Description
The Corporate Plan Summary is based on the 2015-2016 to 2019-2020 Corporate Plan, as approved by the Governor in Council on the recommendation of the Minister of Industry.
BDC Corporate Plan Summary
2015-16 to 2019-20
OPERATING BUDGET | CAPITAL BUDGET
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
2 | bdc.ca
The Corporate Plan Summary is based on the 2015-2016 to 2019-2020
Corporate Plan, as approved by the Governor in Council on the
recommendation of the Minister of Industry.
bdc.ca | 3
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Contents
BDC PROFILE _________________________________________________ page 4
OPERATING ENVIRONMENT ___________________________________ page 6
EXECUTIVE SUMMARY ________________________________________ page 8
HOW BDC HELPS ENTREPRENEURS
Informing, inspiring and celebrating __________________________ page 10
Making it easy to do business ________________________________ page 10
Reaching entrepreneurs across Canada ________________________ page 11
Getting businesses up and running ____________________________ page 12
Turning challenges into opportunities _________________________ page 14
Helping entrepreneurs up their game __________________________ page 15
BDC/EDC products and services ___________________________ page 21
DOING MORE TO SUPPORT ENTREPRENEURS __________________ page 22
Helping to improve competitiveness __________________________ page 23
Facilitating greater access to capital ___________________________ page 27
New powers under the BDC Act ___________________________ page 29
SUMMARY OF INITIATIVES ____________________________________ page 30
PERFORMANCE MEASURES ____________________________________ page 31
INDEX OF PARTNERS/BUSINESS RELATIONSHIPS _________________ page 32
APPENDICES TO THE CORPORATE PLAN
Appendix A: Governance ___________________________________ page 34
Appendix B: Risk Management _______________________________ page 38
Appendix C: Future Performance Measures_____________________ page 40
FINANCIAL PLAN ___________________________________________ page 41
Appendix A to the Financial Plan ____________________________ page 60
Appendix B to the Financial Plan _____________________________ page 63
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
4 | bdc.ca
Economic impact of BDC’s clients
ASPIRATION
To be a leader in making Canadian entrepreneurs the most
competitive in the world
75%
of clients have fewer
than 20 employees
80%
of clients said BDC had
an overall positive impact
on their business
4
5,701
are frst-time clients
(Financing and Growth
& Transition Capital)
2012 2013 2014
Annual revenues generated by BDC clients $176B $192B $200B
Estimated annual export revenues
generated by BDC clients
$21.6B $22.7B $21.9B
2,000
employees
$19.6B
assets
$206M
dividends paid
since 2009
BC & North Prairies Ontario Quebec Atlantic Total
Business centres and offces 14 17 31 26 13 101
Clients
1
3,805 5,190 8,345 11,481 3,906 32,727
Loans/investments
2
$2.4B $4.0B $5.8B $7.1B $1.9B $21.2B
1
# of Financing, Growth & Transition Capital, Consulting and Venture Capital clients and funds
2
$ committed for Financing, Growth & Transition Capital and VC clients and funds, excluding inactive companies
3
Sub-investment grade, which is rated BB+ or less, relates to BDC’s Financing portfolio in $ outstanding
4
Based on the Survey on BDC’s image, role and impact, October 2014
5
Through securitization and venture capital
6
Includes both BDC and non-controlling interests
7
Includes $15.1M invested in 31 inactive companies
8
F-PIL = Funding Platform for Independent Lenders
BDC profle: For 70 years, a steadfast supporter of Canadian entrepreneurs
BDC Business Lines
Financing
Growth &
Transition Capital
Venture
Capital
Consulting Securitization
Term loans
with fexible
repayment
schedules
$17.7B
outstanding
$19.7B
committed
Cash fow, mezzanine,
quasi-equity and
equity solutions for
growth and transition
projects
$601M
outstanding
6
$636M
committed
6
Direct and indirect
equity investments in
multiple technology
sectors
$535M
outstanding
$862M
committed
7
Affordable business
consulting, planning
and management
solutions
2,505
mandates in 2014
Debt fnancing that relies
on the pooling of illiquid
assets (under F-PIL
8
)
$336M
ABS outstanding
$530M
committed
Financing
Growth &
Transition Capital
Venture
Capital
Consulting Securitization
Term loans
with fexible
repayment
schedules
$17.7B
outstanding
$19.7B
committed
Cash fow, mezzanine,
quasi-equity and
equity solutions for
growth and transition
projects
$601M
outstanding
6
$636M
committed
6
Direct and indirect
equity investments in
multiple sectors
$535M
outstanding
7
$862M
committed
7
Affordable business
consulting, planning
and management
solutions
2,505
mandates in 2014
Debt fnancing that relies
on the pooling of illiquid
assets (under F-PIL
8
)
$336M
ABS outstanding
$530M
committed
BDC business centres
BDC clients
18%
of clients are
exporters
94%
of BDC’s portfolio
is sub-investment
grade
3
7,417
Canadian SMEs
receive indirect
support from BDC
5
DATA ARE AS AT MARCH 31, 2014, UNLESS OTHERWISE NOTED
bdc.ca | 5
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
? Diversifed (incl. FedDev) $112.9M
? Healthcare $93.0M
? Information technology $72.1M
? Industrial/clean/energytech $57.1M
? GO Capital
12
$25.6M
? Strategic investments (SIP) $9.7M
? Funds of funds
13
$432.4M
? Strategic investments (SIP) $59.1M
Manufacturing 23%
Wholesale & Retail 19%
Tourism 13%
Commercial properties 11%
Construction 9%
Transport & storage 6%
Business services 4%
Other 15%
Manufacturing 36%
Business Services 21%
Wholesale Trade 11%
Construction 7%
Retail Trade 6%
Tourism 2%
Transportation & Storage 2%
Other 15%
Financing commitment: $19.7B
Growth & Transition Capital commitment: $636M
Venture Capital commitment: $370M in direct investments and $492M in indirect
Consulting Securitization
9
Based on Statistics Canada input/output model results of direct and indirect economic activity generated by clients who were fnanced by BDC in fscal 2014
10
Based on the Survey on BDC’s image, role and impact, October 2014
11
Industry Canada, The State of Entrepreneurship, February 2010
12
Includes GO Capital 100% consolidation in BDC
13
Excludes BDC investment in GO Capital due to consolidation
14
Assets under management represents total committed capital of active portfolios, including anticipated commitments
Commitment by industry sector
Commitment by industry sector
%
Commitment by fund
Commitment by region
Commitment by region
Key metrics
Key metrics
11% are start-ups
(< 2 years) of which 60% survive
more than 5 years (vs. 51% of all
start-ups in Canada)
11
18%
of clients are mid-sized frms
(100 to 499 employees)
? Atlantic ? Quebec ? Ontario
? Prairies ? BC & North
? Atlantic ? Quebec ? Ontario
? Prairies ? BC & North
11%
8%
7%
3%
1%
50%
7%
13%
10%
6%
33%
42%
26%
33%
20%
14%
11%
5%
$53.9B
contribution to GDP
9
57%
of clients are exporters
7,012 SMEs have benefted indirectly
from BDC’s role in the securitization market
Clients gave BDC Consulting a score of 7.5 out of 10 for
understanding entrepreneurs’ needs
10
Each dollar invested by BDC VC
leveraged $5.13
from external investors
BDC VC has
$1.95 billion
assets under management
14
Clients gave BDC a score of
7.4 out of 10 for helping their
business through fnancial diffculties
10
52%
of clients are in
non-metropolitan areas
74%
of BDC VC’s investments were in
early stage frms (seed, start-up and
development phases)
Key metrics $
D
i
r
e
c
t
I
n
d
i
r
e
c
t
DATA ARE AS AT MARCH 31, 2014, UNLESS OTHERWISE NOTED
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
6 | bdc.ca
Operating Environment
BDC’s Corporate Plan is based on the following economic observations and assumptions
Global and selected regional growth forecasts
Share of global
GDP (%)
Real GDP growth (%)
2013 2014e 2015f 2016f
World 100 3.3 3.3 3.5 3.7
United States 16 2.2 2.4 3.6 5.3
Euro area 12 -0.5 0.8 1.2 1.4
China 16 7.7 7.4 7.0 6.9
Japan 5 1.6 0.1 0.6 0.8
Canada 1 2.0 2.4 2.1 2.4
Rest of the world 50 3.0 2.9 3.1 3.4
Source: International Monetary Fund and Bank of Canada, January 2015, e = estimate; f = forecast
GDP shares are based on International Monetary Fund (IMF) estimates of the purchasing-power-parity (PPP) valuation of country GDPs for 2013 from the IMF’s
October 2014 World Economic Outlook. This update has increased the weight of China and the rest of the world, which in turn has revised up World GDP
growth by approximately 0.1 percentage point relative to the July Report.
> Modest acceleration of the global economy is
expected in coming years.
> Crude oil prices have fallen by more than
55 percent since June 2014 due to oversupply.
This will negatively impact countries that are net
oil exporters and will reduce business investment
in the oil sector.
> While lower oil prices are expected to stimulate
global economic growth overall, they will widen
the differences among economies.
> In the Euro area and Japan, growth is forecast to
remain weak. However, in the U.S., the expansion
of the economy should continue:
– the drop in oil prices will be a net beneft to
consumers
– the housing sector is reviving
– job creation is strong, however, long-term
unemployment and involuntary part-time
employment levels remain elevated
– consumers have reduced their debt levels
– the federal budget defcit has been brought to a
more sustainable level
The global context
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SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Does your company expect to invest in new projects within the next 12 months?
? Yes ? No ? Don’t know
0
40
80
2012
55
59
78
41
37
20
3 4
2
2013 2014
Source: BDC Viewpoints, Business Investment Planning Survey, September 2014
The Canadian context
Economic growth
> A more robust U.S. economy should continue
to beneft Canadian exports. Therefore, export-
driven industries are expected to perform better,
supported by stronger global growth and a
lower Canadian dollar. However, competition
from emerging economies and loss of export
capacity mean that Canadian exports to the U.S.
should continue to underperform relative to past
recovery periods.
> The manufacturing sector has not reached its pre-
recession output level and continues to face stiff
competitive pressures; a lower Canadian dollar
will be benefcial but being more innovative and
productive will remain an imperative.
> In January 2015, the Bank of Canada estimated
that the lower price of oil will take one-third of
a percentage point off Canadian GDP growth in
2015. Oil-producing provinces would be negatively
affected, while other regions, such as those more
concentrated in manufacturing, would beneft from
a lower Canadian dollar. If the price of oil remains
depressed for an extended period, this will likely
reduce investments by major oil producers, which
would affect their suppliers negatively.
> Overall, economic conditions in Canada are sound
but long-term economic growth potential is
expected to be weaker than before the recession
at slightly more than 2 percent annually, due to an
aging population and lagging productivity.
Credit conditions
> Credit conditions should remain favourable to
Canadian businesses.
> However, based on Statistics Canada’s “Survey
on Financing and Growth of Small and Medium
Enterprises”, roughly 16 percent of SMEs—and
almost one in four manufacturers—believe that
diffculty accessing fnancing is an obstacle to
growth.
> Generally, frms with fewer physical assets, that
are more innovative, or that are start-ups have the
most diffculty accessing fnancing.
> The Governor of the Bank of Canada warned in
December 2014 that credit for new and small
businesses could be negatively affected as banks
adjust to tougher regulations.
Business investment
> Improved export opportunities should lead to
more business investment in the near term; a
BDC survey shows investment intentions among
SMEs have picked up over the past two years.
> The Canadian Federation of Independent Business
(CFIB) reported that optimism among SMEs
was negatively affected by lower oil prices in
December 2014.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
8 | bdc.ca
Executive Summary
C
anada’s small and medium-sized businesses
contribute signifcantly to the economy: they
account for almost three-quarters of private-sector
employment and more than half of gross domestic
product in the private sector.
The Business Development Bank of Canada (BDC)
helps to ensure that Canada continues to beneft
from its small and medium-size enterprises (SMEs).
It does so by providing entrepreneurs with fnancing,
investments and advisory services, paying particular
attention to SMEs that face market gaps, in accord-
ance with its complementary role.
As a pan-Canadian Crown corporation, BDC strives
to be visible in communities across the country,
including non-urban centres. To accomplish this,
BDC works with public- and private-sector partners,
including other fnancial institutions, private-sector
investment funds and technology accelerators. BDC
also provides educational resources and celebrates
the accomplishments of Canadian entrepreneurs,
including through four new awards announced in
Economic Action Plan 2013.
The report on BDC’s “10-Year Legislative Review:
2001-2010”, tabled by the Minister of Industry in
June 2014, found that BDC meets its mandate of
supporting Canadian entrepreneurs while playing
a complementary role in the market. The review
resulted in recommendations aimed at ensuring BDC
continues to meet its mandate and changes to the
Business Development Bank of Canada Act that will
better enable BDC to support entrepreneurs.
Over the planning period, BDC will continue to fulfll
its role so that Canada can beneft from a strong
entrepreneurial ecosystem.
At the same time, there is a pressing need for
Canadian SMEs to become more competitive
through innovation, productivity, growth and
internationalization. This is where BDC also has an
important role to play. As part of Digital Canada
150, BDC leverages its expertise and resources to
help SMEs innovate and increase effciency. It plays
a pivotal role in the innovation economy, including
implementing several government priorities such as
the Venture Capital Action Plan (VCAP). It assists
SMEs that make signifcant contributions to the
economy, such as high-growth frms and SMEs in
specifc sectors, including aerospace. Plus it helps to
ensure that promising frms have the opportunity to
grow, explore new markets and become the next
generation of Canadian champions.
Now, BDC believes it is important to do more
to enable Canadian entrepreneurs to make an
even greater contribution to the economy. It will
accomplish this by building on existing strategies and
proposing new initiatives to facilitate access to capital
and advisory services and help SMEs become more
competitive.
bdc.ca | 9
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Financial Plan Highlights
BDC Financing plays an important role in facilitat-
ing access to capital for entrepreneurs and sup-
porting the competitiveness of SMEs. Over the
planning period, it will work to ensure that it is
accessible to entrepreneurs across Canada, with a
focus on increasing its support to SMEs in Ontario
and Western Canada. To refect these efforts, BDC
Financing has increased its forecast for acceptances
and the portfolio is forecast to grow to $20.4 billion
in fscal 2016. Net income is expected to increase to
$458 million in fscal 2016.
