Mr. Speaker, this bill replaces the Small Business Loans Act in order to reform the Small Business Loans Program. The purpose of the program is to increase the availability of financing for businesses with gross annual revenues of up to $5 million.
This bill is aimed at increasing the availability of financing for the establishment, expansion, modernization and improvement of these businesses by allocating, between the minister and lenders, portions of eligible losses incurred by lenders in relation to loans of up to $250,000 to such businesses for those purposes.
The government will continue to be liable for 85% of the losses on loans not repaid, with the rest being the lender's responsibility. The financial conditions regarding the loans remain the same, that is 3% above the prime rate for variable rate loans, and 3% above the mortgage rate for fixed rate loans.
The bill provides for the continuous operation of the program subject to a comprehensive program review every five years. It limits the minister's aggregate contingent liability to $1.5 billion for each five-year period. As for the department, it does not have to compensate lenders for losses incurred when its total contingent liability for the loans exceeds $1.5 billion in a five-year period.
The bill also authorizes the minister to conduct compliance audits and examinations. A whole new series of measures are included in the legislation to provide for the audit and examination of various reports to verify that this act and the regulations are being complied with in respect of a loan, including that the lender has exercised due diligence, as provided in the regulations, in the approval and administration of the loan.
The bill before the House authorizes the establishment and operation of pilot projects to determine whether the program should be extended to include loans to the voluntary sector and capital leases. The minister's maximum aggregate contingent liability in respect of each project is provided by an appropriation act or another Act of Parliament. The pilot projects have a maximum duration of five years.
Also, the bill reforms the offence and punishment provisions. Anyone found guilty of an indictable offence is liable to a fine not exceeding $500,000 or to imprisonment for a term not exceeding five years, or to both. However, anyone found guilty of an offence punishable on summary conviction is liable to a fine not exceeding $50,000, where it was only $1,000 previously, or to imprisonment for a term not exceeding six months, or to both.
The bill also provides for a comprehensive review of the program every five years, in consultation with Parliament.
After this brief overview, I would like to address the crucial issues underlying Bill C-53. The Small Business Loans Act is crucial to small and medium size businesses. Since these businesses are the engine of our economy, Bill C-53 deals not only with issues directly related to small business, but also indirectly with the issues of job creation and productivity.
We all know how important small businesses are to our economy. A few figures tell all there is to know: in 1995, when the most recent recession hit us, small businesses with fewer than 100 employees accounted for 99% of the 935,000 businesses in operation in Canada. These small businesses employed 42% of wage earners in the private sector and paid 38% of all wages and salaries.
However, small and medium size businesses are fragile. As a matter of fact, nearly 15% of them shut down during their first year of operation, and more than half of the businesses that existed in 1989 were no longer in operation six years later.
Fortunately, the annual rate of new business start-ups exceeds that of closures, allowing the renewal of this pool of employers and jobs. In many cases, this high rate of closure of small and medium size businesses is caused by insufficient credit. That is why governments, particularly the Quebec government, are forced to develop complementary programs.
Therefore, the Bloc Quebecois supports Bill C-53. However, we are still disappointed by this review of the Small Business Loans Act.
We had the right to expect certain things in this review of the SBLA. For example, we had the right to expect provisions that would give small and medium size businesses in Quebec and Canada increased access to credit.
According to a survey conducted by the Canadian Federation of Independent Business, 29% of small business owners say credit availability is one of their main concerns. Moreover, according to a survey of small and medium size businesses conducted by members of the Bloc Quebecois in their ridings, 90% of them said it was very difficult or difficult to obtain credit at a reasonable cost. Only 10% said it was easy.
We also had the right to expect a program that increases credit availability for those small and medium size businesses which would not otherwise have access to financing.
In the same survey by Bloc Quebecois members, just over 50% of businesses feel that the small business loans program ought not to guarantee loans except those to small and medium-sized businesses which would not otherwise have access to credit.
Finally, we would have been justified in expecting this new legislation to give entrepreneurs the means of financing their working capital so as to ensure the growth and development of their businesses. In fact, 80% of small and medium-sized businesses responding to our survey feel that the small business loans program should also cover financing for working capital.
And what is there on this in Bill C-53? Unfortunately, nothing that will make any further improvement to the situation of small and medium-sized businesses.
Bill C-53 does not improve small and medium-sized businesses' access to credit. There is merely a change in the way the total government commitment is calculated, but in actual fact no increase. The main reason behind this revision is not the needs of small and medium-sized businesses, but the accounting concerns of the government, unfortunately.
Bill C-53 does not make it possible to provide funding to businesses which would not otherwise have access to funding. By focussing its reform on accounting concerns, the government has not included in its assessment the macroeconomic effects of the loan guarantee program. It is in fact taking a step backwards in terms of the Small Business Loans Act by strengthening the requirement for diligence by the banks in according loans under this program. In fact, small and medium size businesses that cannot find financing with the banks should not expect things to be better under this program.
There is also no mention of financing of working capital for small and medium size businesses. There is no provision on this in the bill, not even in what has been called the pilot projects. However, small and medium size businesses have clearly expressed their needs in this area. For these reasons, the Bloc Quebecois has proposed amendments to make a law that truly serves small and medium size businesses.
We want the good news for these businesses to be more than just the fact that the loans program is extended, we want it to be the fact that it is improved too. This is the aim of the Bloc Quebecois amendments, which attempt to respond to the major shortcomings we have noted.
More is needed than simply tightening up the old legislation. The Bloc Quebecois considers that the proposed changes in accounting require an examination of the need for economic development. These vital amendments are being proposed for reasons of economic development and job creation.
We are proposing an initial amendment to clearly establish the aim of the bill. Insufficient funding, in a way, is worse than none at all, because the business cannot develop as it might, and, more importantly, as it should. This amendment therefore is intended to clearly define the program so it may providing financing to SMBs.
We have other amendments as well, and I will leave it to my colleagues to tell the House about them.