Debates of Nov. 23rd, 1998

Canada Small Business Financing Act

[Lee Morrison, Reform, Cypress Hills—Grasslands, SK]

The hon. member for Broadview—Greenwood says I am stalling. He said earlier that it was a waste of time to debate these amendments because the decisions have already been made. Having said that, I guess I should give him what he wants and not continue to debate this ad infinitum or ad nauseam. I will defer to the hon. member for Broadview—Greenwood and we will get on to the next group of amendments.

We will endeavour to show these folks opposite that some useful improvements could be made to their legislation, that there are improvements that could even cause my colleagues and I to support their legislation but we certainly could never dream of supporting it in its present condition.

[Walt Lastewka, Liberal, Parliamentary Secretary to Minister of Industry]

Madam Speaker, the problem with these motions is that Reform Party members voted against this bill in the House and voted against the bill and the amendments in committee. They have tried every deceptive way to stop this bill—

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, I rise on a point of order. I do not believe the rules of the House permit attributing to members motives of deception. I would ask you to require the member to retract what he just said.

[The Acting Speaker (Ms. Thibeault)]

I am sure all members will be careful in debating these amendments.

[Walt Lastewka, Liberal, St. Catharines, ON]

Madam Speaker, the Reform Party has tried to obstruct every part of this bill. I will first talk about Motion No. 6. It is very clear to me that the opposition is trying to completely water down the importance of this bill because it does not believe in small business and it is going to pay for that.

It is very important that small business be able to obtain a loan that is of higher risk than conventional loans. That is the objective of this bill. This motion would take away from that. Borrowers do pay a higher interest when they obtain these loans.

Motion No. 11 was debated in committee. It was agreed on by all parties. The industry committee is made up of all parties.

After much discussion with the stakeholders, including financial institutions, it was agreed that instead of 45 days it should be reduced to 21 days in order that a proper audit could be done, an audit that the auditor general experienced. We are using the auditor general's experience as we put information into this bill.

Remember, there are some 1,500 lenders and 13,000 points of service that have to comply with this request. It would be easier to have 21 days notice. On the other hand, it was also agreed that the minister would respond within 21 days to make the audit procedure in a proper manner.

Again I emphasize the importance of the small businesses financing bill. These motions water it down and should not be approved. I will continue to defend and make sure we have a Canada small businesses financing act that is valuable for small business from coast to coast. Therefore, I ask that members not vote for these two amendments.

[Val Meredith, Reform, South Surrey—White Rock—Langley, BC]

Madam Speaker, speaking on Group No. 3 motions before the House for debate, I challenge the previous member who said that Reformers are not in favour of small business. That is a crock.

Reformers very much support small business. What we do not support is the Canadian taxpayer funding businesses that may or may not survive and being responsible for the debt incurred.

Motion No. 6 is simply asking for an amendment that lowers the percentage of the government's liability for defaulted loans.

What we are talking about when we are talking about the government's liability is that the government does not have any money itself. It is taxpayer money.

What we are talking about is making an amendment that lowers the percentage of taxpayer liability for a defaulted loan. What is meant is that the person who is lending money to a small business that is more risky, that has a higher chance of defaulting on that loan, has to assume a higher risk. That is a very logical move to make.

What we are asking for is instead of the taxpayer assuming 85% of the risk in covering a default that they assume only 50%. I suggest that if the lender is still responsible for 50% of a defaulted loan, they will be a little more judicious in making sure that some very extreme risk cases are not funded.

[An hon. member]

They just won't make the loan.

[Val Meredith, Reform, South Surrey—White Rock—Langley, BC]

The member opposite says that maybe they won't make the loan. If the taxpayer is paying for the default of that loan, maybe the person should not be getting a loan. Maybe small businesses that are too risky should either put up more collateral or be a little more responsible rather than putting the responsibility on to the Canadian taxpayer.