BDC believes that entrepreneurs need to take
advantage of professional, qualifed advisory servi-
ces to grow, innovate and create effciencies. This is
why BDC Consulting is investing in advisory services
that will maximize impact on the competitiveness of
Canadian entrepreneurs. Annual revenues for BDC
Consulting are forecast to increase to $19 million in
fscal 2016. Net losses are expected to remain stable
in fscal 2016, refecting improved effciencies and
cost recovery.
BDC Growth & Transition Capital addresses the
needs of Canada’s fastest-growing companies and of
frms in transition. The forecast for acceptances is in
line with last year, which should bring the portfolio
at fair value to $732 million in fscal 2016. Due to
growth in the portfolio and improved effciency, net
income will increase to $34 million in fscal 2016.
BDC Venture Capital will build on its existing
strategy and address evolving needs in the market
by supporting a variety of companies and looking
for opportunities for early and late-stage investing.
Largely as a result of increased activity in direct
investing, the forecast for authorizations is higher
than last year. BDC VC’s forecast for net income
has improved from last year’s Corporate Plan, with
a net loss of $14 million expected in fscal 2016.
The portfolio at fair value is forecast to increase to
$668 million in fscal 2016.
In the Venture Capital Action Plan, BDC expects to
incur a net loss of $21 million in fscal 2016.
To help some of Canada’s most promising frms
contribute fully to the economy, BDC is proposing
the gradual implementation of a new initiative that
will facilitate access by these “high-impact” frms to
the best solutions available. As an investment in SME
competitiveness, the initiative will be funded from
retained earnings.
Even with these important investments in Canada’s
entrepreneurs, BDC remains fnancially sustain-
able. BDC consolidated net income is expected to
be $423 million in fscal 2016. In fscal 2016, BDC is
forecasting dividend payments of $60 million.
BDC’s 10-year moving average return on equity is
expected to remain stable in fscal 2016. The BDC
Financing reported effciency ratio is forecast to be
38.7 percent in fscal 2016, where a decrease in the
ratio represents improved effciency. This refects an
improvement in effciency compared to fscal 2007,
where BDC spent 50.6 cents to generate a dollar of
revenue.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
10 | bdc.ca
A healthy entrepreneurial ecosystem is critical for
Canada’s economic well-being. BDC reinforces this
ecosystem by raising awareness of entrepreneurship,
offering information and resources, supporting early
and seed stage investment groups, and celebrating
and inspiring entrepreneurs.
In Economic Action Plan 2013, the government
asked BDC to draw on its experience with the
Young Entrepreneur Award program to create and
administer a new awards program. In January 2014,
BDC launched the BDC Entrepreneurship Awards,
recognizing the contribution of entrepreneurs to the
Canadian economy in the areas of mentorship, in-
novation, resiliency and serial entrepreneurship.
In line with Economic Action Plan 2013, the object-
ives of these awards are to promote and celebrate
Canada’s entrepreneurial culture while inspiring
Canadian entrepreneurs to innovate, take risks and
grow their businesses.
The BDC Mentorship Award, presented by Futur-
preneur Canada, was awarded in May 2014 to Ryan
C. Jackson of Medicine Hat, Alberta. This award
recognizes an outstanding Canadian mentor who has
contributed to the success of his/her mentees.
The BDC Innovation Award, presented by the Can-
adian Venture Capital & Private Equity Association,
was awarded in May 2014 to Mirametrix of Mont-
real. This award recognizes Canada’s most innova-
tive start-up company that has reshaped its industry
in exciting and unforeseen ways.
The BDC Resiliency Award, presented in partner-
ship with the Turnaround Management Association,
was awarded during BDC Small Business Week in
October 2014 to Superior Cabinets of Saskatoon.
This award recognizes a Canadian business that has
successfully undergone a restructuring or pivotal turn
of events in the past year.
The fourth award, the BDC Entrepreneurship
Champion, recognizes a Canadian entrepreneur who
has created and grown many successful smaller busi-
nesses over the years, making a substantial contribu-
tion to the Canadian economy. The winner of this
award will be selected by an advisory committee of
Canadian business leaders and key infuencers and
announced in 2015.
Informing, inspiring and celebrating
Making it easy to do business
It is important to reduce “red tape” for business
owners to help them save time and money. BDC
continuously looks for ways to improve the client
experience, for example, by reducing disburse-
ment times and by making loan applications available
online. BDC’s website, BDC.ca, has been improved
over the past few years to make it more intuitive and
navigable for entrepreneurs.
BDC’s Agility and Effciency (A&E) program also
has improved the client experience. It started with
exploring how employees could devote more time
to clients and less time to process. In fscal 2015, the
centrepiece of A&E, the core lending solution, re-
placed older systems and is now fully operational. By
transforming BDC’s processes, it allows for better
automation, easier assignment of tasks, faster pro-
cessing times and more effcient service for clients.
bdc.ca | 11
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Reaching entrepreneurs across Canada
BDC’s fnancing, investments and advisory services
are accessible through more than 100 locations
across the country. BDC currently supports over
32,000 clients directly—and more than 7,400 in-
directly—about 20 percent of whom reside in
rural or remote areas. Ninety-six percent of BDC’s
clients have fewer than 100 employees and in fscal
2014 they generated approximately $200 billion in
revenues, including $22 billion in export revenues.
To ensure that it is able to help entrepreneurs
across Canada, BDC frequently reviews the number
and location of its offces (see page 27 for more
information). In rural markets, BDC works with
Community Futures Development Corporations
(CFDCs). Out of 268 CFDCs across the country,
BDC has partnership agreements with 236, including
in Canada’s North. From fscal 2013 to 2014, there
was a 74 percent increase in deals done in partner-
ship with CFDCs.
In fact, BDC relies on the expertise and cooperation
of a variety of organizations from the public and
private sectors to increase its reach and accessibility
(please see the Index of Partners/Business Relation-
ships on page 32). For example, in its work to
re-energize the venture capital ecosystem in Canada,
BDC works with accelerators and angel investor
groups, which are dedicated to helping promising
technology companies get off the ground.
An effective online presence is another way BDC
increases its reach. Recognizing that the adoption of
web technology is at an all-time high among entre-
preneurs, BDC wants to optimize its use of online
channels to increase its presence and provide more
value to SMEs. This involves developing the ability to
support entrepreneurs online in real-time and pub-
lishing value-added content that helps entrepreneurs
solve various business challenges.
A complementary approach
Working with fnancial institutions allows BDC to
increase credit availability for SMEs while playing its
complementary role.
In fscal 2014, BDC launched a pilot program for
asymmetric lending, where BDC’s terms and
conditions differ from those of the other lend-
ers in the transaction. This results in BDC taking a
greater share of the risk and helps to ensure that the
entrepreneur receives the fnancing. It differs from
pari passu lending, where terms and conditions for
each lender are equal. As at September 30, 2014,
BDC had authorized $28 million in 26 asymmetric
fnancing transactions. As part of the pilot, BDC is
partnering with fnancial institutions across Canada.
Loan guarantees are another way in which BDC
can improve access to fnancing. BDC is currently
exploring the potential of offering loan guarantees,
where BDC would repay a debt obligation to the
lender if the borrower defaults.
To help larger, growing companies access fnancing,
BDC offers subordinated fnancing solutions in con-
junction with other lenders and participates in bigger
transactions through syndication.
To ensure ongoing collaboration and complementar-
ity with fnancial institutions, BDC executives partici-
pate in the Lending Practitioners Forum, an initiative
spearheaded by the Canadian Bankers Association
that involves the major chartered banks and Export
Development Canada (EDC). BDC also participates
on the board and committees of the Canadian Ven-
ture Capital & Private Equity Association and works
closely with Credit Union Central of Canada.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
12 | bdc.ca
Typically, start-ups and small businesses fnd it dif-
fcult to access fnancing as they often lack manage-
ment experience and collateral. Many also cannot af-
ford or access advisory services that could help their
business grow and succeed. To address these market
gaps, as a complementary lender BDC offers tailored
fnancing products, which are often small loans of
less than $500,000, and advisory services.
BDC’s commitment to small businesses is paying
off, with 8,010 small loans authorized in fscal 2014,
well above the target of 6,500. BDC also helped
1,519 start-ups in fscal 2014, exceeding its corpor-
ate target of 1,400. For fscal 2014, BDC’s median
loan size was $100,000, another indicator of its
dedication to small loans and small business.
BDC also helps some of Canada’s most promising
technology frms get up and running through venture
capital (VC) and by working with accelerators and
angel investor groups. More on BDC’s VC activities
can be found starting on page 15.
Young entrepreneurs
Young entrepreneurs often cannot access traditional
fnancing due to a lack of experience and collateral.
BDC works with Futurpreneur (formerly the Can-
adian Youth Business Foundation) to match fnancing
and can provide up to $30,000, twice that provided
by Futurpreneur. As at March 31, 2014, BDC’s com-
mitment under this alliance was for $21 million to
969 young entrepreneurs.
BDC has helped develop and promote mentoring-
focused “crash courses” on Futurpreneur’s online
business resource centre. These interactive modules
provide in-depth, self-guided learning for both the
mentor and the young entrepreneur. For Futurpre-
neur, a measure of success is how many of its entre-
preneurs can access traditional fnancing.
BDC is involved in other programs for young entre-
preneurs:
> Junior Achievement (JA)—BDC supports
JA fnancially to develop and launch the “Be
Entrepreneurial” program, which promotes
entrepreneurship to Canadian youth
> Vanier College BDC Business Case Challenge—a
national business case competition for pre-
university students
> Enactus—BDC renewed its contribution to
Enactus through a three-year commitment of
$50,000 annually. The BDC Entrepreneurs First
Project will award $2,500 each to six Enactus
teams to implement projects in their communities
that accelerate the success of entrepreneurs. Since
2011, 244 students have been involved
Aboriginal entrepreneurs
Aboriginal entrepreneurs can have diffculty access-
ing fnancing and advisory services as they often
lack experience and can have challenges in offering
collateral. BDC supports Aboriginal entrepreneurs
through:
> Growth Capital for Aboriginal Business—fexible
term loans of up to $25,000 for new businesses
and up to $100,000 for existing businesses.
> Aboriginal Business Development Funds—a pro-
gram that provides funds through a community-
based organization. BDC has committed $1 million
to four funds that are delivered at the grassroots
level in various regions of Canada.
Getting businesses up and running
bdc.ca | 13
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
> Consulting—Aboriginal entrepreneurs have identi-
fed mentoring and improved management skills as
priorities. BDC Consulting draws on experienced
Aboriginal consultants to deliver entrepreneurial
training for Aboriginal entrepreneurs.
> E-Spirit—a national Aboriginal business plan com-
petition sponsored by BDC for Aboriginal youth in
grades 10 to 12. Since 2001, E-Spirit has intro-
duced over 6,500 students to entrepreneurship.
In the spirit of complementarity, BDC’s Aboriginal
banking unit works closely with Aboriginal fnancial
institutions across Canada to help ensure access to
fnancing and partners with Aboriginal Affairs and
Northern Development Canada (AANDC) to pro-
vide debt fnancing to First Nations businesses across
Canada with assets on a reserve. This reduces the
impact of one of the main impediments to First Na-
tion business development: Section 89 of the Indian
Act that prohibits use of personal or real property on
reserve land as collateral.
BDC’s Aboriginal banking unit has expanded to
include more specialized account managers across
Canada. Whether for fnancing or advisory services,
Aboriginal entrepreneurs deal consistently with
a specialist from the unit. As at March 31, 2014,
BDC’s commitment to Aboriginal businesses was
$188.1 million to 301 clients.
Immigrant entrepreneurs
For newcomers to Canada with international busi-
ness experience, self-employment is a way to con-
tribute to the economy. In a September 2014 survey
of more than 1,200 existing and former BDC clients,
50 percent of respondents who identifed themselves
as immigrants said fnancing from BDC helped them
create employment. However, immigrants often lack
access to the information and resources needed to
start a business.
Entrepreneurship Connections, a program helping
Greater Toronto Area immigrants start their own
business, was launched in 2011 through a partner-
ship between ACCES Employment and BDC. The
four-week program helps immigrants learn about
the Canadian market, including legal and regulatory
requirements and potential sources of fnance. Par-
ticipants receive coaching, learn to write a business
plan and are paired with a mentor in the Canadian
market. BDC is working with community partners to
establish similar programs.
Social purpose frms
BDC supports “social purpose” frms through pilot
projects in Quebec, Ontario and British Columbia
and by building relationships with organizations
across Canada that work with these frms. The busi-
ness models and plans of social purpose companies
include the creation of a social or environmental
value. Many of these frms seek certifcation as a
Benefcial corporation (B Corp), a new certifcation
similar to LEED for green buildings or Fair Trade for
coffee. Certifed B Corps (a group of 1,200 frms in
35 countries) must meet comprehensive standards
related to purpose, transparency and accountability.
BDC achieved this designation in 2014—the frst
Canadian fnancial institution to do so.
BDC support for small business as at March 31, 2014
# of start-ups
1
served over past 10 years 13,457
$ authorized for small businesses
2
over past 10 years $27B
$ authorized for start-ups over past 10 years $4.2B
# of BDC Entrepreneurship Centres serving small businesses 21
1
Defned as businesses Fundraising for Canadian GPs—a shortage of LPs
in the Canadian market has made it diffcult for
both established and emerging fund managers
to close their funds with an adequate amount
of investment. The Venture Capital Action Plan
(VCAP) should help in this regard.
> Late-stage funding gap—although there has been
signifcant momentum in VC investments, there
remains little capacity for later-stage investment,
which has encouraged U.S. VC frms to enter the
Canadian market to take advantage of strong later-
stage opportunities.
> Imbalanced VC ecosystem—new fund models and
emerging managers raising small funds of less than
$50 million are changing the landscape. This could
result in early stage capital not being suffciently
balanced by later-stage capital.
> Uneven sector momentum—while the information
technology sector has seen a blossoming of
VC fund managers and funding primarily at the
early stages, companies in the industrial and
clean energy sector, as well as in health care,
face signifcant funding gaps. At the same time,
promising new clusters of sectors and frms are
emerging.
