Committee Chair Easter, thank you for that welcome. Thank you for the opportunity to speak with you today.
Export Development Canada is uniquely placed to understand the struggles of so many Canadian businesses today. We're privileged to be positioned so that we can make a real difference helping Canada through this crisis.
I'd like to use the next few minutes to help you understand more about what EDC has been doing to help and to describe some of the tools we're employing to help thousands of Canadian companies survive this crisis, be ready for the recovery and return to growth when that happens.
EDC is Canada's export credit agency. In 2019, we served almost 17,000 customers, close to 90% of these being small and medium-sized Canadian companies. We've helped facilitate $102 billion in Canadian business in 147 countries around the world, thus contributing to about half a million Canadian jobs.
Our business, the business of EDC, operates on commercial terms. That is to say, we do not provide grants or subsidies. At the heart of our business is risk management. Our core product offering is a set of financial solutions and knowledge products that give Canadian exporters of all sizes, their supply chains and their bankers the confidence to move forward with international sales.
EDC can insure exporters, for example, against a foreign customer's failure to pay. Our bonding and loan guarantees are another form of risk management, giving financial institutions the confidence they need to furnish exporters with working capital or to secure the cash flow necessary to pursue international opportunities. Another way EDC helps is by direct financing of deals and international projects.
It's also worth noting that a large portion of our business is delivered in partnership with Canada's financial institutions and private insurers. In this regard, EDC is a public sector partner for private sector growth, promoting the success of thousands of Canadian exporters.
That's EDC's role under normal circumstances, but today is far from normal. EDC is proud to be part of the Government of Canada's response to the pandemic and its economic consequences. Our 1,700 employees—all working from home—are working hard to find new ways to serve Canadian companies. We have been helped in this by Parliament's decision to grant EDC an expanded mandate, which has freed EDC to leverage its full suite of tools in support of non-exporting companies.
Our immediate reaction to the current crisis has been to help our existing customers first, implementing payment deferrals for our financial programs, dispersing liquidity under previously negotiated credit facilities, and paying insurance claims in advance of waiting periods. We have also made our solutions more accessible and expanded our risk appetite, and we continue to be agile to the needs of Canadian companies.
Our knowledge products have also provided much-needed guidance during the crisis. Three COVID-19-related webinars attracted more than 10,000 registrants and over 60,000 visits to EDC's web page. We have also contributed to another 23 virtual events with industry associations and partners, sharing with them details of available programs, and we have produced a web-based triage tool to point Canadian companies to COVID-19 resources across government.
Beyond our core business line, EDC has also collaborated in the design and delivery of two new team Canada programs, the business credit availability program, or BCAP, and the Canada emergency business account, CEBA.
EDC currently offers two forms of BCAP financing guarantees. In simple terms, a guarantee is a promise made by EDC to a company's bank, co-op or credit union to repay all or a large portion of that institution's loan to a Canadian company. EDC's BCAP guarantee, launched in late March, is geared primarily to small and medium-sized companies, supporting loans to a maximum of $6.25 million, with a guarantee of 80%.
Our second guarantee is called the mid-market guarantee and financing program. It offers expanded support for medium-sized businesses, companies earning revenues of between $50 million and $300 million, and supports loans in the $16-million to $80-million range with a guarantee of 75%.
Our first BCAP guarantee was designed to get liquidity quickly to smaller companies with limited financing sources. While the initial uptake has been slower than anticipated, the pipeline is significant, and we anticipate greater demand through the summer and into the fall. EDC is now working with more than 120 commercial financial institutions across Canada to deliver this program.
Early feedback from customers and bankers shows a common theme. Small business owners today are reluctant to take on additional debt. This is primarily due to the uncertainty of the timing and nature of the recovery. They have, however, signalled more openness to the program when their future costs and customers are better understood.
With this feedback, we have changed the tenor of the guarantee from the initial two years to five years, to provide to Canadian companies a longer repayment horizon. This appears to have worked. Our banking partners are currently processing more than 400 loans with supporting EDC guarantees. We will continue, of course, to monitor the program and its parameters.
EDC also helps to deliver the Canada emergency business account. Our role in CEBA is a supporting one, working with Canadian financial institutions by providing funding, validation checks and administration. Since its launch, the enhanced and expanded program has delivered over $26 billion through 233 financial institutions, providing essential liquidity to more than 660,000 companies.