I do not know about the members opposite, whether they ever communicate with their taxpayers, the people on the street who vote for them. When I get letters from my constituents, from taxpayers, they are concerned that the priorities of government are skewed. That government is responsible for providing essential services to the people of Canada and by not putting its priority on funding special interests or businesses is a mistake.

We feel it is prudent for the government to be protecting the taxpayer by making sure that when it is covering loans or putting its neck out and supporting loans that may be defaulted there is a balance in that of what the taxpayer is responsible for and what the lender is responsible for.

The purpose of Motion No. 6 is to make sure that balance is kept, that the taxpayers are responsible for one half and that the lender is responsible for the other half. What we are talking about are high risk loans that are being loaned because traditional sources and vehicles of loans for small businesses are not available to them. We are talking about a very small percentage of small businesses that may or may not succeed.

Members across seem to feel it is the responsibility of the government and the taxpayers to make sure that everybody who wants to start a business is given money to do so. It does not work that way.

Not every child in this country has an education or has the available means for a post-graduate education. They have to earn that right. They have to go to school and get the marks. They have to show they are diligent in the requirements to go on to university or college. The same should apply to the small business community, to somebody who decides that he or she wants to be in business. There has to be an onus put on that individual to make sure that business has a market and is in a community that can support it.

When an individual asks for financing, either from a bank or a government protected bank, there should be minimum risk. The banks must know the business has the ability to survive.

Motion No. 6 states the lender would assume 50% of that liability and the taxpayer would assume 50% of that liability. It would put the onus on the small business to show the lender and the Canadian taxpayer that it has done everything possible to make sure the business is viable and will go ahead. I suggest the number of loans written off would probably decrease.

My understanding now is the default rate is 10 times higher on these loans guaranteed by the federal government. I suggest that 10 times higher is perhaps too much to put on the Canadian taxpayer. I think they would feel the priority of their money should be in things like health care and education, the things they feel are far more important than perhaps taking 85% on the default of a loan.

I think Motion No. 6 is reasonable and logical. I also believe it would have the support of the people who pay the bill when these loans are defaulted, Canadian taxpayers.

Motion No. 11 is self-explanatory when it states that the auditor should not have to give a 21 day notice. They should be able to do what Revenue Canada does, phone up and say they will be there in three days to go through the books. There is no reason why the same degree of short notice that Revenue Canada can avail on should not be applied to this bill as well. I hope everybody will support these motions.

[The Acting Speaker (Ms. Thibeault)]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Vancouver East, Poverty; the hon. member for Waterloo—Wellington, Immigration; the hon. member for Winnipeg North Centre, Health.

[Gary Lunn, Reform, Saanich—Gulf Islands, BC]

Madam Speaker, I would like to first of all set the record straight. I am very pleased to support Motion No. 6. It would in effect change the bill to ensure that the borrower would assume at least half the responsibility and the government or the lender the other half, which is sponsored by taxpayers. Right now it would be 85% to the lender and 15% to the borrowing. I suggest it should be an equal partnership if they have enough confidence in their own business plan when they come forward for that loan.

More important, I want to set the record straight with respect to Reform's commitment to small business. I think it is very important. We believe very strongly in small businesses and are a great defender of them. I think we would just go about it differently. We think it is very important that we provide small businesses immediate tax relief. We also want to make sure they have decreased payroll taxes as opposed to putting money into this small business loans program.

The initial legislation, as everyone well knows, would provide $1.5 billion to small business loans programs. I think there are other ways we could do it than again through government subsidies for businesses. I think there are other ways that would be more beneficial.

We could look at capital gains tax. Now the tax rate is 75%; perhaps lowering it to half that. There are other ways to attract investors, other ways for people to get money, without taking it out of the pockets of taxpayers.

This motion would decrease the liability of the lender or the bank down to 50% from 85%. That would make sure the person who is wanting to borrow this money would have enough confidence that they would assume liability for half. That is not a lot to ask when we are using taxpayer dollars.

Again, if the borrower is liable for only 15% of this loan, what kind of confidence do they have in their business plan to ensure that it will be viable and not be a burden on the taxpayers?

Small business is the economic engine which drives this country. We in the Reform Party believe that. We recognize that. In fact, 75% of our caucus are small business people. We believe very strong in that. But government subsidies are not the answer.

We have the government again giving out $1.5 billion for small business loans programs. But with incredibly high payroll taxes and incredibly high bureaucracy it is just not working. It is our job as legislators to create an economic environment where small businesses can succeed. Right now they are struggling through extremely high levels of bureaucracy, red tape, forms, paperwork and the list goes on and on. They are buried in it from all levels of government.

Again I would argue there are many other ways that we can help small business. Make no mistake, that is one of the principle objectives of the Reform Party of Canada. We believe strongly in ensuring that small business has an economic climate where it can succeed.

Unfortunately this small business program is just throwing money at it and hoping the problem will fix itself. I would argue that is not going to happen. I can never imagine in the private sector anywhere where anybody could borrow money and only be at a liability rate of 15%. They would be laughed at. The banks would absolutely laugh at them anywhere else in the private sector.

So assuming 50% liability, if a person has the confidence in his or her business plan, I would think what would be quite reasonable and would have been an excellent amendment to this legislation, equal partnership between the lender and the borrower in the liability of that loan.

I encourage all members of the House to support this Reform amendment to create an equal partnership. We need, more important, to move away from government subsidies and take away that liability on the taxpayer. These are high risk loans. The default rate is very high with taxpayer money. It is not our money. It is not our money to do as we please with. The people who send us here hope we will use tax dollars wisely. It is not that we would not invest the money in small businesses. We would do it different to ensure that they were getting the help they need.

[Dale Johnston, Reform, Wetaskiwin, AB]

Madam Speaker, I want to speak in general terms about the whole aspect of the government's loaning money to small businesses.

I guess the reason the government first got into the business of loaning money to small businesses was that the banks simply refused to take on some of these ventures that had a little more risk involved in them.

We have to look deep down into the purpose of government's loaning money to small businesses. I think everyone will agree it is to encourage entrepreneurship, to put people to work in order to allow these people to flourish and perhaps even expand their businesses.

Some of the speakers today came up with instances where businesses had started in somebody's garage and then grown to nationwide and international businesses. That is exactly what I think is the optimum goal of getting into a situation where the government loans businesses money.

Everything we do here with regard to the Small Business Loans ACT should be pointed in that direction but I had a constituent who came to me the other day with an absolute horror story about borrowing money from the government. She is 58. She was involved in a government sponsored loans act. The Alberta Women's Enterprize Initiative Association loans money under western economic diversification. I realize that is not exactly what we are debating but it is along those same principles.

This lady went to the organization and asked to borrow some money. She needed approximately $60,000. It wrote her a contract for $60,000 at the rate of 17%. This was in 1996 at a time when if you had any collateral at all you could borrow money for 6% or 7%. Here it was saddling this person with a 17% interest rate. If that is helping small businesses it seems like a rather underhanded way to do it.

On top of that the lender chose not to release all the funds. No doubt it was written into the contract. The lender kept about half the funds the person borrowed and on which she was paying interest. Half the funds were kept on deposit in the financial institution from which she had borrowed the money.

If that is helping small business that is a little like throwing a drowning person a cement life saver. If going into a new business were not risky enough, withhold about half the capital borrowed and charge 17%.

By the time the lady came to see me it was too late for me to intervene. She had declared bankruptcy. They had foreclosed on absolutely everything she had. She had signed over her condominium, her life savings, her pension plan, everything she had as collateral toward this debt in order to get into business and be self-sufficient. Now she is basically a charity case. She has had to move in with her daughter and she is in a terrible predicament.

I felt very badly when this lady came to me and asked what I could do to help her.

The short answer was that I could do very little if anything to help. Likely I could do nothing. At the time she came to see me this case was before the courts. She is being sued for outstanding debt.