Venture Capital Strategic Investment
Plan (VCSIP)
Under Economic Action Plan 2013, the government
asked BDC to invest $100 million of its own capital
in strategic partnerships with business accelerators
and co-investments in graduate frms. To fulfll this
BDC VC’s accelerator partners
Kitchener-
Waterloo
Toronto
Montreal
Moncton
accel-rx
Vancouver
Health Sciences
Montreal
IT / Tech
Execution Labs
Montreal
Digital / Mobile Gaming
CMF | FMC
Montreal
IT / Digital Media
Launch 36
Moncton
IT / Tech
Foresight Cleantech
Accelerator Centre
Vancouver
Cleantech
Highline
Vancouver & Toronto
IT / Tech
Velocity
Kitchener-Waterloo
IT / Tech / hardware
Communitech Hyperdrive
Kitchener-Waterloo
IT / Tech
Creative Destruction Lab
Toronto
Tech / Diversifed
bdc.ca | 17
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
priority, BDC VC’s SIP team is implementing the
Venture Capital Strategic Investment Plan (VCSIP) by
making direct and indirect investments that build on
its work in support of the ecosystem.
A portion of VCSIP funding is also directed to
ecosystem models and infrastructure that are the
foundation for high-growth, technology-driven
entrepreneurs and start-ups in innovation hubs
across Canada, for example, Montreal-based Not-
man House. In this way, VCSIP enables the building
of technology companies and broader connectiv-
ity within the startup community, facilitating the
creation of future VCSIP investments and a more
sustainable early stage innovation ecosystem.
Investments under VCSIP are complementary to
support from the Canada Accelerator and Incubator
Program (CAIP) and other government programs.
Venture Capital Action Plan (VCAP)
Working closely with Finance Canada, BDC has
made signifcant progress in operationalizing the
Venture Capital Action Plan (VCAP), designed to
help create a vibrant VC system in Canada, led by
the private sector.
In January 2013, the Prime Minister announced
that, under VCAP, a $350-million contribution from
the government would be used to leverage up to
$1 billion in private-sector capital to establish and re-
capitalize large, private-sector funds of funds. VCAP
also includes $50 million for a few high-performing
VC funds.
The government assigned a number of functions to
BDC under VCAP, including:
> serving in an advisory capacity to Finance Canada
and Industry Canada by leveraging its internal
expertise and resources to provide advice on
specifc elements of VCAP
> serving as the LP of record for the government
under VCAP, including carrying out such duties as
signing the requisite paperwork, communicating
with the GPs and other LPs, attending meetings
and generally acting on behalf of the government
> undertaking administrative duties including placing
investments on behalf of the government and
monitoring and reporting on the ongoing success
of VCAP to help determine its overall impact on
the economy
The frst stage in executing VCAP took place with
the selection of four high-performing funds in the
IT and life sciences sectors that have demonstrated
strong investment performance and are aligned with
the objectives of VCAP.
The second stage of VCAP involved the selection of
fund managers and negotiation of legal documenta-
tion surrounding the creation of new private-sector
funds of funds. BDC expects that all four VCAP
funds of funds will be closed by the end of fscal 2015
and three will be in active investment mode before
the end of March 2015.
BDC will continue to apply its usual rigour and high
standards in its capacity as agent of the government
and work proactively with the private sector to
ensure VCAP plays the critical role for which it was
designed.
Productivity
Entrepreneurs must invest in the fxed assets and
technology needed for operational effciency, wheth-
er it be state-of-the-art equipment, new facilities to
increase production capacity, or employee training. If
SMEs boost productivity at the frm level, collectively
these improvements can have a signifcant impact on
the domestic economy.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
18 | bdc.ca
BDC’s information and communication technology
(ICT) loans help SMEs improve productivity through
technology. In addition, in June 2012, BDC launched
a pre-approved Equipment Line that allows entre-
preneurs to purchase new or used equipment over a
12-month period with guaranteed terms and condi-
tions. The fexibility of this fnancing frees up cash
for entrepreneurs. The fact that it is pre-approved
is effcient and allows clients to act quickly when an
opportunity arises. BDC fnances up to 125 percent
of an equipment purchase, including training or other
such costs, while taking less security.
To further ease cash fows, BDC provides working
capital to complement an SME’s line of credit with
another fnancial institution. BDC offers amortization
periods suited to the project, seasonal or progressive
repayments, and deferred principal payments.
BDC Consulting also helps SMEs through continuous
process improvements, operational best practices,
and defned performance indicators and objectives.
Improving productivity with
securitization
By partnering with private-sector fnancing compan-
ies in the securitization market, BDC improves the
availability of fnancing and enables SMEs to purchase
vehicles and equipment to support productivity.
A partnership announced in April 2010 between
BDC and TAO Asset Management resulted in the
creation of the Funding Platform for Independent
Lenders (F-PIL) to ensure that smaller fnancing com-
panies could provide fnancing for the vehicle and
equipment needs of businesses and consumers.
The F-PIL’s approach is built on:
> using private-sector securitization techniques and
funding creditworthy companies
> deploying best practices around legal
documentation, due diligence and transaction
structures to increase confdence and improve
private-sector funding
> the requirement for a true risk-sharing
arrangement between BDC, the company
benefting from the fnancing, and the private-
sector partner, TAO
> a commitment to participate in this market for a
sustained period of time
As at March 2014, 7,012 SMEs had benefted in-
directly from this program. BDC’s role in the market
also supports employment at auto dealerships in
Canada.
BDC will continue to monitor and address needs
that may arise in the securitization market to ensure
liquidity for small fnancing companies and SMEs.
Growing and exploring new
markets
To create jobs and prosperity, Canada needs entre-
preneurs with the desire and ability to grow their
business. For SMEs, growth brings challenges that
require unique fnancing and advisory services.
BDC Growth & Transition Capital, formerly BDC
Subordinate Financing, offers cash fow, mezzanine,
and quasi-equity fnancing to larger, more mature
and growing frms with market traction, strong
management and sound fnancial reporting. These
fnancing solutions are particularly helpful for entre-
preneurs who have few tangible assets to pledge for
security and who don’t want to dilute their owner-
ship of the business. Where appropriate, BDC offers
equity solutions by investing in a minority ownership
stake of the company.
bdc.ca | 19
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
BDC Growth & Transition Capital solutions
Cash fow fnancing is designed for companies that have a consistent track record of positive and strong cash
fow and want to plan large-scale projects.
A mezzanine loan is debt fnancing that gives the lender the rights to convert to an ownership or equity
interest in the company. It is subordinated to debt provided by senior lenders.
With quasi-equity fnancing, BDC shares the risk with frms that have not reached positive cash fow but
forecast that they will generate strong cash fow in the near-term. This solution allows the frm to raise capital
and repay the loan at the end of the term to keep cash in the business for daily operations.
With an equity investment, BDC takes a minority ownership stake in the company. As a development
bank, BDC’s interest is in working with management to create a growing, successful company capable of
contributing to the economy.
The majority of BDC Growth & Transition Capital
transactions are done alongside other fnancial insti-
tutions; BDC’s security is subordinated to secured
lenders, meaning chartered banks and long-term
lenders are repaid frst in the event of default. With
BDC taking this additional risk, it helps to ensure
that the entrepreneur can access the fnancing
required. Since private-sector fnancial institutions
tend to consider BDC’s solutions as equity, this helps
SMEs stay within prescribed covenants, including
debt-to-equity ratios.
BDC has found that many entrepreneurs do not
understand these types of fnancial solutions and
their advantages, which led BDC to rename its
subordinate fnancing group to highlight the ways in
which it can help SMEs—with growth and transition
projects. With 83 employees managing a portfolio
of $600 million and more than 400 clients, BDC
Growth & Transition Capital has a pan-Canadian
reach with an emphasis on underserved and non-
urban markets. Its median transaction size in fscal
2014 was $900,000.
The portfolio has experienced strong growth since
2010 as it responds to a number of unmet needs:
> most players in the market are active in deals
above $10 million, leaving few options for
promising companies seeking quasi-equity
solutions in the $2 to $10 million range
> asset-light businesses, such as service businesses
and fast-growing frms, struggle to obtain suffcient
fnancing
> Canadian SMEs need to globalize but this involves
higher risks and solutions beyond senior debt
> access to capital for high-growth frms (HGFs) is
challenged
High-growth frms
In fact, subordinate fnancing is a powerful fuel for
growth and is one reason why about 30 percent of
clients in the BDC Growth & Transition Capital port-
folio are HGFs (defned as annualized growth greater
than 20 percent per year, sales or employees, over
a three-year period, with 10 or more employees at
the beginning of the period). These frms require
non-traditional, higher-risk fnancing tailored to their
cycle of fast growth, which can be followed by per-
iods of slow or no growth.
In fscal 2014, BDC authorized 46 transactions
with HGFs, helping support employment for about
6,000 Canadians. It is strengthening its support
through a pilot program that combines BDC’s
fnancial solutions with strategic advice from private-
sector experts tailored to the needs of HGFs.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
20 | bdc.ca
Ownership transition
As many Canadian entrepreneurs approach retire-
ment, BDC Growth & Transition Capital helps frms
transition from one owner to the next through suc-
cession fnancing, which comprises about 40 percent
of the portfolio.
BDC also helps Canadian entrepreneurs acquire
companies that might otherwise cease operations
or be bought by foreign interests. In these ways,
BDC helps to ensure that Canadian frms remain in
Canadian hands.
Exploring new markets
It is important for Canadian SMEs to internationalize,
which involves looking for opportunities to export,
joining a global value chain, or purchasing inputs from
abroad. Through advisory services, BDC helps SMEs
determine whether they are ready to international-
ize and what markets would best suit them. BDC
can also support internationalization projects with
fnancing; in fscal 2014, BDC authorized $80 million
to help SMEs expand abroad.
BDC works with Export Development Canada
(EDC) and the Department of Foreign Affairs and
Trade Development (DFATD) to help Canadian frms
expand abroad, in line with the government’s Global
Markets Action Plan. In venture capital, BDC works
with DFATD and the Canadian Trade Commissioners
Service to support the Canadian Technology Acceler-
ator (CTA) program, which helps Canadian high-
growth companies access global markets.
BDC increases its knowledge of foreign markets by
reaching out to development banks around the globe
and by spearheading initiatives such as The Montreal
Group and participating in groups such as QG100.
bdc.ca | 21
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
?
= offered;
?
= not offered
Solutions within Canada
for non-exporters/
investors
Solutions within Canada
for exporters/investors
here and abroad
Solutions outside Canada
for foreign buyers of
Canadian goods and services
BDC EDC BDC EDC BDC EDC
Insurance and bonding
Contract insurance
? ? ? ? ? ?
Foreign accounts receivable insurance
? ? ? ? ? ?
Performance guarantees and surety bond
reinsurance
? ? ? ? ? ?
Political risk insurance
? ? ? ? ? ?
Financing
Summary of services
? ? ? ? ? ?
Foreign buyer fnancing
? ? ? ? ? ?
Guarantee bank facilities
?
1
? ?
1
? ? ?
Supplier fnancing
? ? ? ? ? ?
Working capital fnancing
? ? ? ? ? ?
Commercial real estate fnancing
? ? ? ? ? ?
Machinery & equipment fnancing
? ? ? ? ? ?
Other capital assets fnancing
? ? ? ? ? ?
Subordinate fnancing
? ? ? ? ? ?
Financing to purchase or upgrade ICT
? ? ? ? ? ?
Equity/venture capital
Direct investment and via equity funds
? ? ? ? ? ?
Consulting/advisory services
Consulting (fee for service)
? ? ? ? ? ?
Economic intelligence
? ? ? ? ? ?
ICT diagnostic & consulting
? ? ? ? ? ?
Trade advisory services, supply chain
analyses & best practices (non-fee)
? ? ? ?
2
? ?
1
Under the BDC Act, BDC can offer guarantees but currently is not actively doing so
2
For existing EDC customers only
Note that this chart does not refect changes as a result of the 10-year legislative review
Growing and exploring new markets: BDC/EDC products and services
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
22 | bdc.ca
Doing more to support entrepreneurs
F
or Canada to get greater economic beneft from
its small businesses, more of these companies
must become competitive at home and abroad. BDC
believes it can do more to improve the competitive-
ness of Canadian entrepreneurs, allowing them to
contribute fully to the national economy.
Research shows that mid-sized and larger compan-
ies, particularly fast-growing ones, invest more,
create more jobs, offer better wages and benefts,
and are more likely to become exporters. A 2014
Harvard Business Review online article suggests that
high-growth frms drive disproportionately more
jobs, growth, value and sustainability. A 2014 report
from Endeavor Insight, a U.S.-based organization
dedicated to high-impact entrepreneurs, indicates
that, on average, an SME that grows into a large busi-
ness creates more than 200 jobs.
Given the global economic recession and a loss of
competitiveness due to a steep increase in the value
of the Canadian dollar prior to the recession, Canada
lost more than 1,500 mid-sized frms from 2006
to 2010. Canadian exporters, in particular, were
hit hard during the fnancial crisis. A 2013 report
on productivity from Deloitte suggests that more
Canadian start-ups “slow down or simply disappear,
in part because many of our business leaders are not
investing in activities required to sustain growth.”
In the World Economic Forum’s annual index,
Canada slipped down the ranks of the world’s most
competitive economies due, in part, to poor per-
formance in innovation. In 2014, Canada ranked
15th out of 144 countries in competitiveness, down
one position from last year and its lowest ranking
since 2006. At the same time, the U.S. reversed
its downward trend by rising two positions to ffth
place, fuelled by an extremely productive economy
and sophisticated, innovative businesses.
The Canadian government has taken important
steps, with a focus on innovation and the digital
economy, an active global trade agenda, efforts to
reduce “red tape” for smaller businesses, and other
programs to support entrepreneurs. That said, gaps
for services remain or are emerging, particularly for
fast-growing companies in non-traditional industries
where unique fnancing, investment and advisory
solutions are required.
For example, SMEs in the services sector require
specialized support, in part because they have few
tangible assets to offer as security. SMEs looking to
join global value chains need tailored fnancing and
advisory services. Entrepreneurs need to better
understand and have access to equity solutions,
which are a powerful fuel for growth. BDC has
found that the importance of advisory services for
SMEs of all types cannot be overstated.
BDC has been an effective lever for government
by improving access to fnancing, investments and
advisory services for SMEs across Canada. It fulflls its
mandate of supporting Canadian entrepreneurship
and has a signifcant impact on the economy. Over
the years, BDC has responded to government initia-
tives and priorities, including during the economic
crisis. Within a strong management and governance
framework, BDC is fnancially sustainable and com-
plementary to the market. BDC has been proftable
for 25 years and has paid $206 million in dividends to
its Shareholder since 2009.
