Mr. Speaker, I take this opportunity today to speak to the report stage of Bill C-21 with respect to the continuation of the Small Business Loans Act.
The Small Business Loans Act was established in 1961. The initial premise was to ensure that small and medium enterprises would have access to capital for further development.
By that, the intent of the act was to provide incremental financing in situations where traditional financing would no longer be available.
It has been pointed out by the auditor general that 30% to 40% of the loans approved under the Small Business Loans Act would actually be approved anyway so that at the end of the day, on reviewing this act, we would have a loan guarantee program for banks as opposed to a loan guarantee for small business.
Our party will be supporting Bill C-21, only because without it the Small Business Loans Act will not continue and a very valuable piece of legislation would not be there for the small business sector.
That said, we have some concerns with respect to the act. Over the years the ceiling of the act has gone from only a few billion dollars to $15 billion worth of loans guaranteed.
The reason for that is that the original intent of the legislation, incremental financing, has now gone to a situation where we are guaranteeing loans on a continuous basis of nearly a quarter of a million dollars. That is not the access to capital these individuals want.
The initial intent of the Small Business Loans Act was to ensure that there would be financing for slightly riskier loans where the small business sector would be willing to actually pay a higher rate of interest and be willing to pay a fee to have this access to capital. The intent of the legislation has gone to the wayside.
My colleague from the New Democratic Party pointed out that this is a piece of legislation that is highly regarded by small business. All areas of this country, whether Nova Scotia, my home province of New Brunswick or British Columbia, rely on the Small Business Loans Act.
We support both these amendments. The legislation has to continue.
I know my colleagues with the Reform Party have a lot of small business ventures in their areas as well. Those individuals who do have a lot of small and medium enterprises in their neck of the woods rely on this piece of legislation. It would not be a very prudent step for them to recommend that we do not have this loan guarantee program for small business, given the fact that their small business sector relies on this piece of legislation.
I would recommend them to reconsider their current position and actually support this legislation when it comes time to be improved later on. The small business sector needs a small business loans act. It needs a loan guarantee program for incremental loans. It does not need a loan guarantee program for large scale loans.
This is not just me saying this. The Canadian Federation of Independent Business has 88,000 members. Its members categorically point out that one-third of their membership actually believes that the number one issue affecting small business is still access to capital. Look at it from the point that we have a loan program that was only a few billion dollars only a few years ago. It is now a huge amount of money. We are heading toward $15 billion in loan guarantees. One would almost think that with that increase small business financing would be that much more accessible.
In 1997 the acceptance rate for loans has actually gone down 2% from 1987. The reason for that is the type of loans that are now being guaranteed under this program are not in its original intent.
We will be supporting the amendments to this legislation. We will be supporting Bill C-21 this time only, but we do recommend that the government take very seriously the recommendations of the auditor general. The minister pointed out that during his presentation earlier it would be a valuable tool on review of this bill. We recommend that the government act on the recommendations and the observations by the auditor general. Above all is that we move toward the original intent of the Small Business Loans Act, incremental financing.