While the BCAP and CEBA programs remain our priority, our core business offerings continue to have an important impact for Canadian companies. Our accounts receivable credit insurance is helping companies remain competitive, giving them access to working capital without taking on additional debt. From March to May of this year, EDC signed 218 new policies, with another 215 policies pending, compared to 99 policies in the same period last year. This represents a fourfold increase, and an increase in just eight weeks of more than $1 billion dollars U.S. in risk exposure, in support of sales for more than 3,000 Canadian companies.
On the bonding side of our business, to date our solutions have helped support $3.8 billion in trade, a year-over-year increase of 81%. Further, in our financing program, we have issued 25 commitments and 17 offers valued at $3.8 billion U.S., directly linked to providing support for companies impacted by COVID-19.
What these numbers demonstrate is the counter-cyclical nature of EDC. When crisis threatens liquidity and elevates risk beyond the tolerance of other market players, EDC is able to lean in, mitigate risk and deliver that liquidity.
EDC is but a part of a large, coordinated team Canada effort to sustain our nation's economy during this crisis. Global Affairs Canada, the Department of Finance, as well as Innovation, Science and Economic Development and so many other agencies through government are working side by side with EDC, BDC and our financial institutions.
This effort has required agility and creativity from each and every member of the team. I'm proud of all these efforts, not just our own at EDC. I believe that the steps we're taking today will sustain Canadian companies for recovery and return to growth.
Of course, I look forward to the day when EDC's focus will return to its original mandate of helping Canadian companies go, grow and succeed internationally. Until then, we remain dedicated partners in helping serve all Canadian companies in this extraordinary time of need.
Thank you for the opportunity to lend our voice to this important conversation.
My team and I look forward to answering any questions you may have.
Yes, Mr. Chair, and thank you very much.
I want to start by thanking all the members of the committee for your service and for the work you do, especially during these challenging times. Canadians are counting on solid leadership, and I'm very pleased that the committee members are providing it.
I also want to reiterate, Mr. Chair, that my two colleagues are with me. In particular, Jérôme Nycz, who is the EVP for BDC Capital, will answer detailed questions on our pandemic response as it relates to venture capital. I'll make sure that Jérôme has a chance to answer those.
I know that BDC doesn't require a long introduction, by virtue of our 75-year history and the fact that we have been mentioned a fair bit in the media since the start of the pandemic, but for the record, I just want to remind folks that BDC is Canada's only bank that focuses exclusively on entrepreneurs. We're a Crown corporation that reports to Parliament through the .
We operate at arm's length from the government as a lender and as an investor. In this sense, we complement rather than compete with private sector financial institutions, and we're not in the business of providing grants. We take on more risk than other financial institutions, and when times are tough, as they are now, we like to step up and we expect to step up. We also have venture capital and advisory offerings.
What I would like to do is describe the listening to entrepreneurs that we've been doing and share with you as well the direct and indirect measures that we've undertaken to help companies in response to COVID and also in response to the drop in oil prices.
We've done six surveys, both of clients and non-clients, basically once every two weeks since the crisis started. These are published on our website. Since the beginning of the pandemic, the sentiment has improved. Entrepreneurs are still quite concerned—don't get me wrong—but the sense of panic that existed initially has subsided as entrepreneurs have taken stock of the situation and the host of relief measures now available to them. Let me illustrate.
In response to the question, “How worried are you about the impact of COVID on your business?”, 83% were concerned at the end of March. That number is down to 69%, as of midnight. Similarly, on the ability to borrow, 36% were concerned at the start of April. That number is now down to 20% in May.
We're also seeing sentiments improving around several key business dimensions, including the ability to keep employees on payroll, at 47% then versus 65% now; ability to repay debt at 45% then and now at 60%; and, on keeping businesses open, 37% then versus 61% now. In fact, concern is growing more about the ability to meet demand and the lack of personnel to do so. Notwithstanding these improvements.... Don't get me wrong, because the level of concern in absolute terms remains very high, but I do want to highlight that there has been some limited progress made in terms of levels of [Technical difficulty—Editor].
On recovery, 76% of those surveyed feel ready to resume their activities, with 50% saying that it will be easy. The top lessons entrepreneurs have learned, which they have shared with us, are the importance of good cash flow and an emergency fund, as well as expense control. Looking ahead, 36% plan to reduce their expenses and 32% to broaden their offering, and 30% plan to sell online.
That's a summary of what we've heard in our extensive surveying of entrepreneurs.
Moving out of BDC's activities to our direct measures, we introduced a postponement of payments for up to six months free of charge for existing BDC clients with total loan commitments of $1 million or less. We've done almost 37,000 of these postponements, representing more than $800 million in cash flow benefits to our clients and $16 billion, or about half, of our existing loan portfolio. The volume of requests for these postponements continues to decrease. Now we're down to about 30 per day from a peak of 1,200 per day in late March.
We're also authorizing new direct loans, with an online financing loan of up to $100,000. We've drafted this to use a higher risk threshold than normal. We're accepting lower credit scores than had been the case, given the uncertain times, and we reduced our pricing.
We're also offering working capital loans for up to $2 million providing flexible payment terms and payment postponements for the first six months. We've reduced pricing on this product as well.
Application rates for these loans were tremendous early on. We received literally more online applications for working capital loans in the two weeks after announcing our first wave of measures back on March 18 than we typically do over a full year.
I'd also like to note that since this peak, demand has been normalizing, and seemingly in parallel with the improving sentiment of entrepreneurs, demand for online loans through BDC continues to fall. Notably, online financing applications are dropping gradually from about 80 per day, due to the Canada emergency business account and other emergency measures that have been made available for entrepreneurs.
Together, all told, we've authorized almost 10,000 direct loans for nearly $2 billion since our fiscal year started in April. Compared to our normal levels for these types of loans, this represents eight times more in terms of volume, and almost 14 times more in terms of the total value of the loans we've authorized.
Again, our debt solutions are intended to complement the other liquidity support measures that federal and provincial governments have introduced. Indeed, many SMEs have ended up opting for these solutions as they're sometimes preferred as the only solution they need.
To help early-stage tech companies in consultation with the CVCA, which is the Canadian Venture Capital and Private Equity Association, and Réseau Capital, we've put in place a bridge financing program—this relates to venture capital—to match a current financing round being raised through qualified existing and/or new investors into eligible Canadian VC-backed start-ups. The program is ideal for high-potential companies that have investor syndicates willing to support them. BDC invests alongside these syndicates.
To date, we have done about 23 deals totalling $45 million of investment. We originally announced the size of this bridge financing envelope to be $150 million, but based on the demand and the conversations we've had with VC-backed companies, we've increased the size of this program to $300 million based on this assessment of the market.
BDC also offers advisory services. At our advisory services, we want to make sure that Canadian businesses have all the information they need to cope, pivot and recover once the crisis is over. We're doing this primarily through bdc.ca—primarily free of charge—including advice for entrepreneurs in the form of tool kits and articles on their key performance indicators.
There have been just over two million sessions so far on bdc.ca, including close to 25% that have gone to specific COVID-related viewing pages. We will continue to make sure that businesses are aware of this free information that we're providing. Three new COVID-19-themed solutions are now available to address the most pressing issues. We've created a resource tool for entrepreneurs, summarizing federal and provincial COVID supports. This summary tool has been downloaded over 6,000 times.
BDC can't do it alone. Inspired by the experience of the 2008 financial crisis, we're also involved with our shareholder, EDC, and Canadian financial institutions in BCAP, the business credit availability program. The intent, as you all know, is to partner with private sector lenders to provide incremental credit into the system on market terms on a risk-sharing basis.
Only the banks, along with other commercial lenders, can provide the massive reach and the speed that the economy requires now. The speed comes from leveraging their existing banking relations to minimizing the time-consuming back and forth known as “know your client”.
Banks have a key roll to play in this program, as do credit unions. Small and medium-sized businesses can get support through a co-lending program for their operational cash flow requirements through BCAP. Eligible businesses can obtain up to $12.5 million through the program, which will be risk-shared 80% by BDC and 20% by the financial institution. This broadens our reach very significantly. This solution complements the EDC export guarantee program, which I know you discussed earlier today.
Our program launched on April 24. Eighteen financial institutions are now signed up, with dozens more in active negotiations.
Now, reporting on volume is dependent on the FIs and will involve a lag, so we don't have the volume information just yet, but I will be pleased, very pleased, to come back to this committee with the banks to report how the program is going.
Also, as part of BCAP, BDC announced a mid-market financing program to make additional credit available, up to $60 million per business until or before September, working closely with the companies of the primary lenders. That means loans are meant to be used to fund operational cash flow needs for a 12-month horizon, which will in turn ensure a degree of continuity of operations during this period of uncertainty.