Now, BDC is in a position to do more by helping
entrepreneurs become more competitive and by
facilitating access to capital.
bdc.ca | 23
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Focusing on high-impact frms
A healthy SME ecosystem is critical for long-term
competitiveness. While Canada has many of the right
ingredients, its competitiveness has been eroding,
especially when compared to the U.S. Some of the
problem can be explained by challenges at the SME
level and by the fact that many of Canada’s most
promising frms are not always able to reach their
full potential.
In general, Canadian entrepreneurs demonstrate
lower risk tolerance through less investment,
which leads to lower productivity. This situation
is worsened by diffculties obtaining higher-risk
fnancing, particularly for service-based and
knowledge-based frms. There is also a need for
improved management capabilities, for example,
due to a smaller domestic market, Canadian SMEs
need to export sooner than their U.S. counterparts
but often lack the skills and support to do so.
BDC is part of the solution. It already helps SMEs
innovate, become more productive, and grow, both
domestically and globally. However, for Canada to
further strengthen its competitiveness, more must
be done for those frms with the most potential
to make a signifcant contribution. To address this,
BDC is proposing the gradual implementation of a
new initiative that will remove or lessen the barriers
to competitiveness experienced by some of Canada’s
most promising frms.
To truly understand the needs and challenges of
these frms, BDC conducted extensive research, in-
cluding interviews with high-potential entrepreneurs
and Canadian thought leaders, a survey of about
1,000 growing and mid-size SMEs across Canada and
the U.S., and case examples from around the world.
Challenges of high-impact frms
“We don’t have the skills or the experi-
ence to check out and challenge the sales
talent in the market”
—Optics technology developer
“I don’t have time for strategic planning;
where do we see this going over the next
7-10 years and how do we get there?”
—Sports equipment distributor
“My business has more demand than it
can meet right now but I can’t get the
money to hire enough people, I just don’t
have the collateral”
—Telecom company
“I need someone who understands our
business to help identify the right markets
to enter and to give us an idea of how to
get there and when to go”
—Architectural services frm
Helping to improve competitiveness
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
24 | bdc.ca
BDC found that, to have the most impact, support
should be focused on larger, growing and ambitious
frms, which have a disproportionate effect on eco-
nomic growth. These “high-impact” frms account
for about 5 percent of Canadian SMEs. They tend to
be mid-sized (100 to 500 employees); grow more
quickly than their overall sector; and have a manage-
ment team that exhibits higher ambition and higher
risk tolerance. However, there are no defnitive par-
ameters; smaller frms that show high growth could
also ft the profle.
High-impact frms can be found in many sectors.
They share barriers to competitiveness, including the
need to:
> optimize operations to improve effciency
> attract, develop and retain the talent required
> develop and execute marketing and sales plans,
including in foreign markets
> fnd employees with technical skills
> secure higher-risk fnancing for new products,
services, and/or processes; acquire other
companies; purchase machinery or technology to
improve productivity; expand capacity
> set the overall strategy of the company
In recent years, the government has taken signif-
cant steps to support these types of frms and the
economic prosperity they represent for current
and future generations of Canadians. Now, BDC
proposes building on this foundation to become the
“go-to” partner for these frms that otherwise might
not be able to identify or fnd the support they need
to succeed.
With a strong pan-Canadian network of partners and
a deep knowledge of entrepreneurs and SMEs, BDC
believes it is in a position to leverage its knowledge
and expertise to further support high-impact frms,
which can be found among BDC’s existing clients
and also identifed through local networks, associa-
tions and professional services frms.
By working with both the public and private sectors,
BDC will ensure that these frms can access the best
solutions available at each stage of their develop-
ment. BDC will provide these frms with dedicated
advisors to accompany them over the long term,
offering advice and facilitating access to various eco-
system solutions, whether from government pro-
grams, private-sector institutions including chartered
banks, or from BDC’s own offering. These advisors
will facilitate the development of new solutions if
none currently exists and help the frm’s manage-
ment build the skills needed to overcome barriers.
Creating this capacity to act as a “gateway” to a
wide variety of solutions in the ecosystem would
involve deepening relationships with key stakehold-
ers, including Export Development Canada (EDC).
While BDC would initially build this capacity for high-
impact frms, it could eventually make it available
throughout the bank, with a view to benefting even
more Canadian entrepreneurs.
As part of the initiative, BDC will develop specifc
success metrics, starting with the number of high-
impact SMEs on-boarded, solutions delivered and by
whom, and impact on the growth of SMEs compared
to the SME’s plan.
This initiative is a signifcant one for BDC that will be
funded from retained earnings. Once fully rolled out,
it is forecast to have a positive impact on Canada’s
economic growth by improving the ability of high-
impact frms to innovate, become more productive,
and to grow, ultimately becoming among the most
competitive in the world.
bdc.ca | 25
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Strengthening competitiveness
through advisory services
To help SMEs become more effcient and competi-
tive, BDC is also transforming the way in which it de-
livers advisory services. BDC has found that smaller
businesses have unmet needs for a broad range of
these services and often have trouble identifying and
addressing their own requirements. This can serious-
ly impact the ability of these businesses to compete.
BDC also has learned that the most successful
businesses use formal mechanisms such as advisory
boards and consultants and that businesses that are
proactive in seeking outside help to deal with chal-
lenges have better chances of remaining sustainable.
An October 2014 study from Waterloo-based
Centre for Digital Entrepreneurship and Economic
Performance examined a sample of Canada’s fastest-
growing small frms and found that a majority cited a
lack of seasoned management talent as their num-
ber-one inhibitor of growth.
As a development bank, BDC’s advisory services are
complementary to the market in that they:
> support the development of small consulting frms
by partnering with them to offer services to SMEs
> complement other consulting frms by offering a
range of services aligned to the reality of SMEs
> are offered to all types of entrepreneurs in every
region, including rural Canada
In fscal 2014, BDC began implementing a new ap-
proach to its provision of advisory services based on
a desire to increase SME competitiveness by maxi-
mizing client impact while also improving internal
effciencies and responsiveness. A key element has
been to reorganize around three teams:
1. Market-facing team—responsible for identifying
client needs and proposing appropriate solutions.
The team is organized by geographic region and
collaborates within BDC to provide value-added
solutions and services to entrepreneurs.
2. Pillar team—responsible for identifying and
developing advisory solutions and for delivering
Custom
Diagnostics
Training &
Group Program
Free tools, ebooks,
web events, events, blogs
Standardized
solutions
Solutions tailored to address needs of
more sophisticated small business
Time taken to understand client needs and
send a proposal is most important
Greater involvement of experts (internal
and external)
Every solution is unique
BDC standardized methodology and
tools that adapt to client-speci?c
situations. Time to submit proposal
is lower. Proven tool sets that are
ef?cient.
Free/low cost to reach
largest audience
Transfer knowledge, skills,
tools and templates
Highly dependent on
technology
>
>
>
>
>
>
>
>
Offer
depth &
impact
Offer
reach
Tens of
thousands
Thousands
# of
small
businesses
Advisory services solutions
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
26 | bdc.ca
mandates to entrepreneurs with a balanced
combination of internal and external resources.
3. Strategy and operations support team—a
centralized operations support group that
provides an effcient, standardized approach to
solution deployment and consulting resource
management, including qualifying, on-boarding
and developing the partner network.
Solutions will be designed to help SMEs:
> drive growth, for example, through sales and
marketing, innovation and developing new markets
> improve agility and productivity, for example,
through lean concepts, process improvements and
technology adoption and development plans
> build organizational capabilities, for example,
through coaching, strategy planning, HR
management, implementing business management
practices and advisory boards
BDC Consulting is also enhancing its internal busi-
ness capabilities by making its project delivery more
effcient, enhancing the quality of delivery, focusing
on segments where it can create the most impact,
and continuously innovating its solution offering.
To ensure the changes being implemented align with
the goal of creating impact for clients, BDC Consult-
ing plans to measure results with fnancial and non-
fnancial metrics. It will assume the majority of costs
associated with the delivery of advisory services,
ensuring they are affordable to SMEs.
Helping women grow their
businesses
BDC addresses market gaps by supporting demo-
graphics that traditionally have diffculty accessing
services, such as youth and Aboriginal entrepreneurs.
BDC believes that women entrepreneurs also can
face unique challenges, especially in growing their
business.
In Economic Action Plan 2014, the government
indicated its intention to provide more support to
women entrepreneurs. BDC has been working with
government offcials to develop a strategy aimed at
women-owned businesses (defned as more than
50 percent ownership). As part of this work, BDC
examined the characteristics of women-owned busi-
nesses in its portfolio, as well as women-owned busi-
nesses in the larger economy. Observations include:
> self-employment among women is increasing at a
faster rate than among men, but women are less
likely to incorporate and hire so their businesses
tend to start and stay small
> women operate frms in industries less likely
to experience high growth, such as retail,
accommodation and food services
In general, women-owned frms lack scale, which
means that they can pose more risk for lenders.
BDC believes it can build on its understanding of
women entrepreneurs and help more of them grow
their businesses by:
> capitalizing on existing BDC fnancing and advisory
service solutions
> creating an internal committee of employees
with experience and knowledge of women
entrepreneurs
> solidifying partnerships and sponsorships with
organizations targeting female-owned businesses
at the regional and national levels
> devising a communication strategy about how
BDC helps women entrepreneurs
> being more rigorous at tracking and mining data
related to women-owned businesses
bdc.ca | 27
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Being accessible to entrepreneurs
To ensure that it is able to help entrepreneurs across
Canada, BDC frequently reviews the number and
location of its offces and has launched an initiative
aimed at increasing its reach, specifcally in Western
Canada and Ontario, where BDC believes that its
presence should be better aligned with market real-
ities. The initiative will entail opening new business
centres and shared offces to ensure that entrepre-
neurs in these regions are not under-served; increas-
ing BDC’s profle and visibility through advertising
and public relations; and strengthening relationships
with stakeholders and partners in those regions.
In Ontario, BDC believes it can help improve the
province’s declining share of exports to the U.S.,
while encouraging SMEs to export to emerging
markets. BDC will continue to support manufactur-
ers and other sectors in Ontario hard hit by recent
economic conditions. In Western Canada, BDC
recognizes that there has been signifcant economic
growth, which has increased the number of SMEs,
some of which are supporting key sectors such as
oil and gas, which could face challenges if oil prices
remain depressed. BDC wants to ensure entrepre-
neurs in these regions have access to the resources
they require to grow and succeed.
Addressing emerging needs in
growth capital
In response to changing market dynamics, BDC Ven-
ture Capital will build upon its strategy of direct and
indirect investments, complemented by investments
and partnerships in the VC ecosystem. It will do so
by addressing a variety of emerging “white spaces”,
where promising Canadian companies are not ad-
equately supported by growth capital. For example,
BDC VC will address an emerging imbalance be-
tween early and later-stage investing by considering
ways to make more later-stage direct investments. It
will also look for opportunities to invest indirectly in
select later-stage funds that help growing Canadian
companies reach their full potential.
There are also promising companies in important
emerging sectors in Canada that lack the fnancial
support required to compete on the world stage.
BDC VC will address this by considering ways to
provide more value-added fnancial support to these
companies. This could include reaching into its exist-
ing indirect fund investments and supporting some
of the “best and brightest” frms through a strategy
known as “direct co-investment”, where BDC
supports these private-sector frms with additional
direct investments.
BDC’s Growth & Transition Capital portfolio also
has a role to play in addressing emerging needs for
growth capital among Canada’s most promising
frms, many of which exist outside of the technology
sector and as such are not usually candidates for VC
support. In growth capital, the following gaps have
been observed:
> later-stage technology and other asset-light
businesses that don’t ft a venture capital profle
> small frms in sectors of less interest to private
equity
> family and privately controlled mid-sized frms
facing succession issues and/or challenges in
funding their development into a larger business
> private frms that are unwilling to give up majority
control to an outside private equity fund
Facilitating greater access to capital
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
28 | bdc.ca
> smaller businesses needing small amounts of
working capital that don’t ft the profle of private-
sector mezzanine or equity providers
To address these needs, BDC Growth & Transi-
tion Capital will increase its quasi-equity and equity
investments, including prospective quasi-equity,
which takes a forward-looking view of a company’s
potential versus looking at historical performance.
With these types of solutions, BDC can increase the
confdence of entrepreneurs to grow; extend the
growth phase and domestic control of mid-sized
frms; and fll a void for equity in the range of $2 to
$10 million suitable for smaller frms.
As a development bank, BDC would position itself
as a management-friendly “growth partner”, sharing
in the entrepreneur’s vision as a long-term minority
investor and tailoring solutions to the entrepreneur’s
needs. BDC will provide these higher-risk invest-
ments with the goal of creating more mid-sized com-
panies from a variety of sectors capable of becoming
Canadian champions.
Immigrant Investor Venture Capital
Pilot Program
Economic Action Plan 2014 proposed replacing the
federal Immigrant Investor Program with a new
Immigrant Investor Venture Capital pilot program.
Under the proposed program, immigrant investors
would be required to place a $2-million, at-risk in-
vestment in a closed-end fund, which is expected to
target an initial fund size of $100 million.
In May 2014, the government appointed an expert
panel to provide advice on the creation of the fund.
Based on the panel‘s recommendations, the program
will be managed by BDC Capital, the investment arm
of BDC, and by participating fund managers. Discus-
sions between the government and BDC on the
bank’s role will continue into 2015 as the program
unfolds.
bdc.ca | 29
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
New powers under the BDC Act
As a result of the 10-year legislative review, amendments to the BDC Act received Royal
Assent on December 16, 2014. The amendments:
> modernize the scope of management services and require that these services be
complementary to those offered by the private sector
> allow BDC to make loans or give guarantees to a corporation, trust, partnership or joint
venture outside Canada, under limited circumstances
> allow BDC to invest in investment funds or other investment vehicles legally established
outside Canada that have an ongoing commitment to invest in Canada, under limited
circumstances
> allow BDC to provide fnancial services to not-for-proft organizations
> modernize certain governance provisions
In addition, amendments to the BDC Act would allow BDC, through prescribed regulations, to:
> extend credit or provide liquidity to SMEs
> provide additional management services
> make direct investments in a corporation, trust, partnership or joint venture outside Canada,
under limited circumstances
BDC also recognizes that the “10-Year Legislative Review: 2001-2010”, tabled by the Minister
of Industry on June 16, 2014, contains recommendations in four specifc areas that could
improve the impact of the BDC’s efforts going forward. These areas are:
> extending more support to underserved markets
> increasing accessibility and enhancing client service for SMEs
> focusing on complementarity
> enhancing performance measurement
BDC has already taken steps to increase its reach and visibility across Canada, improve the
client experience and work toward better measuring its impact on entrepreneurs and the
economy. Over the planning period, BDC will continue to take the recommendations of the
review under consideration, while also exploring how best to use its expanded powers in
support of Canadian SMEs, in collaboration with partners and other stakeholders. BDC will
communicate with the government on its proposed use of the new powers and their impact.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
30 | bdc.ca
> Gradually deploy a new initiative aimed at
removing the barriers to competitiveness for
high-impact frms in Canada (page 23).
