Source: The Canadian Press

Mar 31, 2009. updated April, 2009

By Julian Beltrame

OTTAWA  - The ability of Canada to develop the new technologies of the future is in jeopardy because entrepreneurs can’t get financing to see them through the recession, the Business Development Bank of Canada warns.

The Crown corporation which helps finance Canadian businesses says the disappearance of venture capital in the country will snuff out hundreds of innovative small companies in infancy and their technology with them.

“It breaks my heart because if we let go of these technology companies, once this recession is over you will have lost all this (new) technology, you will have lost a decade,” Edmee Metivier, the development bank’s executive vice president of financing, told a House of Commons subcommittee Tuesday.

Metivier said the BDC is a shareholder in about 150 technology firms, but in the future the corporation will only be able to help finance a much smaller portion of startups. 

But she says there are hundreds more such companies across the country that can’t find capital to fund research and get new products to the markets. And the BDC can only do so much because it needs partners to finance entrepreneurs.

“They are all at risk, there is no money for them on the marketplace at the moment,” she said.

In a later interview, Metivier said the focus of governments has been on the survival of mature companies, but in doing so they risk losing the companies that represent Canada’s technological future.

“Canada has to think through what it has to do with this sector,” she said.

Before the committee, Metivier and Benoit Daignault of Export Development Canada laid out the difficulties faced by Canada’s small and medium sized companies in obtaining sufficient credit to operate and grow during the recession.

While Canada enjoys a sound banking system, the collapse of many other non-bank lenders _ representing about 30 per cent of loans _ has created a tight market for credit in Canada.

As a result, many companies are being denied loans or are being charged exorbitant interest, they said.

”The difficulties facing Canadian businesses have increased in 2009, so it is difficult to find low-cost financing in these circumstances,” said Daignault.

The Business Development Bank has come under criticism from Liberal finance critic John McCallum in recent weeks for moving slowly in implementing several budget measures intended to free up credit for both businesses and consumers, particularly the auto leasing sector.

Metivier was not confronted by the charges in the subcommittee, but said she had been prepared to respond.

She said she expects the Crown corporation to double the rate of the annual increase in loans this year, and said $750 million had already gone out the door in the first three months.

Any delays on the $12 billion credit facility to increase credit in the auto leasing sector, and loan guarantees for companies were due to the fact the corporation, which operates on a commercial basis, had never engaged in either activity in the past and needed to do due diligence, she explained. 

The loan guarantee facility first announced in December will be in operation starting Wednesday, she said, whereas the measure on auto leasing will likely be up and running by the end of May.

“It would have been humanly impossible to kick start (either) any sooner,” she said. 

Copyright © 2009 The Canadian Press. All rights reserved.

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