The bank is partnering with the Community Futures network to help founders in remote areas access capital and advice.
The Business Development Bank of Canada (BDC) will provide $100 million in business loans to half a million entrepreneurs living in rural and remote areas of Canada.
The Crown corporation, whose sole shareholder is the Government of Canada, has partnered with a network of federally funded economic development organizations to increase funding and resources available to small business owners.
“It’s difficult for young businesses to get funding; it’s difficult in the tech sector, and even more difficult when you’re in a remote rural area.”
Miguel Barrieras, BDC
Community Futures' network of 267 offices provides business development services, loans and financing to small and medium-sized businesses. The Quebec offices are known as Réseau de SADC et CAE, and entrepreneurs in Atlantic Canada receive support through the Community Business Development Corporation. In total, Community Futures says it has provided more than $6.3 million in loans to 135,000 businesses and helped create nearly 800,000 jobs with financial support from Canadian regional development agencies.
The new envelope is based on BDC Community Banking Initiativein November, an attempt was made to boost entrepreneurship in Canada. The development bank says the money will help generate up to $250 million in gross domestic product over five years and fulfill its mission of serving people outside major cities.
The BDC's mandate is to support Canadian entrepreneurship, with a focus on small and medium-sized businesses, and to act as a complementary player in the marketplace. The bank provides loans and equity financing through its investment arm BDC Capital, as well as advisory services to companies and funds throughout the country.
Miguel Barrieras, BDC's chief officer and community banking specialist, told BetaKit that the initiative aims to reach more entrepreneurs in underserved regions of Canada. He stated that in rural areas the share of entrepreneurs is usually higher than in urban areas.
“The complementarity of our overall capabilities … makes them much stronger and will allow us to reach many more entrepreneurs who historically have had fewer alternatives,” Barrieras said.
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Barrieras said the $100 million will increase the lending capacity of Community Futures offices and, in some cases, allow them to double loan amounts from $250,000 to $500,000. The Development Bank also provides Community Futures with advisory services and reference materials, such as information on how best to use artificial intelligence (AI) or cybersecurity tips.
While the initiative is not being run through BDC's venture capital (VC) arm, Barrieras said debt financing opportunities can still benefit early-stage startups, especially for their first “breakthrough” capital.
“It’s difficult for young businesses to get funding; it’s hard in the tech sector, and it’s even harder when you’re in a remote rural area,” Barrieras said. Obtaining further funding will be easier as these companies “prove their worth” by securing lending opportunities, he said.
The landscape for early-stage venture capital funding in Canada has changed. on the declineespecially against the background economic uncertainty due to the ongoing trade war making it difficult for some startups to access seed funding. Artificial intelligence and software companies mainly isolated from the trend, while those who are in medical technology And hardware fought.
In a statement, Industry Minister Mélanie Joly said the initiative takes advantage of the “added benefits” of BDC's financial and advisory expertise combined with the Community Futures network's connections to the community.
This initiative is distinct from the BDC Accelerated Lending Program, which aims to guarantee up to $800 million in loans to entrepreneurs from partner financial institutions. Under this program, debt financing will be split 50-50 between the BDC and the Community Futures office, with “competitive” loan terms.
Barrieras said this makes the funding process more “friendly” for entrepreneurs who will deal with economic development offices in their communities. As part of its broader Community Banking initiative, BDC committed $100 million in June to guarantee loans made by the majority of Indigenous-owned businesses. First Nations Bank of Canada Indigenous organizations purchasing Canadian businesses from retired owners. More recently, the development bank promised 50 million dollars for a similar initiative to help women entrepreneurs acquire businesses.
Artistic image courtesy of Madison McLachlan for BetaKit.