> Refne its offering of value-added advisory
services designed to improve the
competitiveness of SMEs (page 25).
> Open new business centres and optimize
online resources and partnerships to ensure
its fnancing, investment and advisory
service solutions are accessible and visible to
entrepreneurs in Canada (page 27).
> Increase its equity offering to address the
needs of growth-oriented frms (page 23).
> Invest and co-invest in a variety of promising
Canadian technology companies from early
to late stages while continuing to invest in its
three internal direct investment funds
(page 15).
> Help support emerging fund models while
ensuring that all types of funds are well-
capitalized and able to support the growth of
Canadian champions (page 27).
> Play a role in the Immigrant Investor Venture
Capital Pilot Program (page 28).
> Support the government’s intention to provide
increased assistance to women-owned frms
(page 26).
> Explore options for strategies related to
intellectual property.
> Constantly evolve its offering of fnancing
solutions to meet the needs of entrepreneurs.
> Address market gaps for fnancing and
advisory services, with a focus on small loans.
> Provide educational tools and resources and
offer awards programs recognizing Canadian
entrepreneurs.
> Make the most of online capabilities and
indirect channels, including partnerships.
> Offer solutions such as asymmetric and pari
passu lending and syndicated transactions.
> Offer ICT products and advisory services to
help SMEs innovate and improve productivity.
> Provide tailored support to important sectors
such as aerospace and to high-growth frms.
> Offer advisory services and fnancing to help
SMEs explore new markets.
> Offer fexible fnancing solutions to help
companies grow and transition to new
owners.
> Implement the Venture Capital Action Plan
(VCAP) and the Venture Capital Strategic
Investment Plan (VCSIP) and a VC strategy
designed to return the ecosystem to health
and support innovative technology companies.
Over the planning period, BDC will... While continuing to...
Summary of Initiatives
bdc.ca | 31
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Performance Measures
Entrepreneurship
Target
F2015
F2015
YTD
1
Target
F2016
> # of loans ?$500,000 for Financing and Growth & Transition Capital
based on commitment size of ?$750,000
8,000 6,464 8,200
> # of authorizations to new businesses (?2 years)
(Financing and Growth & Transition Capital)
1,500 1,720 2,000
> % of BDC-fnanced start-ups that survive fve years 65% 60%
2
65%
> % of very satisfed clients
3
n/a 56% 57%
> # of transactions authorized with and from partners
(syndications, pari passu, loan referrals and alliances)
2,400 1,857 2,500
Productivity
> # of loans authorized for equipment purchase
(Equipment Line and loans with “equipment purchase” as purpose)
2,000 1,312 1,750
Growth
> % of high-growth frms in BDC Growth & Transition Capital portfolio
(high-growth frm defned as having annualized sales growth greater
than 20% per year over a three-year period)
30% 32% 30%
Innovation
> Support for Digital Canada 150
– Financing: $200M in acceptances annually to 2017
– VC: $300M in authorizations by 2017 (% of objective reached)
n/a
n/a
$190.7M
30%
$200M
60%
> Venture capital return of capital (RoC) 1.00 1.04 1.01
Effciency
> BDC Financing reported effciency ratio
4
39.7% 37.8% 38.7%
BDC strives to measure its impact on Canadian entrepreneurs. As a result, its performance measures continue to evolve to properly capture public policy impacts.
Appendix D presents a new framework and proposed measures toward which BDC is working.
1
Unless otherwise noted, fscal 2015 YTD numbers are as at December 31, 2014
2
Fiscal 2014—data available on an annual basis only
3
“Very satisifed” clients gave a score of 9 or 10 out of 10 for overall satisfaction pertaining to BDC’s services
4
A decreasing result indicates improved effciency
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
32 | bdc.ca
Index of Partners/Business Relationships
PARTNERSHIPS
Accelerators Various
BDC VC supports accelerators across Canada, including Extreme Startups,
FounderFuel, GrowLab Ventures, Communitech Hyperdrive, Launch36,
Execution Labs, Creative Destruction Lab
Canadian Technology
Accelerator
CTA
Initiative managed by the Canadian Trade Commissioners Service that
provides Canadian high-growth companies with support to access global
markets. BDC connects top technology SMEs coming out of Canadian
accelerators to the most relevant CTAs.
Community Futures
Development
Corporations
CFDC
CFDCs support community economic development. By working closely
with CFDCs across Canada, BDC reaches entrepreneurs in areas where it
does not have a physical location.
C100
BDC participates in this organization dedicated to supporting Canadian
technology entrepreneurship and investment. Members include executives
of Apple, Cisco, eBay, Facebook, Google, Microsoft and Oracle.
Department of Foreign
Affairs, Trade and
Development
DFATD
In 2011, BDC signed an agreement with DFATD to share business
intelligence about global markets and collaborate on marketing. BDC and
DFATD signed a strategic partnership in 2013 to expand the Canadian
Technology Accelerator (CTA) program in the United States. Seven
DFATD trade commissioners are co-located in BDC business centres
across Canada.
Export Development
Canada
EDC
BDC and EDC share an important relationship, including a two-way
referral system that ensures Canadian companies access the services of
the organization whose competencies best meet their needs. An MOU
between BDC and EDC was fnalized in late 2011.
Futurpreneur Canada
Futurpreneur is a national, non-proft organization that supports business
owners aged 18 to 39. Futurpreneur and BDC collaborate to offer
fnancing to young entrepreneurs.
National Angel Capital
Organization
NACO
BDC works with NACO to strengthen Canada’s angel investing
community.
National Research
Council—Industrial
Research Assistance
Program
NRC/
IRAP
BDC is a partner in NRC/IRAP’s Concierge service, which is a single
access point to help entrepreneurs access support for growth.
Ontario Centres of
Excellence
OCE
OCE help drive entrepreneurial growth in Ontario. BDC assists their
clients in accessing fnancing.
TAO Asset Management TAO
BDC partners with TAO in the securitization market to deliver the
Funding Platform for Independent Lenders.
bdc.ca | 33
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
STRATEGIC RELATIONSHIPS
Aboriginal Affairs and
Northern Development
Canada
AANDC
BDC works with AANDC to provide debt fnancing to First Nations
businesses across Canada with assets on a reserve.
Canadian Bankers
Association
CBA
BDC maintains a sound working relationship with the CBA, which
contributes to the development of public policy on issues that affect
fnancial institutions.
Canadian Manufacturers
and Exporters
CME
BDC and CME are building on a pilot project called Export Experts, a
series of on-site workshops that highlight best practices in international
trade.
Credit Union Central of
Canada
Canadian
Central
BDC maintains a sound working relationship with Canadian Central, the
national forum for the Canadian credit union system.
FedDev Ontario FedDev
BDC works with the federal economic development agency in southern
Ontario to support entrepreneurs.
MaRS Centre for Impact MaRS
Through MaRS, BDC increases its knowledge and involvement with social
entrepreneurship.
National Research
Council of Canada
NRC
BDC works with NRC and NSERC to increase opportunities for joint
funding; improve access to complementary federal funding; improve
access to investment capital; and, increase awareness of partnership
opportunities and available funding programs.
Natural Sciences and
Engineering Research
Council of Canada
NSERC
Small Industries
Development Bank of
India
SIDBI
SIDBI is the principal institution for the promotion, fnancing and
development of micro, small and medium-size businesses in India. BDC
and SIDBI signed a memorandum of understanding in 2013 to share
knowledge and best practices.
MEMBERSHIPS
Association of Develop-
ment Financing Institu-
tions in Asia and the
Pacifc
ADFIAP
BDC partners with associations around the world such as ADFIAP and
ALIDE to gain insight into foreign markets and assist Canadian businesses
with their global expansion plans.
Latin American Asso-
ciation of Development
Financing Institutions
ALIDE
Canadian Venture
Capital & Private Equity
Association
CVCA
BDC maintains a sound working relationship with the CVCA, which is a
leading source for advocacy and professional development for venture
capital and private equity professionals.
Centre for Business
Innovation
CBI
Part of the Conference Board of Canada, the CBI conducts research on
how Canadian companies incorporate innovation into their operations.
BDC is a member of the CBI.
Global Commerce Centre GCC
Part of the Conference Board of Canada, the GCC examines issues related
to trade and international business. BDC is a member of the GCC.
Lending Practitioners
Forum
BDC participates in this initiative spearheaded by the Canadian Bankers
Association that involves the major chartered banks and Export
Development Canada (EDC).
QG100
BDC participates in this private group of chief executive offcers from
Quebec that supports the development of global leaders.
The Montreal Group TMG
Initiated by BDC, TMG is a global forum of state-supported fnancial
development institutions. The goal is to encourage an exchange of ideas
and best practices with the aim of assisting micro, small and medium-sized
enterprises with their business challenges.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
34 | bdc.ca
Within the context of its incorporating and governing legislation, its approved Corporate
Plans, and specifc instructions that it may be given by the Government of Canada, BDC
operates at arm’s length from the government with ultimate accountability to Parliament
through the Minister of Industry.
An independent Board of Directors, supported by various committees, ensures a high
standard of corporate governance. BDC’s president and CEO sits on and reports to the
Board. The Board’s duties are to:
> approve BDC’s strategic direction and Corporate Plan to meet its public policy
mandate;
> set performance targets and monitor progress;
> ensure that BDC is identifying and managing its risks;
> ensure the highest standards of corporate governance;
> establish compensation policies;
> review and approve management’s succession plan and evaluate the performance of
the president and CEO;
> review BDC’s internal controls and management information systems;
> oversee communications and public disclosure;
> oversee BDC’s pension plans and establish its fund policies and practices;
> approve fnancing and investment activities beyond management’s authority; and,
> ensure that BDC is meeting the provisions of the BDC Act.
BDC‘s internal structure includes the Senior Management Committee, which comprises
the president and CEO, the executive fnancial and operating offcers, and designated
senior vice presidents. Its responsibilities include:
> setting, recommending to the Board for approval and implementing the vision,
corporate strategy, objectives, and priorities of BDC;
> establishing and ensuring respect for sound risk management practices;
> overseeing BDC’s disclosure obligations and practices;
> allocating enterprise-wide resources; and,
> reporting and making recommendations to the Board.
Governance
Compliance
Appendix A to the Corporate Plan: Governance
As a federal Crown Corporation, BDC is fully compliant in displaying the “Canada”
wordmark in all of its corporate identity applications. BDC respects the Offcial Languages
Act and its operations adhere to the regulations and policies implemented by the Treasury
Board Secretariat, giving special attention to the economic and social development of
minority offcial language communities.
bdc.ca | 35
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
MINISTER OF INDUSTRY
BOARD OF DIRECTORS
Audit
Committee
Compliance and Security
Committee
Board Credit and
Risk Committee
Risk Management
Committee
Human Resources
Committee
Client Experience
Committee
Leaders
Council
Pension Funds
Investment Committee
Employee Experience
Committee
Governance and
Nominating Committee
Venture Capital
Investment Committee
Project Portfolio
Committee
Credit Risk & Valuation
Committees
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EVP Financing & Consulting
EVP BDC Capital
EVP, Chief Financial and Risk
Offcer
SVP Human Resources
SVP Legal Affairs, Corporate Secretary
SVP Marketing & Public Affairs
SVP & Chief Information Offcer
SENIOR MANAGEMENT COMMITTEE
Ombudsman
Chief Audit
Executive
with direct
reporting to the
Audit Committee
VP,
Offce of the
President
BDC governance structure
Disclosure
Committee
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
36 | bdc.ca
Audit
This committee promotes an
overall corporate culture of qual-
ity fnancial reporting and ethical
behaviour. Its main duties are to:
> review and advise the Board
on fnancial statements before
BDC discloses them to the
public;
> review fnancial disclosures;
> review the adequacy and
effectiveness of internal
control, and, in particular,
major accounting and fnancial
reporting systems;
> oversee BDC’s standards of
integrity and conduct;
> oversee the process for
disclosing wrongdoing;
> give advice and
recommendations about the
appointments and terms of
auditors and special examiners;
> review the terms of
engagement of auditors and
special examiners who report
directly to the committee and
are accountable to the Board;
> review and advise the Board on
the audit of the annual fnancial
statements, the scope of the
special examination and the
special examination report;
> consider the appointment
and work of the chief audit
executive, who reports
directly to the committee
and administratively to the
president and CEO; and,
> review directors’ and offcers’
expenses.
Board
Credit and Risk
This committee’s main duties are
to:
> identify and manage BDC’s
principal risks;
> regularly review the enterprise
risk management policy and
other policies concerning
key risks, such as credit,
market, strategic, reputational,
operational and other principal
risks;
> review reports and indicators
related to enterprise risk
management, portfolio risk
management, capital adequacy
and treasury operations risks;
> approve new business
activities, except those related
to venture capital;
> periodically review the business
continuity plan;
> approve loans and transactions
that exceed the delegated
authorities of senior
management; and,
> review policies and guidelines
related to the delegation
of authority for all fnancial
products, except venture
capital products.
Governance and
Nominating
This committee helps the Board
fulfll its corporate governance
oversight responsibilities. Its main
duties are to:
> continually review best
practices and regulations
related to governance and, if
necessary, recommend changes
to BDC’s approach;
> review BDC’s corporate
governance policies, including
the board code of conduct and
the employee code of conduct,
ethics and values;
> annually assess the Board’s
compliance with these policies;
> regularly review the mandates,
structures and memberships of
the Board and its committees;
> develop selection criteria
for the president and CEO
position;
> recommend candidates for the
president and CEO position, as
well as directors;
> review and annually approve
the list of skills required by
directors;
> develop processes to assess the
performance of the Board, its
committees and its individual
members; and,
> ensure that comprehensive
director orientation and
continuous training programs
are in place.