All I could do was sympathize with her and say that if I had the opportunity I would bring her case before parliament. She agreed that there was nothing I could do to intervene. She wondered if there was something that parliament could do to prevent this from happening to other unsuspecting people. She admits quite freely that she was not cautious enough. She should have read all the fine print. She definitely made some mistakes.

I think when we are talking about small business loan programs we should bear in mind what our ultimate goal is. If our goal is to help small businesses that had the other more established conventional lending institutions turn their backs on them, then we must make sure we are actually doing that and not simply putting a mill stone around these peoples' necks that they simply cannot carry.

We have to make sure taxpayers money is secured and that there is reasonable expectation for the business to flourish. I think the people who are borrowing money to invest in a business must prove they have expertise to carry on this business and that they have the necessary training, some rudimentary understanding of how business works, rudimentary accounting abilities and also have some good independent counsel available to them.

I would like to leave today thinking that the House and the committee considering this bill will bear in mind the burden placed on them to ensure this legislation is fair and does do what people such as the lady who came to see me expect it to do.

[Rob Anders, Reform, Calgary West, AB]

Madam Speaker, I rise on Motion No. 6 put forward by my colleague from Saskatoon. We support this amendment.

The amendment lowers the percentage of the government's liability for a defaulted loan. This means the Liberals want to increase the government's liability with regard to small business loans.

People are probably asking themselves have the Liberals not learned lessons with regard to liability. Obviously not. They are the masters of this. They have a $600 billion liability called the national debt that does not take into account the unfunded liability with the Canada pension plan, with native land claims and a host of other things we could toss on to the kitty.

The Liberal government, according to independent estimates such as the Fraser Institute, has put a total liability, in other words dug a potential hole, of two trillion dollars. The government wants to once again saddle taxpayers with future debt and future taxes with an even greater liability. The government does not think the way to solve the problems of small business is to actually lower taxes.

No, the Liberal solution for these things is always to increase the government's liability and therefore the taxpayers'. The government feels it at election but the taxpayers are the ones who feel it in the long term. The people of my generation are certainly going to be paying for all the boondoggles this government has got us into and for all the debt that it dug us into when it had some of its former prime ministers and finance ministers at the helm.

This amendment also means that the lender must assume a larger portion of any loss. Business is about calculated risk. That is something which unfortunately some of my Liberal friends across the way forget about.

If a business person is going to go to the government or is going to turn toward the Small Business Loans Act as opposed to going to a conventional bank or any other type of lender as they would for just about anything else, aside from any of these kinds of protections or special arrangements made through the Small Business Loans Act, they go ahead and negotiate a loan under normal circumstances. Under these circumstances, of course, the government picks up the liability.

It is only fair for people who want access to money, especially when it is arranged through some special contrivance with the government, to be willing to accept some level of risk. I do not think we would be asking them to accept too great a risk with the way the Small Business Loans Act would be structured by our motion. It means that there is some sort of individual responsibility. That is something that my Liberal friends across the way do not understand very well. They understand collective responsibility very well, but not individual responsibility.

I am going to digress and talk about the Charter of Rights an Freedoms to illustrate this point. The charter was based upon the idea of collective responsibility. That is something Pierre Trudeau believed in. He believed that rather than going ahead and representing people as individuals, the charter should safeguard their rights as groups. As a result, we have all sorts of groups across this land claiming victimhood status or some other sort of label. The charter does not protect people as individuals, it instead protects peoples' collective rights.

That is part and parcel of the Liberal philosophy here. It is representing collective rights. It is representing group rights. It does not talk much about the individual.

Motion No. 6, put forward by my hon. colleague from Saskatoon, states that by lowering the liability from 85% to 50% the lender also assumes a greater risk in making the loan.

The Liberals would like the government to have more liability which means that the taxpayer would have more liability. It also means that the Liberals are disregarding the idea of individual responsibility for small business accountability. They are trying to up the ante for the government to pick up the cost. As well, lo and behold, it was not bad enough that they beat up on two groups with a baseball bat, they took that bat to a third group. They actually now want the lenders, the banks or the institutions that give these loans, to have greater risk in terms of giving out this money. Is that not the solution?

