Industry Committee on Oct. 19th, 2016

[Brian Masse, NDP, Windsor West, ON]

Yes, and you've paid a dividend back to the annual coffers of....

[Jérôme Nycz]

That's correct.

[Brian Masse, NDP, Windsor West, ON]

I guess the overall conditions and the model have been working, but you seemed to alter your small-business plan a little, which I'll get into a bit later.

Just to complete this element here, it's interesting, because you've occupied a space that the private sector has apparently abandoned, probably because it doesn't get enough profit. That's my suspicion. Again, that is an interesting situation, as there are those who argue that the private sector can do it better and always does it better.

I do want to segue a bit towards the small business. I have to say that you're presenting more of a small-business case, at least to the public right now, but your commercials are already out on TV. What's the difference?

[The Chair, Liberal, Dan Ruimy]

Mr. Masse, you're out of time.

[Brian Masse, NDP, Windsor West, ON]

That's okay. We'll have plenty of time to discuss this later.

[The Chair, Liberal, Dan Ruimy]

Sorry.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

[The Chair, Liberal, Dan Ruimy]

All right. We're going to move to you, Mr. Sheehan. You have five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

Picking up from my colleague, I'm going to ask a question on the riding profile, particularly for his riding. Under finance, growth, and transition capital, you note that of the top three loans, number one is land and buildings, and the third is equipment. Land and buildings are at about 64.3% and equipment is at 11.1%.

Why isn't there more emphasis on equipment? I ask that because it's important for manufacturing. We've heard again and again about investments and equipment. I'm from Sault Ste. Marie, where we have a steel industry. The steel industry, including Essar itself, Tenaris, and the small and medium-sized enterprises associated with them are always looking for equipment. We call that advanced manufacturing. Could you please explain why?

[Susan Rohac]

I'll answer that.

That's in dollar numbers, is it?

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

It's on a percentage basis.

[A voice]

They're in dollars.

[Susan Rohac]

But that's in dollars, and not number of deals.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

That's correct. It's dollars.

[Susan Rohac]

The simple answer is that a building costs a lot more than a piece of equipment does, so when you look at the actual number of deals as opposed to a dollar amount, we're actually doing more in equipment and in working capital for manufacturers than we are for buildings.

The second point is that this particular sheet is just for that riding. It might not represent the entire country.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

That was my question. I want to clarify that.

[Susan Rohac]

If any of you would like to have your riding statistics, we can get you those for your individual riding.

I have the numbers here. If we look at the year to date, 40% of our deals to manufacturers have been for working capital purposes, 25% have been for equipment, and 11% have been for realty. That's in numbers of deals, but if you look at dollars, absolutely, the buildings cost significantly more, so it just skews the stats a little bit. That doesn't add up to 100%. The other 24% is for ICT, refinancing, or change-of-ownership types of programs that wouldn't fit into one of those buckets.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

I'll pick up on that. How can the government support investments by the steel sector and help the industry take advantage of the opportunities brought forth by new technological developments?

[Jérôme Nycz]

I'll ask Bill to speak to this. We looked at the ICT, and we tried very hard in the past four or five years to increase awareness of ICT. We had a three-pronged program: raising awareness, consideration, and adoption. It was a combination of the work that we're able to finance along with the advisory services. I'll ask Bill to add a bit on the advisory services. How do you increase awareness? How do you get the entrepreneur to come to the conclusion that they have an issue? What are the solutions going forward?

Bill.

[William Ciprick]

I'll give you a couple of broad statistics. I know you're asking specifically about steel. In the past three years, from a non-financial advisory standpoint specific to manufacturing—and remember that we operate as an advisory service—it's an investment that the bank makes for each mandate that we do. We've done almost 2,000 different mandates with focuses being on operational efficiency, sales and marketing, and, probably most popular, strategy and management support. Whereas the entrepreneur companies are growing, they often aren't very clear regarding the path they need to follow in order to obtain the goals they want. As I said, there have been almost 2,000 mandates in that regard, and from the bank's standpoint, we've made an investment of almost $40 million.

I'll be honest. We don't necessarily look specifically by sector. We manage across pretty much every one you can imagine. I'm sure if I were to dig into the stats, we'd see many mandates, because we do cover coast to coast, and we do cover all sectors. We get asked, and it's usually the same request. We're sector-agnostic in that regard.

[Jérôme Nycz]

As I said in my opening remarks, we have a diagnostic tool now and we're launching it this week, BDC Small Business Week. That will enable entrepreneurs to ask, “How am I productive compared to my peers?” We worked with Statistics Canada and it took us three years to develop this tool. Once you're aware of how you compare to your peers, then you can contemplate making a decision—and this is where the advisory services can come in and do a bit of strategy work and say, “You need to invest in digital technology versus analog machinery”, and so forth. Awareness is number one, and then you sit down with the advisory services and look at a plan forward. Often that plan comes with investment going forward.

So, we increase their awareness and make sure that the company has the resources to be able to take the step forward.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to Mr. Lobb. You have five minutes.

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

I apologize for not being here for the beginning of your comments. You mentioned your existing business is growing, or your business of lending is growing this year. Have these businesses been in existence for many years, and are now coming to you for the first time, or are these businesses that have been in existence for quite a while and they have a relationship and they're growing the relationship?

[Susan Rohac]

I would say it's a bit of both. Are you talking about start-up manufacturers, then, or companies that we haven't dealt with?

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

They are both existing, so, they've been in business for many years. One block would have had no relationship with you in the past, and the other would have had some sort of a relationship with you.