Role / Description of BDC and EDC
Through the BCAP, the Business Development Bank of Canada (BDC) and Export Development Canada (EDC), both financial Crown corporations, worked closely with private sector lenders to improve access to financing for Canadian businesses.
Business Development Bank of Canada
BDC is Canada's business development bank. From 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs. BDC works with entrepreneurs in all industries, through all economic cycles and focuses on helping small and medium-sized businesses in their development projects, local and global. As a Crown Corporation BDC is wholly-owned by the Government of Canada and is financially self-sustaining.
BDC'S RESPONSE TO THE CREDIT CRUNCH
As a complementary lender, BDC's role is magnified during economic slowdowns. To help clients cope with the credit crisis, BDC introduced a number of remedial measures as early as August 2007.
- Increased overall financing activity
- Extended repayment terms on new authorizations
- Offering postponement of capital repayment
- Increased support to manufacturers and a dedicated team to help Ontario auto parts manufacturers in particular
- The launch of a new working capital loan for expansion projects abroad
Increased term lending activities
Through the BCAP, BDC partnered with private financial institutions to provide additional loans and other forms of support to creditworthy businesses whose access to financing would otherwise have been restricted.
A key element of the program was an enhanced relationship between BDC and financial institutions for referrals and deal sharing. This was facilitated through joint corporate communication plans and a grassroots approach at the local branch offices. The result was close collaboration on syndicated loan transactions for large clients, coordinated efforts for small loan processing and purchased participation in commercial mortgages.
Vehicle and Equipment Financing Partnership
In Budget 2010, the Government of Canada created the Vehicle and Equipment Financing Partnership as part of the BCAP. This program is funded and managed by BDC, with an initial allocation of $500 million in funding, in partnership with experienced lenders and investors in the private market for asset-based financing. The partnership has expanded financing options for small and medium sized finance and leasing companies.
For more information on BDC and its role and activities under BCAP, please visit the BDC Web site.
Export Development Canada
EDC is Canada's export credit agency. The Corporation offers financial services, insurance and bonding products, as well as analyses of global markets and economic conditions to help Canadian exporters and investors expand their international business. As a Crown corporation EDC is wholly owned by the Government of Canada and is financially self-sustaining.
EDC's Response to the Credit Crunch
Recognizing that companies need additional financial resources of the type EDC provides, the Government increased EDC's financial flexibility in the 2009 Budget by increasing the limit for paid-in capital to $3 billion from $1.5 billion. This permits the Government to inject more capital into EDC if needed. As well, it increased EDC's limit for contingent liability to $45 billion from $30 billion. This gave EDC more room to issue insurance and guarantees.
The Government also increased the limit for the Canada Account to $20 billion from $13 billion to enable it to provide additional support to business. The Canada Account is used by the Government to support transactions that are deemed to be in the national interest but that fall outside of EDC's capacity in some measure.
These measures gave EDC the flexibility to adapt to the evolving needs of Canadian companies and to develop solutions in partnership with financial institutions. Through the BCAP, EDC helped to fill gaps in credit markets through its participation in syndicated and club credit facilities, bonding/surety provision, insurance and financial guarantees.
Expanded mandate to serve the domestic market
During the credit crunch, the Government of Canada temporarily broadened EDC's mandate and scope of activity for two years to enable the Corporation to provide its financing, bonding and insurance services, in partnership with the private sector and BDC, to the domestic market. This measure added much-needed capacity to the Canadian financial system to help Canadian companies get credit, so that they could remain viable and grow, both at home and abroad.
For more information on EDC and its role and activities under the BCAP, please visit the EDC Web site.