It's structured as a junior loan, and it serves as a bridge, which is very light on cash flow to a point in time four years down the road. I'd be happy to discuss the mechanics with the committee when we get there. This facility will be launching in a couple of days. We're just finalizing now the legals with the bank and have included support for all sectors, including oil and gas, as previously announced.
Looking ahead to the fall, BDC will be there in the recovery, as we've been in the past, including during the credit crisis. We'll work with the government to make sure we share our market insights as the situation continues to evolve. Regarding loan offerings, we'll stay vigilant and continue to adapt to evolving needs as the economy ramps up. We'll ramp up in a commensurate way to help businesses invest and to help them grow. In particular, we can expect that Canadian businesses will continue to digitize and to adapt to the new reality, and we'll work to minimize the risks on their supply chains.
Thank you for your attention. I hope this lays a useful frame for our discussion.
In my view, it would be very important for the government to monitor and map the economic sector by territory, company size and sector. I'm really interested in your surveys. If you could provide us with a snapshot of the information you have, we would appreciate it.
At the moment, we feel like we're sailing in the dark. The economy is picking up in certain sectors and regions. However, in order to properly modify emergency measures to support businesses during the crisis, we need this information and an understanding of how the situation is evolving.
According to the figures you gave in your presentation, there was a clear improvement between the months of March and May. We can expect a further improvement in June. In my opinion, it will be important to support the sectors that are considered sustainable and important for our economy, those that will need help and are slower to restart.
As you were saying, Mr. Denham, with regard to the tourism sector, restaurants, hotels, and so on, it will obviously be very important to ensure a follow-up.
You also mentioned in your presentation that you provide loans to businesses and that you have made a decision to increase your risk tolerance when financing businesses. Can you tell us more about that?
You may have some information with you that could be made public. Under normal circumstances, what is the percentage of funds invested that may not be repaid? When we talk about risk-taking, that's what we're talking about. What would be the difference between these levels of variation?
We'll call the meeting to order. This is in public. People should know that. We'll just go through the business until, hopefully, next December, but as you know, things are always subject to change.
I believe, David, you sent a copy of the report of the steering committee to members, so that's been done. You have that in your hand. We will discuss it. I know that Mr. Ste-Marie had a concern with one point. There's that to deal with, so we'll go through that report and discuss it fully. Also, Mr. Poilievre has a motion he wants to put on the floor.
We won't be able to hold committee meetings on June 25 as we proposed because the House of Commons is closing down to do technology upgrades and whatever between June 23 and, I believe, July 5. I don't have the exact dates but I believe that's it. We'll have to do something about that June 25 meeting if we go ahead with it.
The subcommittee report is before you. I don't believe it's necessary for me to read it. You have all had the opportunity to read it.
I'll just quickly explain that for paragraph 1(a) we've already had those meetings today.
For paragraph 1(b), on Thursday, June 11, we'll be hearing from the , department officials as well as the Canada Pension Plan Investment Board and the Canada Development Investment Corporation.
For 1(c), on June 16 we'll hear from the new Governor of the Bank of Canada, and we'll do a second panel study of the main estimates.
For 1(d), on June 18 we'll dedicate a meeting to a panel composed of economists from the major Canadian banks. We ask that members submit their witnesses no later than the end of the day today. I want to remind people, because we've seen some of the names coming in, this is for bank economists and probably we should stick to bank economists. That's what the panel is for. I see Peter shaking his head. He can discuss that later. We'll let you in on that, Peter, but that was what that panel was for, bank economists. We had economists previously.
For 1(e), on Monday, June 22.... The reason we're going to Monday is that June 24 is Saint-Jean-Baptiste Day, and there are celebrations on June 23. We felt in fairness to anybody from Quebec that we should move the Tuesday meeting forward to the 22nd. On Thursday, June 25, we will have to make a change there, as indicated, on account of the House. Then there's Tuesday, July 7 and Thursday, July 9. All of those various meetings will be two hours and dedicated to hearing respectively from the Auditor General of Canada, the chief executive officer of the Canada Infrastructure Bank, the commissioner of the Financial Consumer Agency of Canada and the superintendent of Bankruptcy Canada, and another four hours will be dedicated to the hearing of witnesses who have requested to appear.
Let's deal with point one first, and see where we are on that. I don't know whether we want to go by agreement or by motion. We can do it either way, I think.
Is that possible, Mr. Clerk?