When I talk to small business people they do not tell me that they want to have greater access to rope with which to hang themselves. They do not want unending supplies of rope to regulate themselves, to tie themselves up or to strangle themselves and cut off the creative juices of productivity. No, they do not want any of that.

They want lower taxes. That is what businesses are talking about. They want less regulation. They want less payroll taxes so they can employ more people and provide more jobs. But that is not something these Liberals understand very well.

[John Richardson, Liberal, Perth—Middlesex, ON]

Nobody does it better than the Liberals.

[Rob Anders, Reform, Calgary West, AB]

Nobody gives out jobs to their political friends better than Liberals. That member across the way who heckled about Liberal jobs knows only too well about patronage. This institution is full of people who got jobs because of their friendship with the Prime Minister or other members across the way. But I do not think that is the way to provide employment in this country. I do not think that is the solution. I think the Liberal job creation strategy of patronage puts the taxpayers on the hook for these types of things and that is not the way it should go. I have never door knocked a small businessperson in this country who told me they want to make sure there is full employment in this country and, therefore, every Liberal hack across the land should get a job, and a good patronage one at that. I have never heard them say that yet.

The default rate under the Small Business Loans Act is nearly 10 times higher than in the private sector. The changes that the government wants to make will make it even worse. How is the government helping small businesses by giving them more rope to hang themselves with? That is not what they are asking for. Small business across the country is asking for tax cuts, less regulation and less government interference. They want government out of their face and the Liberal government will not give it to them. It comes back again and again. It is always meddling with private business in this country.

The Liberals think it is more important to give money to foreign aid than they think it is to give tax cuts. They think it is more important to forgive foreign banks their debts, to the tune of hundreds of millions or billions of dollars—

[Walt Lastewka, Liberal, St. Catharines, ON]

Mr. Speaker, I rise on a point of order. We are debating Motions Nos. 6 and 11. The previous speaker did mention after a request from the Reform Party that we should focus on the motions.

I would hope, Mr. Speaker, that we could continue to speak on the motions that are on the floor.

[The Acting Speaker (Mr. McClelland)]

The parliamentary secretary makes a cogent point.

I invite the hon. member for Calgary West to return to his dissertation.

[Rob Anders, Reform, Calgary West, AB]

Mr. Speaker, it is just like a Liberal to interrupt you when you are on a roll about some of the problems the government has.

The Liberals talk about the Small Business Loans Act. They talk about wanting to increase the problems for the banks and the lenders which will be left holding the bag. The government will be left holding the bag. The default rates are going to continue to increase because of Liberal policies. This whole philosophy is wrong-headed. It is Liberal wrong-headed thinking. It is not talking about allowing greater competition.

I know small business people in Calgary who, when they needed money to expand their business, did not go grovelling to the Small Business Loans Act or any of those types of places. To get entrepreneurial capital they went to the banks themselves, but they could not get it because of the conservative lending philosophies. That is the way banks operate. I understand that. Where did they go? They could not get it anywhere in this country. They went across the border to institutions in the United States because there was greater competition and less regulation. As a result, they got access to the capital they needed. That is a real solution that Liberals across the way are not talking about, greater competition and less regulation in banking. That would be a—

[The Acting Speaker (Mr. McClelland)]

Resuming debate, the hon. member for Markham.

[Jim Jones, Progressive Conservative, Markham, ON]

Mr. Speaker, I am delighted to rise today to speak to Motions Nos. 6 and 11.

I have heard a lot of inaccurate information coming from members of the Reform Party. It truly shows that they have a lack of understanding of what the Small Business Loans Act is.

I would assume that any financial institution would do proper due diligence on any person applying for a small business loan.

I heard somebody say that the loss is 10 times higher than it is in the private sector. That is not true. It is about double. The private sector has a loss of about 3.7% on its loans, and the average is 6%. I cannot see how that is 10 times higher.