Board Committees
bdc.ca | 37
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Human
Resources
This committee’s main duties are
to:
> oversee the human resources
strategy to ensure it is aligned
with the Corporate Plan;
> review — and, if appropriate,
recommend to the Board
for approval —the CEO’s
recommendations for
appointments of senior
management committee
members, the chief audit
executive and the ombudsman;
> set and assess the CEO’s
objectives and performance;
> review compensation for senior
executives;
> review and approve the design
of compensation programs and
material payments;
> approve performance measures
and metrics;
> receive and examine actuarial
evaluation reports and
fnancial statements related
to BDC pension plans, as
well as recommend funding
contributions; and,
> ensure there is a valid succession
plan in place.
Pension
Funds
This committee’s main duties
are to:
> monitor and advise the Board
on all matters related to the
investment of the funds’
assets;
> recommend asset allocation
and investment policies and
strategies;
> ensure that investments
comply with established
policies;
> recommend to the Board the
appointment, termination
and replacement of external
investment managers; and,
> monitor the performance of
these managers.
Venture Capital
Investment
This committee’s duties are
to:
> regularly review the
venture capital investment
policy and other policies
and processes for venture
capital activities and related
risks;
> approve the business plan
of the three venture capital
internal funds, as well as
investment strategies and
guardrails;
> review strategic initiatives
aimed at improving the
venture capital ecosystem;
> review and recommend
capital allocations for the
internal funds;
> review and recommend
delegations of authority;
> monitor portfolio
performance; and,
> approve investments that
exceed the delegated
authorities of senior
management.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
38 | bdc.ca
A strong risk management culture enables BDC
to take appropriate risks while offering relevant
services to entrepreneurs. BDC manages risk
through formal risk review processes, which include
a Board-approved risk appetite statement, risk
policies and delegated authorities and limits.
The risk appetite statement enables BDC to
articulate and monitor its risk profle against defned
risk appetite limits, taking action as needed to
maintain a balance of risk and return. The statement
is based on qualitative and quantitative measures that
demonstrate the Board’s vision for managing the
risks that BDC is willing to accept in the execution of
its mandate.
The Internal Audit Department promotes sound risk
management practices. Through its annual audit plan,
the department works to ensure that BDC follows
these practices. BDC’s Legal Affairs department also
plays a role in managing risk by ensuring compliance
to various legal obligations and by establishing an
employee code of ethics and values.
BDC’s three risk management functions are enter-
prise risk management (ERM), credit risk manage-
ment (CRM) and portfolio risk management (PRM),
which includes treasury risk management. These
three functions:
> ensure that BDC applies sound risk management
principles, appropriate policies and corporate
directives to manage signifcant and emerging risks,
according to risk thresholds outlined in the risk
appetite statement;
> develop tools to measure, monitor and report on
these risks; and,
> provide timely and complete reports on these risks
to the organization’s risk management committees,
the senior management committee and the Board.
Using an ERM framework protects BDC by
managing risk exposure, resolving uncertainty
and building reputational equity. It ensures that
BDC makes risk-related decisions in a methodical,
consistent way.
The ERM policy outlines the way BDC manages
risk through a governance framework of Board and
senior management committees, and by identifying
and assessing signifcant risks, and managing them on
an enterprise-wide basis.
Appendix B to the Corporate Plan: Risk Management
bdc.ca | 39
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
IDENTIFY
Every quarter, risks at the corporate and functional levels are identifed, as-
sessed, documented and classifed. They are then presented to the Risk Man-
agement Committee, the SMC and the Board of Directors for discussion. Risks
related to all signifcant projects, new products or services, and policy changes
are also assessed and discussed.
RISK
MANAGEMENT
Ide
n
t
i
f
y
A
n
a
l
y
z
e
a
n
d
m
e
a
s
u
r
e
M
o
n
i
t
o
r
,
d
i
s
c
l
o
s
e
a
n
d
r
e
p
o
r
t
>
>
>
>
ANALYZE AND MEASURE
The risks posed by BDC’s activities
are quantifed and qualitatively
assessed. BDC updates related tools
and models, taking into consideration
best practices in the fnancial services
industry. Risks across the organization
are measured to ensure they refect
BDC’s policies, corporate directives,
standards and tolerance limits. Board
members and senior managers use
this information to understand BDC’s
risk profle and portfolio performance.
CONTROL AND MITIGATE
Risk tolerance thresholds are set to refect BDC’s object-
ives and strategies. BDC also uses policies and guidelines to
codify its governance and risk management culture.
BDC has the following methods for mitigating risks:
> adequate and clear roles, responsibilities, processes,
policies, corporate directives and procedures
> risk management functions and committees that provide
oversight and monitoring
> risk mitigation activities, such as hedging, insurance risk
management, business continuity planning, information
technology recovery planning, and anti-fraud and anti-
money laundering programs
> quality reviews and audits to ensure that BDC is using
appropriate and sound risk management practices (every
quarter, the Internal Audit Department presents the results
of the audits to the Audit Committee)
MONITOR, DISCLOSE AND
REPORT
BDC monitors activities affecting its risk
profle, material risk exposures and loss
events, and acts to align risk exposures with
risk appetites.
Risk process owners monitor, disclose and
report risks, with support and oversight
from the Risk Management Committee and
risk management functions. They prepare
monthly or quarterly reports on all signif-
cant risks, and they meet through risk man-
agement and board committees to report
and discuss the risks they manage.
C
o
n
t
r
o
l and
m
i
t
i
g
a
t
e
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
40 | bdc.ca
Appendix C to the Corporate Plan: Corporate Plan Performance Measures
BDC recognizes that its performance measures are important in allowing Parliamentarians and the public
to gauge the impact of BDC activities on entrepreneurs and on the economy. In light of this, and mindful of
the recommendations from the Minister’s report on the legislative review of the BDC Act, BDC is working
towards a new framework and measures to be incorporated in future Corporate Plans.
To respond to Treasury Board guidelines and in light of the recommendations made by the Minister of Industry
as part of the legislative review, BDC proposes using three categories for the performance measures that ap-
pear in its Corporate Plan.
Core measures—Measures central to BDC’s mandate that would remain the same from year to year, ensur-
ing continuity, and for which annual targets would be set. Examples include number of small loans, number of
mid-sized frms in BDC’s portfolio, and percentage growth in the number of fnancing transactions with part-
ners. In this way, BDC would refect the basic tenets of its mandate, including support for small and medium-
size businesses, complementarity, client experience and fnancial sustainability.
Initiative measures—Measures related to specifc initiatives, such as Digital Canada 150 or the Venture
Capital Strategic Investment Plan (VCSIP), that would refect evolving priorities and allow latitude for change
within the measures. Annual targets would be set. Examples include ICT interventions.
Impact measures—Measures that would demonstrate the public policy role of BDC and its impact on clients
and the economy. These measures would be tracked annually, but an annual target would not be set; instead,
a fve-year “goal” would be identifed. Examples include percentage of clients who said BDC had a positive
impact on their business following the services they received, and percentage of clients who found that BDC
helped them expand to new markets.
BDC is working toward presenting a new framework and measures in Corporate Plan 2017-2021, and will
continue to work with the government to ensure the relevance and viability of its approach.
bdc.ca | 41
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Financial Plan
T
he Financial Plan is based on the following assumptions regarding economic conditions:
> Modest acceleration of the global economy is
expected in coming years.
> In January 2015, the Bank of Canada estimated
that the lower price of oil will take one-third of
a percentage point off Canadian GDP growth in
2015.
> Long-term economic growth potential in Canada is
expected to be weaker than before the recession
at slightly more than 2 percent annually, due to an
aging population and lagging productivity.
> In the U.S., the expansion of the economy should
continue.
> A more robust U.S. economy should continue to
beneft Canadian exports.
> Improved export opportunities should lead to
more business investment.
> Credit conditions should remain favourable to
Canadian businesses, however, frms with fewer
physical assets, that are more innovative, or that
are start-ups continue to have the most diffculty
accessing fnancing.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
42 | bdc.ca
BDC Financing plays an important role in facilitating
access to capital for entrepreneurs and supporting
the competitiveness of SMEs. Over the planning
period and in line with its complementary role, BDC
Financing will continue to assist small businesses,
including those that have diffculty accessing fnan-
cing due to location, sector or demographic. It is
maintaining a focus on small loans, often for less than
$250,000, to help entrepreneurs buy equipment
to increase productivity, innovate through ICT, and
grow and explore new markets. BDC’s commitment
to small loans is paying off, with 8,010 small loans
authorized in fscal 2014, well above the Corporate
Plan target of 6,500.
Given strong credit conditions, BDC Financing will
continue to facilitate access to capital for SMEs by
collaborating with other fnancial institutions, which
includes providing support to medium-size frms and
participating in larger transactions through syndica-
tion.
In fscal 2015, BDC embarked on an initiative to
increase its reach and visibility, specifcally in West-
ern Canada and Ontario, where BDC feels that its
geographic presence should be better aligned with
market realities. The initiative will entail opening new
business centres and shared offces to ensure that
entrepreneurs in these regions are not under-served;
increasing BDC’s profle and visibility through
advertising and public relations; and strengthening
relationships with stakeholders and partners. This
initiative is not only about reaching more entrepre-
neurs, but also about providing value-added support
to have a real impact on the growth and success of
Canada’s SMEs.
To refect these efforts, BDC Financing has increased
its forecast for the number of acceptances. In dollars,
acceptances are expected to increase to $4.8 billion
in fscal 2016, and in numbers to 11,900.
As a result, the BDC Financing portfolio is forecast
to grow to $20.4 billion in fscal 2016.
BDC has reduced its provisions for credit losses
compared to last year’s Corporate Plan, which will
contribute to rising net income over the period, even
with the investments to implement the reach and
visibility initiative. However, as can be seen in Table
4, the provision for credit losses as a percentage of
the average outstanding portfolio increases, refect-
ing current volatility in oil prices and the potential
impact on economic growth. As of fscal 2017, BDC
expects the provision to stabilize at a level repre-
sentative of the somewhat higher risk being assumed
by BDC.
Net income for BDC Financing in fscal 2015 is esti-
mated at $475 million, higher than last year’s Cor-
porate Plan forecast due mainly to lower provisions.
As a result of BDC’s efforts to reduce costs and fnd
effciencies, including through its Agility & Effciency
(A&E) program, operating expenses as a percent-
age of the average portfolio decrease in the latter
years of the planning period, even with the additional
investments made in support of Canada’s SMEs.
BDC Financing
bdc.ca | 43
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 1: Net Planned Acceptances ($M)
Actual
2014
Estimate
2015
Proposed
2016
CP 2015-16 to 2019-20 4,102 4,600 4,800
Table 2: Net Planned Acceptances (#)
Actual
2014
Estimate
2015
Proposed
2016
CP 2015-16 to 2019-20 10,976 11,200 11,900
Table 3: Portfolio Outstanding ($M)
Actual
2014
Estimate
2015
Proposed
2016
CP 2015-16 to 2019-20 17,815 19,100 20,433
Table 4: Net Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net interest income 830 884 958
Fee and other income 15 15 16
Net realized gains (losses) on other fnancial instruments 1 1 –
Net revenue 846 900 974
Provision for credit losses (73) (83) (138)
Net unrealized gains (losses) on other fnancial instruments – (2) (1)
Income before operating and administrative expenses 773 815 835
Operating and administrative expenses 339 340 377
Net income 434 475 458
As a % of average outstanding
Net interest income 4.8 4.8 4.8
Fee and other income 0.1 0.1 0.1
Net realized gains (losses) on other fnancial instruments – – –
Net revenue 4.9 4.9 4.9
Provision for credit losses (0.4) (0.5) (0.7)
Net unrealized gains (losses) on other fnancial instruments – – –
Income before operating and administrative expenses 4.5 4.4 4.2
Operating and administrative expenses 2.0 1.9 1.9
Net income 2.5 2.5 2.3
Average portfolio outstanding 17,222 18,372 19,802
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
44 | bdc.ca
BDC Securitization
By partnering with private-sector fnancing compan-
ies in securitization, BDC ensures that smaller fnan-
cing companies can remain active in the market and
able to provide fnancing for the vehicle and equip-
ment needs of businesses and consumers, ultimately
helping SMEs improve their productivity.
BDC partners with TAO Asset Management to offer
the Funding Platform for Independent Lenders (F-
PIL). Under this program, BDC Securitization fore-
casts authorizations of $450 million in fscal 2016.
Since F-PIL involves fewer deals for larger amounts,
authorizations can be diffcult to forecast and can
fuctuate throughout the planning period. Net in-
come is forecast to be lower than last year’s Corpor-
ate Plan, at $3 million in fscal 2016. Operating and
administrative expenses remain stable through the
planning period.
As at March 31, 2014, 7,012 SMEs had benefted
indirectly from this program. BDC will continue to
monitor and address the needs of smaller fnancing
companies in the securitization market to ensure
liquidity for SMEs.
Table 5: Securitization ($M)
Actual
2014
Estimate
2015
Proposed
2016
Authorizations (175) 315 450
Disbursements 200 207 231
Portfolio at cost 334 405 457
Fair value allowance 2 2 3
Portfolio at fair value 336 407 460
Net revenue 8 6 5
Operating and administrative expenses 2 2 2
Net income 6 4 3
bdc.ca | 45
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
BDC Growth & Transition Capital, formerly BDC
Subordinate Financing, offers cash fow, mezzanine,
and quasi-equity fnancing to larger, more mature
and growing frms with market traction, strong
management and sound fnancial reporting. Where
appropriate, BDC offers equity solutions by investing
in a minority ownership stake of the company.
These types of higher-risk fnancing solutions can be
a powerful fuel for frms experiencing rapid growth
and useful for entrepreneurs planning management
succession. They are suited to businesses with few
tangible assets and entrepreneurs who don’t want to
dilute their ownership of the business.
To further address the needs of entrepreneurs for
higher-risk growth capital, BDC Growth & Transi-
tion Capital will offer more equity and quasi-equity,
including prospective quasi-equity, which takes a
forward-looking view of a company’s potential ver-
sus looking at historical performance.
The forecast for acceptances is in line with last year’s
Corporate Plan, increasing to $240 million in fscal
2016, bringing the portfolio at fair value to $732 mil-
lion. Over the following years, BDC expects operat-
ing and administrative expenses as a percentage of
the average outstanding portfolio to decrease.
Due to growth in the portfolio and improved ef-
fciency, net income for BDC Growth & Transition
Capital is expected to increase and is higher than
forecast in last year’s Corporate Plan. Net income is
expected to be $34 million in fscal 2016.
