantic one. Almost all of them point towards you as the source of funding for manufacturing start-ups.
However, here you are. Your funding is very small. How can we promote advanced manufacturing if you're not willing to take risk alongside the entrepreneur?
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
I think we take the risks. When you have a manufacturing start-up, if it's advanced manufacturing, we're often.... We have the example of Diablo. We've been backing the company for 13 years.
Liberal
Chandra Arya Liberal Nepean, ON
Individual cases are fine, Mr. Nycz, especially...even the average size of the loan. For a manufacturing start-up, the cost of equipment is quite substantial. It's $150,000 on average, or $200,000 on average. Where does it lead? I don't know how many manufacturing companies can buy equipment with that amount.
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
I'll come back to the point we made before. That's the first loan: $150,000. Once it comes to repeat business, it goes into the $6-billion portfolio. As I said before, it's $150,000, and then we launch $500,000 to provide more resources to start.
Liberal
Chandra Arya Liberal Nepean, ON
Ms. Rohac, you mentioned that 40% of the lending you do goes to working capital.
Vice-President, Growth and Transition Capital, Ontario and Atlantic, Business Development Bank of Canada (BDC)
That's correct.
Liberal
Chandra Arya Liberal Nepean, ON
Basically, that was, I thought, the major portfolio for a chartered bank with the working capital loans.
Vice-President, Growth and Transition Capital, Ontario and Atlantic, Business Development Bank of Canada (BDC)
No. I think what we're referring to when we say “working capital” is very different from a line of credit. We do not provide lines of credit.
Vice-President, Growth and Transition Capital, Ontario and Atlantic, Business Development Bank of Canada (BDC)
When we say working capital, we mean additional working capital that can be used for intangible needs. That's very critical for start-ups.
For example, when a company—
Vice-President, Growth and Transition Capital, Ontario and Atlantic, Business Development Bank of Canada (BDC)
Yes.
October 19th, 2016 / 4:15 p.m.
Liberal
Chandra Arya Liberal Nepean, ON
For a manufacturing company, as you know, other than the capital investment in running the business, the bulk will go to raw materials. Usually the second-biggest amount is for salaries. What are the other things you finance, besides raw materials?
Vice-President, Growth and Transition Capital, Ontario and Atlantic, Business Development Bank of Canada (BDC)
A chartered bank's line of credit is usually limited to 50% of the raw materials and 75% of the accounts receivable. Our working capital will go to supplement that. As well, it will go to help with some of the start-up costs of hiring people, of marketing development, and of leasehold improvements—
Liberal
Chandra Arya Liberal Nepean, ON
Under the venture capital action plan, in the other committee you guys mentioned that 126 companies have received $418 million.
Out of $418 million, how much was our portion of the $350 million or $400 million we gave you? Even in your last strategy plan, you said that, as of March 31, you funded 62 companies with $95 million. These are all top numbers that tend to be very attractive, but when we drill down, how much of the $400 million that the government gave you is part of that?
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
Right now there is $560 million that was committed.
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
We're at one-third of that. The program is $1.3 billion, of which $900 million is from the private sector, and the balance is from government, including the provincial government.
When we talk about a fund of funds, there is investing in a funder's commitment to the fund, and then that fund makes a commitment to the underlying portfolio.
Liberal
Chandra Arya Liberal Nepean, ON
What you are referring to, if I'm not wrong, is that from $350 million, you realistically do $1.3 billion. Out of that $1.3 billion, you invested about $550 million into 17 Canadian funds.
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
Yes.
Executive Vice-President, BDC Capital, Business Development Bank of Canada (BDC)
That's good.
