Mr. Speaker, I am pleased to join in this discussion to the amendments to Bill C-21, the Small Business Loans Act which provides loans and guarantees to small businesses.
The amendments to the act would extend the current lending period, as most of my colleagues have stressed, to March 31, 1999 and raise the program's total lending ceiling by $1 billion, taking us to $15 billion.
During this period of extension Industry Canada will have the opportunity to work in consultation with our stakeholders to review and give consideration to the sustainability of the program.
This review will investigate ways to sustain self-financing, to improve accountability and to verify the conditions stipulated in the act.
In my riding of Etobicoke—Lakeshore there are over 3,600 businesses. Many are small and medium size business. They are an integral part of the economic infrastructure of Etobicoke—Lakeshore.
The operation of these businesses cuts across the manufacturing and service sectors of the economy. To use the oft used phrase, they are the main engine of employment in my riding.
Maintaining a strong economy is vital to the success of our economy. Providing opportunities whether through financing, technology or whatever assistance we can give to small businesses will give the Canadian economy the energy it needs to grow.
Canada has more than 2.5 million small businesses. Small businesses created 81% of the new jobs in 1996-97.
In recent consultations with businesses in my riding, the one concern I heard from small business owners over and over is the difficulty they face in obtaining financing. Access to capital is their number one problem. The Small Business Loans Act addresses the problems of these constituents.
There is a history to the Small Business Loans Act. It was passed in 1961 to provide loans to small and medium size businesses which would otherwise not have access to conventional financing. In 1996-97 approximately 30,000 small and medium size businesses used the Small Business Loans Act to access roughly $2 billion of financing.
The importance of the $2 billion in financing to those 30,000 small and medium size businesses has been stressed over and over again. I can say to the House that without access to these financial resources, the small businesses in my riding would not be operational today nor would they have the success that they have had.
The program under the Small Business Loans Act is consistent with the Liberal government's commitment to assist small and medium size businesses adapt to new technologies, to produce new goods, to be innovative, to reduce costs and to increase their productivity.
Through this program we are working with stakeholders in the banking industry to foster a prosperous economic environment in Canada where businesses are provided with a chance to take advantage of opportunities in the global market.
The government has followed through on the commitments we made at the doors of our constituents. We have followed through with initiatives such as Strategis, an Industry Canada interactive web site aimed at increasing support for small businesses.
For the benefit of those of my colleagues on the other side who would question this, I think it is important that they note that the federal government shares the risk of loans to small business by paying 85% of the loss sustained by the lender. The lender is responsible for the rest. The loans are made by banks or other institutions which assess the eligibility of applicants. All businesses with sales not exceeding $5 million are eligible, except for farms, and religious and charitable organizations.
The Small Business Loans Act program is not a subsidy to business. I stress it is not a subsidy to business. In 1995 when the act was revised it moved toward covering the cost of loan losses. Lenders pay for the cost of the program through a one time loan registration fee. In short the majority of these loans are repaid. To date, loans under the Small Business Loans Act are approaching $14 billion, the total lending ceiling for the program. Very few of those loans are in default.
Changing economic conditions in Canada and global economic trends, not to mention the growing demand on the program by companies have given us some indication that this program needs to be maintained. The $1 billion addition to the program is necessary at this point in time.
Providing support to this sector of our economy will enable it to continue to support jobs and economic growth which is so necessary in our communities.
Recent studies have found that the small business loans program is one of the best programs compared to other available programs. Administrative and default costs are low. The government instituted a 2% registration fee and in 1995 legislated a 1.25% annual administration fee on lenders on the outstanding balance of loans which again were appreciated. Those fees are aimed at moving the small business loans program toward cost recovery over a 10 year period.
We have heard about the support this program gives to small businesses. At the same time we know in talking to our constituents there are other ways in which they are looking for assistance. I speak of the individuals who look to what we call micro credit. That is the very, very small seed money which is necessary for a business to start up.
Every effort is being made to ensure that there is fiscal prudence in the program and that we exercise that kind of management. Earlier one of the members made reference to the auditor general's report. The minister, as he said in his statements, is giving full consideration to ensuring good fiscal management.
Small and medium size companies do not exist in a vacuum in the marketplace. They need government and private sector assistance to expand, to remain competitive, to build a solid economic foundation and to do all the things that are necessary to sustain, to grow and to have those jobs in our communities.
I support the amendments put forward by the Minister of Industry. I remind my colleagues on all sides of the House that this is an important issue for the small businesses in our areas. I call on all my colleagues to support the amendments to the Small Business Loans Act.