Business Development Bank of Canada (BDC)

Business Development Bank of Canada (BDC)

April 15, 2008 23:59 ET

BDC's new Entrepreneurial Insight newsletter - Small businesses prove to be resilient despite difficult market conditions

MONTREAL, April 15 - Drawing on data from its loan portfolio
and its experience with its 27,000 entrepreneur clients, the Business
Development Bank of Canada (BDC) has found that to date small business is
generally managing to cope with the effects of a strong Canadian dollar and
turbulence in the financial markets. This is one of the conclusions BDC
reaches in the first issue of its new Entrepreneurial Insight newsletter.
"Small businesses and especially manufacturers make up much of BDC's loan
portfolio. Thus the state of our portfolio could be a good barometer of the
health of SMEs and the Canadian economy," says Jérôme Nycz, Vice President,
Strategy & Planning. "Our loan portfolio is relatively stable and solid. The
number of clients having temporary or permanent difficulties in repaying their
loans remains low and has changed very little in the past three years.
Although 2008 is far from over and we are continuing to monitor the situation
closely, so far we have seen that entrepreneurs are very resilient and most
can adjust to market conditions."

SME manufacturing exporters are more vulnerable

However, BDC has also found that market conditions are having more impact
on manufacturers. Nearly half of the BDC loans that have deteriorated
(i.e. are unlikely to be repaid) were granted to manufacturers. Manufacturing
exporters, particularly those whose exports to the United States make up 40%
or more of their sales, are the most vulnerable.
"SMEs that moved into export markets in recent years were betting on the
proximity and ease of trading with the United States," Mr. Nycz explained.
"Because of their generally lower productivity, the rapid increase in the
value of the Canadian dollar and fierce global competition, SME manufacturing
exporters who relied too heavily on the U.S. market are suffering the
consequences today."

Special measures to support SME manufacturers

Although they account for only 4.2% of Canadian SMEs, manufacturers make
up 26% of BDC's clients. To help them adjust to market conditions, BDC
recently offered its eligible clients the option of postponing principal
payments on their loans for six months.
"We know that manufacturers who navigate through these difficult waters
successfully are those that have developed clear business strategies so that
they are ready to seize opportunities on national and international markets.
By offering them this financial respite, we wanted to give our entrepreneur
clients the leeway they need to review their business plans and export
strategies and look at ways to improve productivity," Mr. Nycz explained.

The Entrepreneurial Insight (http://www.bdc.ca/NR/rdonlyres/ejyefexsbg2bf
lqjfvevqtw6m7v7w54ifockckivdu4ynd2x6hhoov6xntwz5t4kwpyjtzkxxl3uo5lttkly7a6tdha
/SME+Insight_Feb29_2008_final-E+_3.pdf) newsletter is available on BDC's
website. In addition to presenting a detailed picture of Canadian SMEs, the
newsletter discusses their contribution to the Canadian economy, the dynamics
of business creation, survival and growth, and some of the success factors for
start-ups.

About BDC

BDC is a financial institution wholly owned by the Government of Canada.
BDC actively supports the development and growth of Canadian small and
medium-sized businesses through its complementary financing, investment, and
consulting services. For more information visit www.bdc.ca.

Contact Information