moved:
Motion No. 3
That Bill C-99, in Clause 4, be amended by replacing line 6, on page 4, with the following:
"ty taken".
Mr. Speaker, we welcome this opportunity to discuss the third and last group which deals with the above amendment and for which some background may be useful.
Clause 4(1) of the bill reads as follows:
4(1) Subsection 7(1) of the Act is amended by adding the following after paragraph (e): e .1) prescribing the terms and conditions on which a lender may release any security, including a personal guarantee, taken for the repayment of a business improvement loan;
That is a sore point with us, and that is what we want to change through this amendment. In fact, the proposed amendment is entirely in line with the message we got during the last federal election campaign, when the Liberal Party of Canada had already said in its famous red book that if it were elected, it would ensure that no personal guarantees were required for loans under the Small Business Loans Act.
However, whether it was divine or some other kind of intervention, whether it was a lack of political will or loss of memory-Alzheimer's not being restricted to humans, even institutions will forget, and I think this is very disturbing in the present case-I think the government forgot a promise that must have been welcomed by the business community, especially small business entrepreneurs who are directly affected by the Small Business Loans Act. The promise was that from now on, the Small Business Loans Act would no longer require personal guarantees.
The Liberals forgot, and it is our job to remind them of one of the few promises in the red book that made sense. Asking the borrower for a personal guarantee under the Small Business Loans Act is, like the hon. member for Champlain said earlier, like having a belt-the government guarantee-and asking for suspenders because you are afraid the belt will break and the loan will otherwise be a write-off.
With the 90 per cent guarantee the lender used to have and which will now be 85 per cent, the lender could still expect to avoid severe losses after agreeing to lend money to a small business. However, if the lender can also ask for a personal guarantee, in most cases a home, a bank account, a car or part of the assets of the entrepreur and business owner, we are seeing a kind of security that may be unnecessary and provides what may be excessive guarantees for the lender.
As the hon. member for Durham mentioned earlier, there is always an element of risk involved, and the lender should be prepared to share the risk. In this area, 15 per cent may be riskier than 10 per cent, especially in the case of new or high tech businesses, as we pointed out, but to ask for personal guarantees as well is something to which we object, and we hope the government considers and endorses this amendment.
Another direct advantage is that, if personal guarantees such as a house were not required as security under the Small Business Loans Act, because the government provides a guarantee to the bankers-these assets in the possession of the borrower, in the possession of the manager of the small business, particularly in the case of high tech or exporting companies, which make lenders feel insecure-if those assets were freed up and not used as security, they could be presented to lenders to facilitate obtaining a loan, as security in any negotiations or transactions other than those under the SBLA, the Small Business Loans Act.
The borrower could therefore use these personal assets not required as security to plan future business development, particularly in the case of small high tech or export businesses, where lenders might justifiably feel insecure about the operation or the very nature of the business' activities. Often lenders are not familiar with high tech and export businesses, whose accounts receivable are outside the country and not always easily checked.
The Export Development Corporation is involved as well, but here again with additional administrative costs and delays.
Thus, by eliminating the personal guarantees now required under the SBLA, they could be placed in another context for use by the borrower as security with a lender. This is what we hope the government will accept, and that is why we have presented this amendment.