Mr. Speaker, I am very pleased to add my voice to those of my colleagues today in speaking on Bill C-99, an act to amend the Small Business Loans Act.
As parliamentarians we are frequently called upon by our constituents to assist in the creation of employment in order to boost the economies of our ridings and subsequently the economy of our country.
Often two very significant areas, increased employment and minimal debt, are found to be in contrast with one another. Bill C-99 will provide a vehicle whereby businesses have greater access to capital which of course in turn creates more employment resulting in a healthier economy.
In my riding of St. John's West, the community of Argentia was struck about a year ago by the closure of the U.S. naval base. The closure of that base caused the residents of the area a great deal of distress. However, they did not roll over and die at the thought of losing their jobs. Instead they decided to build on what had been left on the base by the Americans.
With the very generous assistance of this government, they are now slowly beginning to open a few new businesses. One of the greatest setbacks to many of those new businesses is the inability to obtain financing in order to keep the businesses going. They seem to be having difficulties obtaining the required financing because of the size of their businesses. This new act will be a major asset to them.
Bill C-99 is a vehicle those people will be able to use hopefully in the very near future so they can continue to keep their businesses operating. This loans act is a part of the government's overall strategy to provide a positive environment for the growth of small business, especially with regard to accessing financial capital.
The SBLA came into effect in 1961. Its purpose was to continue to increase the availability of loans for the establishment and improvement of small business enterprises. Since then more than 420,000 loans totalling over $15 billion have been made to businesses. For over 30 years the SBLA has been helping such businesses obtain capital for improvements and expansion. This government is committed to maintaining the basic nature of this successful program.
The goal of the program is to assist small businesses in obtaining fixed asset financing which is otherwise unobtainable because businesses lack sufficient collateral, they are too new, or they are not located in large growth areas such as central Canada. Of all SBLA loans, 35 per cent go to start-ups and a further 20 per cent go to businesses under three years old.
As I stated earlier, the SBLA is particularly significant in my riding of St. John's West because it does provide funding for the formation and stabilization of an economic foundation based on small enterprise. The benefits are widely recognized. It helps small businesses which are so important to the economy right across the country. They are the foundation for economic strength and stability. The future economy of our country has been built on small business and it will continue to depend on them.
The cod fishery off the coast of Newfoundland has suffered a destruction and now there is a moratorium. Alternate measures must be found to promote the economy of that area. The SBLA mandate provides for funding to be targeted toward small businesses which are lacking collateral, which are not new and which are not located in the large centralized or industrial areas of Canada.
Newfoundland is a province with an abundance of culture, an educated populace and an international accessibility through trade due to its coastal location. Throughout my riding of St. John's West, industry based resources are abundant. There are natural harbours, forestry, and watershed management, to name a few.
Since April 1993 activity under the program has increased dramatically. A potential program deficit of over $100 million annually based on the 1994-95 activity levels was threatening the sustainability of the SBLA. The proposed changes would decrease the costs and increase the efficiency of the SBLA. The resulting strengthening of the program will enable it to continue to provide benefits to small businesses.
The proposed legislation was developed after extensive consultation with lenders and borrowers alike. Recommendations of the Standing Committee on Industry and the small business working committee have also been addressed. The major recommendation of all those consulted was unanimous: the government should act quickly to put the SBLA program on a full cost recovery basis, a move initiated by a regulatory change effective April 1, 1995.
Bill C-99 moves to initiate full cost recovery. The regulatory amendments of April 1 include a new 1.25 per cent annual fee which is levied on each lender's average outstanding balance on loans made after March 31, 1995. The second amendment states that the maximum rate a lender can charge under the SBLA is increased by 1.25 per cent to the prime interest rate plus 3 per cent for floating rate loans, and to the residential mortgage rate plus 3 per cent for fixed rate loans. These changes have put the SBLA
program on a sustainable cost recovery basis for all loans made after March 31, 1995.
In addition to full cost recovery incentives, Bill C-99 provides for improvements relating to borrowers and low volume lenders. These changes are secondary to the major regulatory changes of April 1, 1995 which introduced a new annual fee on lenders and an increased maximum interest rate.
Bill C-99 will continue the process of renewal by putting in place additional changes to the SBLA. It will permit the release of security, including personal guarantees, taken by lenders for repayment of the loans. It will also permit the establishment of a claims processing fee by regulation. It will improve government guarantees for coverage for low volume lenders, to improve competition among lenders particularly in the smaller communities, such as those in my riding.
Bill C-99 will permit the SBLA program in the future to respond more quickly to changing economic and program circumstances by allowing the guarantee percentage to be adjusted by regulation. It will accelerate a previously legislated decrease in the percentage of an SBLA loan which is guaranteed by the government from 90 per cent to 85 per cent.
These changes are of particular importance to my riding of St. John's West because of the emphasis on smaller communities.
In addition, new resiliency clauses which will be implemented into the SBLA are tailored to help small business respond more quickly to changing economic circumstances.
In summary, the changes incorporated into Bill C-99 will ensure that the program will continue to be successful in assisting small businesses in obtaining the financing which they so badly need for expansion and the creation of jobs throughout the country.