BDC Growth & Transition Capital
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
46 | bdc.ca
Table 6: Growth & Transition Capital ($M)
Actual
2014
Estimate
2015
Proposed
2016
Acceptances (#) 126 165 164
Acceptances ($) 187 220 240
Growth (%) (1.4%) 17.6% 9.1%
Portfolio at fair value 577 635 732
Net interest income 50 51 62
Net realized gains (losses) on investments and write-offs (6) (26) (26)
Fee and other income 22 25 24
Net revenue 66 50 60
Net fair value change (17) (10) (21)
Fair value adjustments due to realized gains (losses) and write-offs – 19 26
Income before operating and administrative expenses 49 59 65
Operating and administrative expenses 26 25 31
Net income 23 34 34
Net income attributable to:
BDC’s shareholder 16 32 34
Non-controlling interests 7 2 –
Net income 23 34 34
As a % of average outstanding
Net interest income 8.6 8.2 8.9
Net realized gains (losses) on investments and write-offs (1.0) (4.2) (3.7)
Fee and other income 3.8 4.0 3.5
Net revenue 11.4 8.0 8.7
Net fair value change (2.9) (1.6) (3.0)
Fair value adjustments due to realized gains (losses) and write-offs – 3.0 3.7
Income before operating and administrative expenses 8.5 9.4 9.4
Operating and administrative expenses 4.5 4.0 4.5
Net income 4.0 5.4 4.9
*Non-controlling interests are in AlterInvest Inc., AlterInvest L.P. and AlterInvest II L.P.
bdc.ca | 47
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
BDC VC’s strategy of direct and indirect investing
complemented by innovative work in the VC eco-
system has made progress in supporting Canadian
technology companies and returning the VC market
to health.
BDC VC’s three internal direct investment funds
emulate the best practices of the private sector and
are focused on building leading Canadian technology
businesses in the IT, health-care, and industrial/clean/
energy-tech sectors. Each fund was “seeded” with
promising companies from BDC’s legacy portfolio
that meet the objectives of the respective fund strat-
egies. The remaining direct legacy investments are be-
ing managed within BDC VC’s Diversifed Portfolio.
BDC VC’s indirect, or fund of funds, approach is
focused on building and supporting at-scale, world-
class Canadian VC funds. This is being done with
larger commitments by BDC VC to private-sector
funds that have a clear sector focus and recognized
expertise. BDC VC will use its indirect investments
to complement those made by the Venture Capital
Action Plan (VCAP) to help ensure the success of the
program. BDC VC is also invested in GO Capital, a
fund designed to support the creation of companies
in all sectors of science and technology in Quebec.
GO Capital’s investment period is complete and it
will only invest to support its existing portfolio.
To help rebuild the VC ecosystem, BDC VC cre-
ated the Strategic Investments and Partnerships
(SIP) team. It is developing innovative initiatives to
reinforce key areas of the ecosystem and making
direct and indirect investments that fll fnancing
gaps, focusing on early stage investments, angels and
accelerators.
Over the planning period, BDC VC will build upon
its existing strategy to address evolving needs in the
VC market by:
> Supporting a variety of technology companies—
BDC VC will complement investments made by
its three sector-specifc internal funds by making
direct “development” investments, including co-
investments, in companies from other sectors with
the potential to contribute to the economy.
> Supporting both early and late-stage investing—
BDC VC has noted the emergence of new fund
models and emerging managers raising small funds
of less than $50 million. This could result in a
situation where early stage capital is insuffciently
balanced by later-stage capital. To address this,
BDC VC will look for opportunities to do more
later-stage investing, including through its three
internal funds, while also supporting less traditional
funds in emerging sectors through its indirect
investments.
Largely as a result of increased activity in direct
investing, the forecast for authorizations is higher
than last year’s Corporate Plan. As the portfolio
matures over the planning period, BDC VC expects
more exits. This should result in disbursements being
almost equally matched by proceeds and relatively
stable cash fow. The portfolio at fair value is ex-
pected to increase due to strong investments, lower
expected write-offs and fair value depreciation.
It should be noted that the risk associated with esti-
mating proceeds is signifcant as the value and timing
of exits are diffcult to predict.
BDC VC’s forecast for net income has improved
from last year’s Corporate Plan. As mentioned, it is
diffcult to forecast the timing and value of exits and
the amount and timing of fair value changes. While
BDC is optimistic about the direction of its strategy
over the planning period, these factors may cause
signifcant variation from plan.
BDC Venture Capital
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
48 | bdc.ca
Table 7: Venture Capital - Authorizations ($M)
Actual
2014
Estimate
2015
Proposed
2016
Diversifed 9 9 5
GO Capital 4 5 –
Healthcare 6 25 24
IT 22 19 26
Industrial, Clean and Energy Technology 11 21 15
Development Investments – – 5
SIP (Strategic Investments and Partnerships) – – –
VCSIP (Venture Capital Strategic Investment Plan) 6 9 7
Direct investments 58 88 82
Fund of funds 67 75 100
SIP 14 12 15
VCSIP 16 10 13
Indirect investments 97 97 128
Total authorizations 155 185 210
Table 8: Venture Capital - Net Investing Activity and Portfolio ($M)
Actual
2014
Estimate
2015
Proposed
2016
Proceeds 97 40 90
Disbursements (excludes operating and administrative expenses) (118) (151) (138)
Net investing activity (21) (111) (48)
Portfolio at cost 535 625 665
Portfolio at fair value 495 613 668
Fair value / cost 93% 98% 100%
bdc.ca | 49
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 9: Net Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net realized gains (losses) on investments 42 (1) 14
Write-offs (61) (20) (22)
Net realized gains (losses) on investments and write-offs (19) (21) (8)
Fee and other income 4 2 2
Net realized gains on other fnancial instruments (9) – –
Net revenue (loss) (24) (19) (6)
Net fair value change (27) 4 (4)
Fair value adjustments due to realized gains (losses) and write-offs 47 21 20
Net unrealized foreign exchange gains (losses) on investments 15 3 –
Net unrealized (losses) gains on fnancial instruments – (2) –
Income before operating and administrative expenses 11 7 10
Operating and administrative expenses 23 22 24
Net income (loss) (12) (15) (14)
Net income (loss) attributable to:
BDC’s shareholder (11) (13) (13)
Non-controlling interests* (1) (2) (1)
Net income (loss) (12) (15) (14)
*Non-controlling interests represent 80% of GO Capital net income
Table 10: Net Income by Fund ($M)
Actual
2014
Estimate
2015
Proposed
2016
Healthcare (18) (4) (3)
IT 17 (10) (1)
Industrial, Clean and Energy Technology (1) 8 (2)
Development Investments – – –
Direct internal investments (2) (6) (6)
Diversifed (10) 5 10
GO Capital (2) (5) (2)
Direct legacy investments (12) – 8
Total direct investments (14) (6) 2
Fund of funds 7 (2) (13)
SIP (includes direct and indirect investments) (5) (4) (3)
VCSIP (includes direct and indirect investments) – (3) –
Net income (loss) (12) (15) (14)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
50 | bdc.ca
Table 11: Consulting ($M)
Actual
2014
Estimate
2015
Proposed
2016
Revenue from activities 22 17 19
Delivery costs 10 8 11
Margin 12 9 8
Operating and administrative expenses 28 31 35
Net income (loss) before transition costs (16) (22) (27)
Transition costs 1 3 3
Net income (loss) (17) (25) (30)
BDC Consulting
BDC believes that entrepreneurs need to take
advantage of professional, qualifed advisory services
to grow, innovate, create effciencies and ultimately
become more competitive.
However, from its experience in the market, BDC
has found that small business owners have unmet
needs for a broad range of these services and often
have trouble identifying and addressing their own
requirements.
To address this market gap, BDC is investing in
advisory services that will maximize impact on the
competitiveness of Canadian entrepreneurs by
enabling them to take advantage of growth, pro-
ductivity and innovation projects. In its role as a
development bank, BDC will assume a portion of
costs associated with the provision of such services,
which often entails working with an external frm to
provide the services to the entrepreneur. In this way,
BDC leverages the private sector, helping to ensure
the complementarity of its approach.
Revenue for BDC Consulting is expected to be
$19 million in fscal 2016 and will continue to rise,
refecting increased reach in the marketplace. Net
losses are expected to remain stable, refecting in-
creased effciency and improved cost recovery.
bdc.ca | 51
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
To help some of Canada’s most promising frms
contribute fully to the economy, BDC is proposing
the gradual implementation of a new initiative that
will facilitate access by these “high-impact” frms
to the best solutions available at each stage of their
development. With a strong pan-Canadian network
of partners and a deep knowledge of entrepreneurs,
BDC believes it can leverage its knowledge and
expertise to further support high-impact frms, in
collaboration with the public and private sectors.
This initiative is a signifcant one for BDC that will
be funded from retained earnings. As an investment
in SME competitiveness, the initiative is expected to
incur a net loss of $7 million in fscal 2016.
Operating and administrative expenses will be com-
prised of salaries as well as investments in systems
and tools and in strengthening and developing new
partnerships required to support this initiative, in
addition to standard operating costs and overhead.
It is important to note that, as this initiative is new
to BDC and has yet to be operationalized, these
forecasts and estimates are preliminary and will be
reviewed as more details become known.
Also, while support for high-impact frms is pre-
sented as a separate segment in this Corporate Plan,
BDC does not have suffcient information at this
time to determine whether a separate segment is
required under IFRS. It should be noted that report-
ing on this segment in this Corporate Plan may differ
from upcoming annual reports.
Support for High-Impact Firms
Table 12: Support for High-Impact Firms ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net revenue – – –
Impairment reversals (losses) on loans – – –
Net change in unrealized appreciation (depreciation) of investments – – –
Operating and administrative expenses – – 7
Net income (loss) – – (7)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
52 | bdc.ca
Venture Capital Action Plan
Recognizing the importance of venture capital to
Canada’s economic prosperity, in Economic Action
Plan 2012 the government announced $400 million
to help increase private-sector investment in early
stage risk capital and to support the creation of
large-scale VC funds led by the private sector.
In January 2013, the Prime Minister announced the
Venture Capital Action Plan (VCAP), which will make
available:
> up to $350 million to establish or recapitalize
as many as four large funds of funds led by the
private sector in partnership with institutional and
corporate strategic investors, as well as interested
provinces
> an aggregate investment of up to $50 million in
existing high-performing VC funds in Canada
BDC was asked to carry out certain duties and
functions to serve as the agent of government under
VCAP and has created a small team dedicated to
implementing this initiative.
The frst stage in executing VCAP took place with
the selection of four high-performing funds in the
IT and life sciences sectors that have demonstrated
strong investment performance and are aligned with
the objectives of VCAP. The second stage of VCAP
involved the selection of fund managers and negotia-
tion of legal documentation surrounding the creation
of new private-sector funds of funds. BDC expects
three of the four VCAP funds of funds to be in active
investment mode before the end of March 2015.
Disbursements commenced in fscal 2014 with
$6 million for two of the high-performing funds and
one of the fund of funds.Through the issuance of
common shares that are not included in the calcula-
tion of dividends, BDC received a capital injection
of $50 million in fscal 2014. BDC expects a capital
injection of $150 million in fscal 2016.
Due to a change in the methodology for calculating
fair value, the net income forecast differs from that
presented in last year’s Corporate Plan. The new
methodology of fair value is based on expected dis-
tributions from the funds determined from the net
asset values. The result is that forecasted losses in
fscal 2015 are less than last year’s Corporate Plan.
With $387.5 million to be committed by BDC, it
is expected that more than $1 billion will be raised
from other partners, for a total commitment of
$1.4 billion. However, it should be noted that the
fundraising environment remains diffcult.
Given the nature of the industry and that VCAP is
in the early stages of implementation, it is diffcult
to forecast the overall fnancial performance of the
program. BDC continues to collaborate with offcials
from Industry Canada and Finance Canada on oper-
ational details.
BDC supports the overarching goal of VCAP to
encourage private-sector involvement in the VC
asset class through a new source of funds and is
committed to working with all the players involved
to ensure the success of the program. BDC believes
that the combined effect of VCAP, VCSIP and its own
VC investing activities will have a signifcant positive
impact on the VC market in Canada.
bdc.ca | 53
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 13: VCAP ($M)
Actual
2014
Estimate
2015
Proposed
2016
Authorizations 210 178 –
Disbursements 6 51 99
Proceeds – – –
Portfolio at cost 6 57 156
Portfolio at fair value 5 50 127
Net revenue – – 2
Net fair value changes (1) (7) (22)
Income before operating and administrative expenses (1) (7) (20)
Operating and administrative expenses 1 1 1
Net income (loss) (2) (8) (21)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
54 | bdc.ca
8.1%
7.8%
2%
6%
10%
14,000
23,000
32,000
2014
(actual)
2015 2016
VCAP Securitization Venture Capital
Growth & Transition Capital Financing Growth %
Table 14: Consolidated BDC Portfolio—as at March 31 ($M)
Table 14 shows the composition and growth of
BDC’s consolidated outstanding portfolio in dollars
from fscal 2014 to 2016. Growth of the portfolio
increases to refect the impact of the initiative to
improve reach and visibility.
BDC consolidated net income is expected to be
$423 million in fscal 2016. Consolidated net income
will be impacted as BDC makes the investments
required to support the competitiveness of Canadian
SMEs, but remains at a fnancially sustainable level.