There is also the 50% proposal. Reform members assume that it is 50% of all losses. It is not. If it is a financial institution and it has an accumulated loan portfolio of $100 million, it is 90% on the first $250,000, 50% on the next $250,000, and for any losses over and above that it is 10%.

They are saying there is going to be a huge amount of losses. That is not true. I have trouble understanding their logic.

Most small businesses would prefer to get their loans from financial institutions because to get small business loans they have to pay interest which is 3% above prime and another 1.5% in administrative fees. It is unfortunate that these people cannot get their loans from financial institutions, but they help to create a lot of jobs. Over the life of the Small Business Loans Act several hundred thousand jobs have been created. A lot of businesses have grown bigger and they will create a lot more jobs in the future.

Motion No. 11 concerns the 21 day notice period. A financial institution may have many loans across many of its branches. When it is given notice of an audit it takes a few days to collect the information. That is the reason the committee supported 21 days for the notice.

My party will not be supporting these two motions.

[The Acting Speaker (Mr. McClelland)]

Pursuant to order made earlier this day, the questions on the motions in Group No. 3 are deemed to have been put and the recorded divisions are deemed requested and deferred.

The House will now proceed to debate Group No. 4, Motion Nos. 7 and 8. Also pursuant to order made earlier this day, the motions in Group No. 4 are deemed to have been moved.

[Jim Pankiw, Reform, Saskatoon—Humboldt, SK]

moved:

Motion No. 7

That Bill C-53 be amended by deleting Clause 13.

[Francine Lalonde, Bloc, Mercier, QC]

moved:

Motion No. 8

That Bill C-53, in Clause 13, be amended

(a) by replacing line 32 on page 6 with the following:

“made to borrowers in the voluntary sector, to guarantee loans made to finance working capital or to guarantee”

(b) by replacing line 4 on page 7 with the following:

“voluntary sector, to guarantee loans made to finance working capital or to guarantee capital leases, the Minister”

[Gurmant Grewal, Reform, Surrey Central, BC]

Mr. Speaker, I spoke to the earlier amendments and I am delighted to speak to the amendments put forward in Group No. 4, Motions Nos. 7 and 8.

Motion No. 7 was put forward by the official opposition. Motion No. 8 was put forward by the Bloc. I will be supporting Motion No. 7, but I have no reason to support Motion No. 8.

Motion No. 7 would entirely delete two pilot projects aimed at expanding the loans program to the volunteer and capital lease sectors of the economy. Capital lease ventures are those in which the major assets of the business are leased. This serves to lessen the amount of money that can be recovered from the sale of assets in the case of default. The volunteer sector is made up of not for profit organizations. The Reform Party can rightly question why the taxpayer should be guaranteeing loans made to non-profit organizations.

The Reform Party opposes the initiative outlined in clause 13 of Bill C-53 as it represents a broadening of the program that we cannot support in principle.

The Small Business Loans Act is intended to help small businesses in our economy. Small businesses are the engine of the economy. They keep the economy running. Ninety-six per cent of the jobs in this country are created by small businesses.

The Liberal government promotes bigger and larger businesses. It forgets about the small businesses. Small businesses are already under pressure. They have to pay high premiums for employment insurance. They have to pay high premiums for the CPP. They have all kinds of red tape. Government is on the backs of small businesses.

On the contrary, the government is giving subsidies, guarantees, loans and all kinds of good things to big business. Recently the government gave a $25 million tax free loan to Bombardier. The government is taking care of big business, not small business.

When the government expands the scope of the SBLA to volunteer or non-profit organizations, it deprives smaller businesses of the opportunity to get financing from this program. The intent of the act is therefore defeated. Neither my colleague nor I can support this expansion of the Small Business Loans Act.

Motion No. 8 was put forward by the Bloc. It would effectively expand the loan provision contained in the pilot project advanced by Bill C-53. This pilot project includes the ability of industry to grant loans to the volunteer and capital sectors of the economy. This would deprive entrepreneurs of the opportunity to start a business and create jobs.

