Government of Canada Announces $450 Million in New Funding for BDC to Assist Canadian Businesses

Market Wire, June, 2009

The Honourable Denis Lebel, Minister of State (Economic Development Agency of Canada for the Regions of Quebec), on behalf of the Honourable Tony Clement, Minister of Industry, today announced that the Government of Canada is providing $450 million to the Business Development Bank of Canada (BDC) in support of small and medium-sized enterprises and innovative firms.

The funding will include $100 million to establish the Operating Line of Credit Guarantee and $350 million over three years to help drive venture capital investment in promising Canadian technology businesses.

"Today's announcement will enable BDC to team up with financial institutions to give businesses with strong balance sheets and business fundamentals access to credit that will enable them to continue playing a key role in the vitality of our country's economy. The venture capital funding will help growth-oriented businesses achieve even more ambitious objectives, while stimulating the Canadian economy."

The Operating Line of Credit Guarantee will be delivered under the Business Credit Availability Program as part of the government's Extraordinary Financing Framework announced in Canada's Economic Action Plan, and it will improve access to financing for Canadian businesses during this period of economic uncertainty.

"The health of the Canadian economy depends greatly on the vitality of Canadian businesses, which often need credit to finance their growth," said the Minister of Industry, the Honourable Tony Clement, at the time of an announcement on the same subject this morning in Toronto. "The Operating Line of Credit Guarantee will allow BDC to work with financial institutions to make it easier for Canadian businesses with strong balance sheets and business fundamentals to access the credit they need to get even stronger. The funding for venture capital will assist growth-oriented firms to get the funds they need to innovate and boost the Canadian economy."

"Working together with Canada's financial institutions, BDC will help ensure that creditworthy businesses have access to the short-term financing they need to remain successful and grow in the months ahead," said Jean-Rene Halde, President and Chief Executive Officer of BDC. "Innovative firms will also have greater access to funding to bring their innovations to market."

The Operating Line of Credit Guarantee is a time-limited facility that allows BDC to guarantee lines of credit that financial institutions already extend to their clients. This guaranteed portion goes above and beyond what the banks are already committing. Through the program, financial institutions and BDC will share the risk, while providing increased support to their clients. The Operating Line of Credit Guarantee applies to operating lines of credit with authorized limits of a minimum of $400 000 and a maximum of $40 million. This funding will have a total market impact of at least $300 million.

The $350 million in funding for BDC's venture capital activities will allow it to make additional direct investments of $260 million over three years in Canadian businesses already in the BDC portfolio, as well as investments in new seed technology companies and later-stage technology companies. It will also allow BDC to commit $90 million over three years to private, independent Canadian venture capital funds. This funding is in addition to the $75 million in venture capital funds allocated in the Government of Canada's Budget 2008, which is being used to support the creation of a privately run venture capital fund.

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.

To learn more about Canada's Economic Action Plan, visit www.actionplan.gc.ca .

BACKGROUNDER

Business Development Bank of Canada Financing

The Business Development Bank of Canada (BDC) aims to accelerate the success of entrepreneurs and help develop Canadian businesses by providing financing, venture capital and consulting services with a focus on small and medium-sized enterprises (SMEs). The BDC does not offer grants or subsidies; rather, it seeks to earn a return from the business financing it provides, while extending financing into market niches that would not otherwise be served.

The BDC is mandated to be a complementary lender in the market, offering loans and investments that supplement or complete services already available from commercial financial institutions. Its financial activities include secured and unsecured loans; subordinate financing, which incorporates elements of debt and equity financing; direct and indirect venture capital investments with a focus on early-stage high-technology ventures; and customized business consulting services.

The BDC's role is magnified during economic slowdowns. Since the start of the credit crisis, the BDC has introduced a number of remedial measures. Since August 2007, it has: