The federal Business Development Bank of Canada (BDC) approved 100% loan guarantees of $1.2 billion to 4,972 unidentified businesses. The loans were disclosed in a recently released BDC report to the House of Commons finance committee.
The BDC is a crown corporation, is wholly owned by the federal government and is a major lender and investor in companies across Canada. Loans were approved through a Highly Affected Sectors Credit Availability Program launched by cabinet in February 2021.
Companies that previously qualified for wage and rent subsidies and showed 50% revenue losses in three of the previous eight months before their application were eligible for 100% loan guarantees, as first reported by Blacklock’s reporter.
Official estimates show that fifty-two banks and credit unions across Canada have enrolled in the program to date. Records show that loans reaching $6.25 million were made available to chain operators of hotels and restaurants. The program waives interest payments for a year, and the 4% loans have a decade-long repayment period.
Spokesperson for the United Here union representing hospitality workers Michelle Travis urged borrowers to be identified. On May 21, she told the finance committee “transparency is critical,” and that “the public should know because the government is absorbing the risk.”
“Frankly there are a lot of programs that are out there at the federal level and we don’t know which companies are tapping them,” said Travis. “Which companies are getting low interest, fully-backed loans from the government? And how much are they getting?”
Finance minister Chrystia Freeland said that the loan guarantees were meant to help hard-hit employers “weather this storm and be ready for a robust recovery.”
Freeland gave the impression that the loans were given due to hardships brought on by the pandemic, although evidence suggests that the BDC might be in no position to issue loans at all.
In 2018, Ian Madsen of the Frontier Centre for Public Policy published a valuation of the BDC. Madsen raised concerns over the illiquidity of BDC’s assets. He concluded that “it is far better that private investors take on the risks that BDC is incurring.”
Madsen told True North that the BDC pandemic loans “seem to be an instance of mission creep and political meddling, wherein the government has steered them into being a lender of last resort.”