The Reform Party is fundamentally opposed to expanding the loans program to include volunteer organizations in our economy. All our MPs will support the initiative or any amendment to enhance prospects to help small business. Based on that our position is very clear. We cannot support any amendment or any of the sections which will expand the scope away from small business to anywhere else.

The auditor general clearly identified in his report that larger organizations had been taking advantage, that smaller organizations had been collaborating, and that subsidies applied to other organizations that had received further loans. The system has already been abused. The auditor general has made some clear observations in that regard.

Rather than clarifying the situation, making it simpler and focusing on small business, the government intends to diversify the scope so that small businesses will have to compete with medium and larger organizations for financing. Through this amendment they will have to compete with non-profit and volunteer organizations.

If government wants to support volunteer organizations there are other means to do it. We do not mean that volunteer organizations should not be supported, but they should not be allowed to compete with smaller businesses.

The government always gets things wrong. It has been supporting larger businesses. I gave an example the other day of being on the verge of an storm. When the storm comes the bigger trees will fall and the smaller plants such as the grass will remain green. Small organizations have this ability because they are grassroots organizations run by between two and five individuals, but they will only survive the storm if we support them. We need to nourish the small business sector of our economy if we want the system to work.

In summary, government should set things right in terms of how the economy works. The government should look at employment records to see who creates the jobs. Many times the government pats itself on the back because it has created jobs. It is not government that creates jobs. It is the small business sector or its entrepreneurs that create jobs.

I have been an entrepreneur. I have been involved with small businesses from time to time. I understand as many other small business entrepreneurs understand. Small businesses are independent organizations. The small business organization, the CFIB, has 90,000 members. It has been pleading with the government to ensure small businesses can take advantage of the act.

In a nutshell I ask government members to look into the effectiveness of the program to ensure that it achieves the objectives for which it was intended. With these observations in mind I am hesitant to support the amendment made by the Bloc, but I will support Motion No. 7 put forward by the hon. member for Saskatoon—Humboldt which highlights the withdrawal of that clause.

[Francine Lalonde, Bloc, Mercier, QC]

Mr. Speaker, I am pleased to participate in this debate, especially as the fourth group is being considered, because I can speak of an amendment I made, which is supported by the Bloc Quebecois.

But I will not explain my amendment without responding to our colleague who has just spoken. I think we cannot say how important the small and medium businesses are to the creation of jobs and to economic development and yet not look at the difficulties they have getting financing. The Small Business Loans Act, as the auditor general pointed out, needed a tightening of accounting criteria. However, it works and its principles carry over to other sectors and to other credit requirements.

That is the aim of this part of the bill, which proposes—I would say even timidly—that pilot projects be set up to permit, among other things, what we in Quebec call social economics, that is, all the private projects that do not come from the co-operative sector, for example. The labour and other co-operatives sector live and develop in the private economy sector, but it has its own internal rules.

This part of the social economy formed by co-operatives includes businesses not trying for maximum profits, but to create jobs and provide services. Their objective being financial self-sufficiency, why would this sector not also have access to the government guarantee?

That is why I have no hesitation whatsoever in agreeing with this part of the bill. What I would like to see is to have another element added which would also be studied, in a pilot project, the operating capital fund. I shall explain.

Contrary to what the Reform members keep on saying about this bill, small and medium size businesses experience horrendous problems, particularly at time of setting up or of rapid expansion. They have enormous difficulty in obtaining credit. If the laws of the marketplace are the only things coming into play, they will not get any credit, or they will have to pay exorbitant rates reflecting the risk they represent.

At the industry committee we receive representatives of the major banks every three months, and they tell us that, when fledgling or rapidly expanding businesses are concerned, there is a risk. If there is no government guarantee, they tell us that this risk will have a very costly impact on small and medium size businesses and on economic development.

