moved:
That Bill C-91, an act to continue the Federal Business Development Bank under the name Business Development Bank of Canada, be referred forthwith to the Standing Committee on Industry.
Mr. Speaker, I am very pleased to begin debate on the motion to refer Bill C-91, the Business Development Bank of Canada Act, to committee before second reading.
I have every confidence that the members of the committee will bring their ideas and convictions to bear on this legislation, which establishes a new mandate for the Federal Business Development Bank under the name of the Business Development Bank of Canada.
The objective of Bill C-91 is to make government assistance in the area of commercial financing more efficient, effective, and relevant to the needs of small business.
The bill reaffirms the bank's mandate, which is to provide management, consulting and training services to Canadian entrepreneurs. Small business is faced with a variety of challenges, ranging from the tax burden and deregulation to skills improvement and technology acquisition. But the most pressing need certainly remains sufficient financing and adequate consulting services in commercial management.
Without financing and adequate consulting services, small business cannot set out to conquer either the national or the international market.
It is essential that small businesses have access to financing through debt financing, as well as equity financing at every stage of their development, but especially at the initial stage.
Let us look at the challenges small businesses face when seeking debt or equity financing, in terms of four weaknesses in the services currently provided by Canada's financial markets.
First is the risk factor, as several lending institutions are reluctant to grant loans to certain small businesses, even at rates that take into account the higher risk associated with such loans.
Second is the size of the loan. Whether the loan requested is for $1 million or $50,000, the cost to the bank or venture capital holders to prepare and assess business plans and financial proposals as well as to monitor the progress of the venture generally remain constant.
Third is knowledge. Often financial institutions are not familiar with the nature of industries emerging in the new economy. They do not have any tried and true method to assess the risk associated with granting a loan to new industries or investing in them.
Fourth is flexibility. Lenders are often reluctant to provide financing to potential winners on flexible terms. Traditional lenders usually require payments to spread over the term of the loan. This type of financing can prove overwhelming for businesses at the product development stage, as these businesses have not yet reached the point where they can generate enough sales revenue to offset their debt.
These four problems arise from the fact that our economy is changing rapidly. In meeting the challenges of a knowledge based market, small business has modernized much more rapidly than traditional financial institutions.
The small business community in Canada must move swiftly to innovate and to secure a share of emerging business opportu-
nities. The Canadian economy as a whole relies upon their abilities and entrepreneurship to sustain economic growth and to create jobs.
Here is an instance where government can make a difference to the marketplace. No one is suggesting that governments can replace private sector financial institutions in meeting the needs of the marketplace, but it is in situations such as those I have described where government can provide leadership. We need leadership to demonstrate that it is possible to address the needs of small business in the knowledge economy. One government institution has experience and skills to provide that leadership: the Federal Business Development Bank.
Members may be aware that the bank is approaching its $3.2 billion statutory ceiling for capital and liabilities. With no change to this ceiling, the bank would have to ration credit, turning away qualified entrepreneurs who otherwise are positioned to create jobs. Under this legislation the bank's capital and liability ceiling would be removed and the bank would be subject to a 10-year legislative review, which is similar to the requirements imposed on chartered banks under the Bank Act.
Hon. members will recall that in the 1995 budget the finance minister said that the bank and regional agencies will forge new strategic alliances to ensure co-ordinated delivery of business financing. The bank's new mandate will encourage stronger partnerships and increased cooperation with the regional agencies and other federal financial institutions such as the Export Development Corporation.
Mr. Speaker, I would like to address the issue of regional development by showing how important the Federal Business Development Bank is in Quebec. Its head office is located in Montreal, and nearly twenty per cent of its offices are in Quebec.
Over the course of 50 years, the FBDB has provided more than $4.5 billion in loans to small and medium size businesses in Quebec. At present, the loan portfolio for Quebec totals $1.1 billion, shared among 3,600 clients. These past five years, FBDB clients have created 8,500 new jobs and more than 9,000 entrepreneurs in Quebec have benefited from management consulting services provided by the bank.
A similarly impressive story can be told elsewhere in the country. The arrangements we are making with regional agencies, in co-operation with the provinces and territories, will avoid costly overlap and duplication.
Finally, I want the House to understand that Bill C-91 is a key element in our commitment to provide leadership in creating a business climate that promotes small business growth, innovation and job creation. I believe that the innovative approaches the Business Development Bank of Canada will take after this legislation comes into effect will show the chartered banks in Canada that there is a profitable future for them in the service of Canadian small businesses.