CBDCs to play increased role in stimulating business development in communities

Community Business Development Corporations (CBDCs) today received a funding commitment of $10 million to support the development of small- and medium-size enterprises in communities affected by the downturn in the groundfish industry in Newfoundland and Labrador.

Funding, through the Canada-Newfoundland Agreement for the Economic Development Component of the Canadian Fisheries Adjustment and Restructuring Initiative (EDC), was announced by Senator Joan Cook on behalf of George Baker, Minister of Veterans Affairs and Secretary of State for the Atlantic Canada Opportunities Agency (ACOA), Beaton Tulk, Minister of Development and Rural Renewal and Nick Hurley, president, Newfoundland and Labrador Association Community Business Development Corporations.

CBDCs are a network of 15 autonomous, not-for-profit corporations that work in cooperation with all levels of government, the private sector, and community development groups to meet the needs of small business. They assist in the creation of small businesses and in the expansion and modernization of existing ones by providing financial and counselling services to entrepreneurs. Local independent boards of directors, sensitive to the needs of communities, make investment decisions.

Today�s funding commitment is complementary to, but not a replacement for, the CBDCs regular investment funds which ACOA provides.

"Supporting the diversification of the province�s small business sector is widely regarded as a critical component of community economic development in this province," said Senator Cook. "By involving community-based organizations such as Regional Economic Development Boards and CBDCs in the delivery of this program, the federal and provincial governments are helping to foster business development activity."

Minister Tulk noted that Regional Economic Development Boards have been calling for greater community-based access to small business capital, as have many other people the provincial government heard from during its public consultations on jobs and growth. "By providing access to risk capital not otherwise available for business establishment and expansion in regions hardest hit by the downturn in the groundfishery, we are responding to that call. This will better enable individuals to seek out and create new sources of employment," the minister said.

For qualifying clients, CBDCs can provide loans, loan guarantee or equity capital up to $125,000. CBDCs will also provide technical assistance to small businesses in the form of business counselling, advice and information.

"With volunteer boards of directors in tune with the needs of their communities, CBDCs make decisions locally," said Mr. Hurley. "We believe in our communities and work with people to make their business ideas work for them."

Funding available through CBDCs is complementary to other types of business funding: micro-lending through organizations such as the Newfoundland and Labrador Federation of Cooperatives and the Newfoundland and Labrador Organization for Women Entrepreneurs, ACOA�s business development program, the Department of Development and Rural Renewal�s Strategic Enterprise Development Fund, and commercial lending through banks.

The three-year $81.25 million Canada-Newfoundland Agreement for the Economic Development Component of the Canadian Fisheries Adjustment and Restructuring Initiative (EDC) was signed on August 16, 1999. The agreement is designed to build upon the strategic plans and priorities of the Regional Economic Development Boards to improve the long-term economic climate in regions impacted by the downturn in the groundfish industry.

It is delivered federally by ACOA and provincially by the Department of Development and Rural Renewal.

For more information, please contact:

Doug Burgess
ACOA
(709) 772-2935

Josephine Cheeseman
Department of Development and Rural Renewal
(709) 729-4570

Nick Hurley
Provincial Association of CBDCs
(709) 786-0016

Funds will be allocated among the CBDCs based on the level of fisheries-affectedness, need, opportunity and availability of alternate sources of capital.

Funding provided to CBDCs will be directed at project investment only and will not be used for CBDC administrative purposes.

General terms and conditions have been established to ensure consistency in the application of the program. These include:

activities supported must be incremental and complementary to existing business financing programs;

a range of investment tools may be used (i.e., loans, provisionally repayable contributions, equity, community capital);

interest rates on loans shall be set at levels comparable to prevailing commercial rates to ensure complementarity with existing programs;

activities supported will be consistent with identified growth sectors with priority given to projects that are consistent with Regional Economic Development Board and federal-provincial plans and priorities.

the program will be used to encourage higher risk activities than would normally be undertaken by CBDCs using traditional programming.

Eligible applicants may be individuals, partnerships, incorporated companies and co-operatives involved in eligible commercial activities.

Activities will be evaluated on the basis of viability, net economic benefit, competitive impact, consistency with program objectives and need.

viability will measure the prospects for success of the venture based on such factors as the concept, business plan, financial history (where applicable), management, commitment of the principals and competitive position;

benefit assessment will consider such factors as jobs created/maintained, sales generated and spin offs to local suppliers;

activities will be assessed to ensure they do not have a competitive impact on existing businesses;

consistency with program objectives will measure the venture�s fit with the identified priorities of the respective regional economic development boards and the federal and provincial governments;

the level and form of investment shall be based on that which is deemed essential for the activity to proceed.

2000 03 13                                                         3:40 p.m.