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9 months ago

Business Development Bank of Canada (BDC) Updates

Dear Valued Clients,

As we continue to gather information from the Business Development Bank of Canada (BDC) and various banks, we want you, our corporate clients, to be aware and prepared for some of the information required to assess your situation.

Effective March 18, 2020, new relief measures from the BDC for qualified businesses include:

  1. Working Capital Loans of up to $2 Million with flexible terms and payment postponements for up to 6 months for qualifying businesses;
  2. Postponement of payments for up to 6 months, free of charge, for existing BDC clients with a total BDC loan commitment of $1 Million or less;
  3. Reduced rates on new eligible loans;
  4. Additional details regarding Business Credit Availability Program (BCAP) measures, including industry specific support, is expected to be announced in the coming days.

BDC’s working capital financing initiative for companies affected by COVID-19 has now been formalized. We are outlining the details of the loan structure from the BDC as well as the due diligence requirements below.

Working Capital Facility Proposition:

  1. Loan amount: Maximum $2,000,000
  2. Term: 36 months
  3. Principal Payment Postponement Period: 12 months, interest-only
  4. Repayment Schedule: 40% to be repaid in equal monthly principal + interest payments over 24 months, beginning after to the 12-month principal postponement period, with the remaining 60% payable in a balloon payment at the end of the term.
  5. Fees: Processing fee (0.50% of the loan amount), legal, and standby fees apply. A fee of $500 is payable for any in-house security taking method, if applicable. All fees are to be made via electronic payment at this time (no physical cheques).
  6. Pricing: BDC Floating Base Rate minus 1.75%. As of today, the BDC Floating Base Rate is 5.05%, making the All-In Rate 3.30%. The BDC Floating Base Rate is subject to change.
  7. Conditions of Funding: Receipt of Security. No proof of expenditures is required.
  8. Security:
    1. 1st rank General Security Agreement (GSA) and mortgage charge on existing real estate subject to existing lender that could have a GSA / hypothec in force (no cession of rank or priority agreement requested).
    2. No subordination of BDC’s rights.
    3. Personal guarantees may apply (subject to credit department decision).

Documents to be Obtained:

  1. Financial Projections and/or Cash Flow Forecasts;
    2. Completed BDC Form F4025 - Request for Financing;
    3. Completed BDC Form F4037 for any beneficial owner of 25% or more the company; 4. Current Financial Statements for all current BDC Debt Parties;
    5. Any other documents that may be required during the formal credit approval stage.

Preliminary Questions: You must provide a short narrative addressing the questions below.

1) At what activity level do you anticipate to operate at, over the next six months (i.e. full shut down or reduced capacity)?
a. What are the main impacts on your activities?
b. Complete or partial closure of your premises?

2) What are the key carrying costs for the next 6 months (rent, insurance, electricity, salaries, financial fees, etc.)? How these needs will be covered (i.e. with BDC support, other financial partners, shareholder injection, revenue stream etc.)?

3) With a working capital loan and/or postponement (and support from other lenders) does this cover your cash needs for the next six months?
a. Cash and availability on your current bank line of credit?
b. Do you have other sources of funding available?

4) What are your agreements with key suppliers (and customers) on payment terms / support for the next six months?
a. Have you undertaken discussions / negotiations with third parties?
b. Discussion held with the company’s existing operating lender: lender to provide appropriate support as required (i.e. waiver of covenants, extension of the facility, over-margining etc.).

If you need financial support as a result of economic setbacks surrounding the global COVID-19 outbreak, you are required to contact the BDC directly. To start the process for financial assistance, you will need to create a written request to your BDC and/or Commercial/Small Business Banking Representative which describes the answers to the questions above.Ultimately, your plea for financial assistance needs to outline your COVID-19 Contingency Plan.

Along with your written request, you will need to provide your most recent Financial Statements. In many cases, Year End Financial Statements may not be available for your company, so it is important to produce your most recent Financial Statements, Projections and Forecasts with your initial request to avoid delays with your assessment. We are ready to help you with this.

All these requirements will be key for the BDC and/or Commercial/Small Business Banking Representatives to assess your case. The BDC, along with all six of the major banks will be assessing each business on a case by case basis, so it is not guaranteed that you will receive the amount of financial assistance you are looking for. You will have to remain calm and realistic through these unprecedented times.

We will reiterate that you need to present a strong case for your business and illustrate the impact that COVID-19 has had and will have on your business, and the ability to sustain your business and accommodate your employees as you deal with the anticipated financial burden.

To help with your research, you may click on the links below for additional information:

https://www.bdc.ca/en/about/mediaroom/news_releases/pages/bdc-announces-additional- measures-provide-relief-canadian-entrepreneurs.aspx

https://www.bdc.ca/en/about/mediaroom/public_statements/pages/we-are-here-for-you-your- business.aspx

https://www.bdc.ca/en/about/mediaroom/public_statements/pages/useful-advice-help- entrepreneurs-plan-respond-impacts-coronavirus.aspx

We are doing our best to help you, your business, and your families through this together. Please do not hesitate to reach out to your Manager at Prasad & Company LLP for guidance and assistance.

Pramen Prasad CPA, CA, CMA

Managing Partner Prasad & Company LLP

We’re always ready to serve you

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