I support the pilot project aimed at making the government guarantee accessible to businesses in the social economy sector, but I would also like to see another dimension added, the financing of working capital.

In the studies that have been carried out for some time on the review of this act, a recommendation was looked at for guaranteeing working capital under certain conditions. No trace of this was evident in the bill itself, but it was discussed a great deal. Some people were really very much in favour of this, because when financing is insufficient to cover the company until there is some revenue coming in, the project can fail completely because no credit was given at a certain point. This is a serious problem.

Of course, people can say that other solutions will be found, that there will be funds from this or that source. In Quebec there are a few of these, but they do not cover all localities and all municipalities. This holds true even more in the rest of Canada than in Quebec. Why not include, therefore, in the pilot project a means of studying the conditions under which working capital could be guaranteed, for instance through management advice? There is nothing to prevent adding such advice to the regulations.

I tried an experiment and proposed to a number of Bloc Quebecois colleagues to follow my example and send a questionnaire to SMBs asking them if they were in favour of guarantees for working capital. One of the questions was “Do you think that if SMBs had more ready access to sufficient credit in hard times and to management advice there would be fewer bankruptcies and greater development?” The number of yes responses was astronomical, because this is their experience.

Often the credit lacking, plus the management advice, makes the difference between a business going bankrupt and weathering the storm and developing. It is the governments' responsibility to be aware of this.

Business people often start up without the necessary training and background, but once they have started and invested money they have accumulated for years—or money from their brother-in-law, and so on—there is no question of leaving them there saying “Too bad, they will learn a lesson going bankrupt`'. We have to be there with management advice and loan capability.

The rate of bankruptcies is too high, but there is no need for that. It could be different. For things to change, SMBs need help and not just to be left to the market. The market will allow the big businesses to come through.

Right now, public companies can get financing by selling stocks. They made the fortunes of people who bought stocks for a while. The situation is uncertain at the moment, and I know that in Great Britain there is concern about the American bubble, but that does not affect SMBs. They need accessible credit, a sort of a blood transfusion, in conditions that are not too difficult, with a dose of management advice.

I hope my colleagues opposite, since I do not think I can expect this from those beside me, will understand that it is easy to include working capital in the pilot project because it is a pilot project.

If this were possible, I think it would a very important plus for a number of businesses that would otherwise be facing an unhappy ending to their adventure. They lose everything, because at some point they lacked sufficient funding and management advice.

I really hope that this addition to the pilot project will mean progress in understanding the conditions in which businesses grow and develop rather than die.

[Lee Morrison, Reform, Cypress Hills—Grasslands, SK]

Madam Speaker, the hon. member for Mercier was very passionate in her defence of small business people. I certainly appreciate her passion.

However, I wonder whether she has her priorities just a little skewed. The parts of the bill that we do not like are not about small entrepreneurs. They are about big banks and making their lives easier.

These 85% loan guarantees are not meant to be of benefit to the borrower. These are of benefit to the lender. I am sure the hon. member for Regina—Lumsden—Lake Centre agrees with me on this point. It is probably the only thing in the world on which we agree.

We do not have to make the world safe for Matthew Barrett. This is exactly what we are doing. If we were to amend this piece of legislation to remove any reference whatsoever to lending money to people in capital leasing ventures, we would be improving the legislation because we would be lowering the risk to the taxpayer, not the risk to the banks. The banks do not take a risk. The parts of the bill we just discussed ensure that the banks are not going to get their hands burned. The only people who are going to get burned are you and me and all the other taxpayers.

As someone who was an independent businessman for most of his adult life, I find that this is unconscionable. I will go from unconscionable to obscene when I look at the provision for allowing small business loans to not for profit organizations.

Good heavens. What does this have to do with economic growth? This is just another backdoor handout by this Liberal government to people who really have no legitimate call on public funds. Of course for the Liberal government that is nothing new. There is always money for SNC Lavelin, for Bombardier and for the Desmarais family, for anybody who is really big and powerful and on the inside.