CALGARY -- The head of the Business Development Bank of Canada says it is setting aside $500 million in extra financing to help small- and medium-sized businesses weather the downturn caused by low oil prices.
BDC president Michael Denham said that while there's not a crisis yet, with delinquencies and loss rates up only slightly, the bank wanted to be ready for a potential increase in demand in the months ahead.
"There's no massive deterioration right now, but in order to be prepared for when our clients and entrepreneurs need to access more financing, we took this step today," Denham said Tuesday in an interview.
He said the funding amounts to about a 40 per cent increase compared to the bank's normal lending in the oil and gas sector, and that the bank will also be working to process applications faster.
"Given the needs of the sector, we're making more dedicated financing available than is typically the case. We're going to work the files through our processes much more rapidly than is typically the case. So we're tackling this with a level of urgency," Denham said.
He said the bank hasn't tapped out its current allocation of funds for small and medium oil and gas companies, which almost all work on the service side of the industry and make up about five per cent of the bank's portfolio. But he said the bank wants to make sure clients have confidence it will be there for them in the coming months.
The funding is intended to help businesses increase their efficiency, improve financial management, buy new technology and equipment, and especially diversify away from the oil and gas industry, said Denham.
Dan Kelly, president and chief executive of the Canadian Federation of Independent Business, said the funding could be helpful.
"Often in an economic downturn, especially one that affects one sector harder than others, capital markets can dry up pretty fast," said Kelly.
The bank also plans to provide advice to companies on how best to adjust their businesses to endure the impact of the economic downturn.
BDC is a crown corporation that supports Canadian entrepreneurship through loans, investments, and advisory services. It has more than 100 business centres and over 32,000 clients across Canada.