Consolidated Portfolio and Net Income
bdc.ca | 55
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 16: Consolidated Comprehensive Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net income 432 465 423
Other comprehensive income (loss)
Items that may be reclassifed subsequently to proft or loss
Net change in unrealized gains (losses) on cash fow hedges (3) – –
Total items that may be reclassifed subsequently to net income (3) – –
Items that will not be reclassifed to OCI
Remeasurements of net post-employment beneft liability 53 (59) –
Other comprehensive income (loss) 50 (59) –
Total comprehensive income 482 406 423
Total comprehensive income (loss) attributable to:
BDC’s shareholder 476 406 424
Non-controlling interests 6 – (1)
Total comprehensive income 482 406 423
Table 15: Consolidated Net Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Financing 434 475 458
Securitization 6 4 3
Growth & Transition Capital 23 34 34
Venture Capital (12) (15) (14)
Consulting (17) (25) (30)
Support for High-Impact Firms – – (7)
Venture Capital Action Plan (2) (8) (21)
Net income 432 465 423
Net income (loss) attributable to:
BDC’s shareholder 426 465 424
Non-controlling interests 6 – (1)
Net income 432 465 423
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
56 | bdc.ca
Table 17: BDC Financing Operating Expenses ($M)
Actual
2014
Estimate
2015
Proposed
2016
Total operating expenses 339 340 377
Less:
Pension expense 46 41 50
Adjusted operating expenses (excluding pension) 293 299 327
Reported effciency ratio 40.0% 37.8% 38.7%
Adjusted effciency ratio (excluding pension) 34.6% 33.2% 33.5%
41.0%
43.7%
41.4%
40.3%
43.5%
40.0%
37.8%
38.7%
44.7%
38.3%
38.0%
39.2%
36.7%
38.3%
34.6%
33.2%
33.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016
20%
40%
0%
47.8%
60%
Table 18: BDC Financing Historical Effciency Ratio—as at March 31 (%)
Effciency ratio
Effciency ratio
excluding pension
Over the years, BDC has made a concerted effort
to achieve effciencies while fulflling its role as a
development bank and implementing government
priorities. In fscal 2015, BDC Financing expects
to surpass the target for its reported effciency
ratio due to lower staff levels than anticipated and
reduced costs in the areas of communication and
meals, travel and accommodations made possible
by investments in videophones, instant messaging,
videoconferencing and voice-over-Internet protocol.
While it remains committed to ongoing improve-
ments in effciency, BDC expects to incur increased
operating expenses related to initiatives such as its
efforts to improve reach and visibility. Implementa-
tion of this initiative will result in an increase in fscal
2016 in the effciency ratio for BDC Financing, which
is expected to decrease in the following years.
Cost Containment and Effciency Measures
bdc.ca | 57
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Capital Budget
In an effort to remain effcient and responsive to
client needs, BDC invests in information technology
and in its business facilities across Canada. Capital
expenditures in IT are expected to be lower than
anticipated with the adoption of cloud solutions
as opposed to in-house application development.
Combined with the fact that the implementation of
the Agility & Effciency (A&E) program is complete,
capital expenditures are forecast to be lower than in
past years.
Projected Return on Common
Equity
BDC is required to achieve a return on equity (ROE)
at least equal to the government’s long-term cost of
capital. To meet this requirement, BDC follows the
10-year moving average returns for Government of
Canada three-year bonds, which is currently 2 per-
cent.
For fscal 2015, BDC expects its 10-year moving
average ROE to be 9.1 percent due to strong results
in BDC Financing.
Table 21: Dividends ($M)
Actual
2014
Estimate
2015
Proposed
2016
Dividends* 60 55 60
*Common dividends are declared, booked, and paid in the following fscal year
Table 19: Capital Budget ($M)
Actual
2014
Estimate
2015
Proposed
2016
Facilities 1 4 5
Information technology 11 3 5
Agility & Effciency (A&E) 24 – –
Total 36 7 10
7.8%
7.4%
6.1%
5.2%
7.6%
8.9% 9.1%
9.0%
8.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016
4%
8%
0%
12%
Table 20: ROE 10-year Moving Average (%)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
58 | bdc.ca
Dividend Policy, Statutory
Limitations and Capital Adequacy
Dividend Policy
Common dividends are payable annually and fuctu-
ate based on BDC performance. In fscal 2016, BDC
is forecasting dividend payments of $60 million. BDC
has paid $237.4 million in dividends in the past fve
years (including a $55-million payment in June 2014)
to the Government of Canada.
Statutory Limitations
The BDC Act requires that the aggregate of bor-
rowings and contingent liabilities in the form of
guarantees provided by BDC not exceed 12 times its
equity. Growth in earnings should ensure that BDC
will not exceed this statutory requirement over the
planning period.
The debt-to-equity ratio is projected at 3.4:1 in fscal
2015 and should move to 3.3:1 by fscal 2016, well
below the statutory limit. The total equity of BDC
should increase from $4.726 billion in fscal 2015 to
$5.222 billion by the end of fscal 2016.
BDC’s paid-in capital limit was raised by the Budget
2009 Implementation Act to $3 billion from $1.5 bil-
lion, as originally set out in the BDC Act. BDC’s
paid-in capital is currently at $2.166 billion, but will
increase to $2.516 billion following the capital injec-
tion required for VCAP.
Capital Status
In line with its requirement for fnancial sustainability,
BDC provides for an additional capital safeguard to
help Canadian entrepreneurs withstand diffcult eco-
nomic conditions without requiring further invest-
ment by the Government of Canada. This approach
observes Treasury Board guidelines dated March 28,
1996, which state that, “the Bank maintain capital
and loss provisions suffcient to ensure that BDC
can withstand unfavourable economic circumstances
without requiring additional government funding.”
In a decision dated May 14, 2009, Treasury Board
reconfrmed BDC’s capital adequacy ratios (percent-
age of net portfolio assets) of at least:
> 10 percent for term loans
> 25 percent for quasi-equity loans (defned as
venture loans, patient capital, working capital
support program)
> 100 percent for venture capital investments
(including VCAP)
> 10 percent of the fair value of F-PIL assets
BDC’s available capital is expected to reach
$4.667 billion by the end of fscal 2015. BDC’s capital
status under Treasury Board guidelines is expected
to be $1.708 billion in fscal 2015. BDC believes it is
also prudent to reserve capital for loans and invest-
ments already committed to entrepreneurs but not
yet disbursed by BDC. These undisbursed amounts
should represent $665 million of capital by the end
of fscal 2015. In addition, BDC reserves capital for
the investments it expects to make in its three inter-
nal VC funds and in VCSIP, for which the government
requested that BDC set aside $100 million of capital.
BDC also uses an economic capital model to man-
age risks by ensuring appropriate capital to support
its current and future business and to safeguard its
fnancial sustainability. The philosophy behind this
model is to balance the requirement for BDC to
fulfll its public policy mandate while remaining fnan-
cially self-suffcient. It also provides a benchmark for
the Treasury Board assessment guidelines.
bdc.ca | 59
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Stress Testing
In keeping with industry practices and the core tenets
of sound fnancial and risk management, particu-
larly during times of uncertainty, BDC conducts
entreprise-wide stress tests on its signifcant risks
and portfolios to determine an appropriate level of
capital to withstand a sustained economic downturn.
Specifc scenarios are selected based on historical and
estimated impact on the current portfolios.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
60 | bdc.ca
Table 22: Consolidated Statement of Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Interest income 1,020 1,087 1,316
Interest expense 132 146 291
Net interest income 888 941 1,025
Net realized gains (losses) on investments (25) (47) (34)
Consulting revenue 22 17 19
Fee and other income 41 42 44
Net realized gains (losses) on other fnancial instruments (8) 1 –
Net revenue 918 954 1,054
Provision for credit losses (73) (83) (138)
Net change in unrealized appreciation (depreciation) of investments* 3 27 (1)
Net unrealized foreign exchange gains (losses) on investments 15 3 –
Net unrealized gains (losses) on other fnancial instruments (1) (4) (1)
Income before operating and administrative expenses 862 897 914
Operating and administrative expenses 430 432 491
Net income 432 465 423
Net income (loss) attributable to:
BDC’s shareholder 426 465 424
Non-controlling interests 6 – (1)
Net income 432 465 423
*Includes net fair value change and fair value adjustment due to realized gains (losses) and write-offs
Appendix A to the Financial Plan
The following table presents BDC’s fnancial highlight. In fscal 2016, BDC expects total revenues of $1.054 bil-
lion and a net income of $423 million, of which $424 million is attributable to BDC’s shareholder.
bdc.ca | 61
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 25: Projected Statement of Cash Flows ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net cash fows provided by operating activities (957) (805) (797)
Net cash fows used in investing activities (3) (321) (331)
Net cash fows provided by fnancing activities 935 1,160 1,222
Net increase (decrease) in cash & cash equivalents (25) 34 94
Cash & cash equivalents at beginning of year 702 677 711
Cash & cash equivalents at end of year 677 711 805
Table 23: Total Revenues by Business Line ($M)
Actual
2014
Estimate
2015
Proposed
2016
Financing 846 900 974
Securitization 8 6 5
Growth & Transition Capital 66 50 60
Venture Capital (24) (19) (6)
Consulting 22 17 19
Support for High-Impact Firms – – –
Venture Capital Action Plan – – 2
Net revenues 918 954 1,054
Table 24: Operating Budget - Expenses ($M)
Actual
2014
Estimate
2015
Proposed
2016
Financing 339 340 377
Securitization 2 2 2
Growth & Transition Capital 26 25 31
Venture Capital 23 22 24
Consulting (incl. delivery and transition costs) 39 42 49
Support for High-Impact Firms – – 7
Venture Capital Action Plan 1 1 1
Total operating budget 430 432 491
Operating expenses as a % of the average total loans and investments
portfolio
2.3 2.2 2.3
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
62 | bdc.ca
Table 26: Consolidated Statement of Financial Position (unaudited, in $M)
Actual
2014
Estimate
2015
Proposed
2016
ASSETS
Cash and cash equivalents 677 711 805
Asset-backed securities 336 407 460
Loan Portfolio 17,749 19,095 20,423
Allowance for credit losses (508) (507) (559)
Loan Portfolio (net) 17,241 18,588 19,864
Growth & Transition Capital investments 577 635 732
Venture Capital investments 495 613 668
Venture Capital Action Plan 5 49 126
18,654 20,292 21,850
Post-employment beneft asset 84 21 35
Other assets 155 152 147
Total assets 19,570 21,176 22,837
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued liabilities 106 115 124
Short-term notes 14,057 15,511 16,860
Long-term notes 775 542 337
Borrowings 14,832 16,053 17,197
Post-employment beneft liability 188 222 229
Other liabilities 55 60 65
Total liabilities 15,181 16,450 17,615
Equity
Share capital 2,138 2,138 2,288
Contributed surplus 28 28 28
Retained earnings at beginning of year 1,748 2,167 2,518
Net income 426 465 424
Remeasurements of net post-employment beneft liability 53 (59) –
Dividends on common shares (60) (55) (60)
Retained earnings 2,167 2,518 2,882
Accumulated other comprehensive income 5 5 5
Equity attributable to BDC’s shareholder 4,338 4,689 5,203
Non-controlling interests 51 37 19
Total equity 4,389 4,726 5,222
Total liabilities and equity 19,570 21,176 22,837
Debt/Equity ratio 3.4 3.4 3.3
bdc.ca | 63
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Future accounting changes
Information is provided below on new standards,
amendments and interpretations to existing stan-
dards that are not yet effective but that are expected
to impact BDC’s fnancial results. BDC is currently
assessing the impact of these changes on its consoli-
dated fnancial statements.
IFRS 9—Financial Instruments
On July 24, 2014, the International Accounting
Standards Board (IASB) issued the fnal version of
IFRS 9—Financial Instruments, bringing together the
classifcation and measurement, impairment and
hedge accounting phases of the IASB’s project to
replace IAS 39 Financial Instruments: Recognition and
measurement and all previous versions of IFRS 9. The
fnal version amends classifcation and measurement
of fnancial assets and introduces a new expected
loss impairment model. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018 and
will be applied retroactively subject to certain excep-
tions.
Since 2008, the IASB has been working to replace
IAS 39 and structured the project in three phases:
1. Classifcation and measurement of fnancial
assets and fnancial liabilities
2. Impairment
3. Hedge accounting
The new standard introduces new presentation and
extensive new disclosure requirements.
1. Classifcation and measurement of fnancial
assets and fnancial liabilities
IFRS 9 applies one classifcation approach for all
types of fnancial assets to determine whether the
fnancial asset is measured at amortized cost or at
fair value, based on both the entity’s business model
for managing the fnancial assets and the fnancial
asset’s contractual cash fow characteristics. IFRS 9
contains three principle classifcation categories for
fnancial assets: amortized cost, fair value through
other comprehensive income (FVOCI), and fair value
through proft or loss (FVTPL). The existing IAS 39
categories of held-to-maturity, loans and receivables,
and available-for-sale are removed.
2. Impairment
IFRS 9 replaces the current “incurred loss” model
in IAS 39 with an “expected credit loss” model. The
new model applies to fnancial assets that are meas-
ured at amortized cost or FVOCI, such as loans,
lease and trade receivables, debt securities, contract
assets and most loan commitments and fnancial
guarantee contracts. The model uses a dual meas-
urement approach under which the loss allowance
will be for either 12-month expected credit losses
or lifetime expected credit losses, the latter applic-
able if credit risk has increased signifcantly since
initial recognition. A simplifed approach is available
for trade and lease receivables and contract assets,
allowing the recognition of lifetime expected credit
losses at all times.
3. Hedge accounting
The new standard carries forward the general hedge
accounting requirements originally published in
2013. The objective is to more closely align the ac-
counting with risk management activities. The IASB
is continuing to work on its macro hedge accounting
project.
Appendix B to the Financial Plan
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
64 | bdc.ca
IFRS 15—Revenue from contracts with
customers
On May 28, 2014, the IASB issued a new standard,
IFRS 15—Revenue from contracts with customers,
replacing IAS 18—Revenue. The new standard is
effective for annual periods beginning on or after
January 1, 2017.
The new revenue model applies to all contracts with
customers except those that are within the scope
of other IFRS standards, such as leases and fnancial
instruments. The core principle of the standard is
that an entity will recognize revenue when it trans-
fers promised goods or services to customers in an
amount that refects the consideration to which the
entity expects to be entitled to in exchange for those
goods and services.
The new standard establishes a fve-step model that
will apply to revenue earned from a contract with a
customer (with limited exceptions), regardless of the
type of revenue transaction or the industry. Exten-
sive disclosures will be required, both qualitative and
quantitative. The objective is to disclose suffcient
information to enable the users of fnancial state-
ments to understand the nature, amount, timing and
uncertainty of revenue and cash fows arising from
contracts with customers.
doc_272862615.pdf
The Corporate Plan Summary is based on the 2015-2016 to 2019-2020 Corporate Plan, as approved by the Governor in Council on the recommendation of the Minister of Industry.
BDC Corporate Plan Summary
2015-16 to 2019-20
OPERATING BUDGET | CAPITAL BUDGET
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
2 | bdc.ca
The Corporate Plan Summary is based on the 2015-2016 to 2019-2020
Corporate Plan, as approved by the Governor in Council on the
recommendation of the Minister of Industry.
bdc.ca | 3
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Contents
BDC PROFILE _________________________________________________ page 4
OPERATING ENVIRONMENT ___________________________________ page 6
EXECUTIVE SUMMARY ________________________________________ page 8
HOW BDC HELPS ENTREPRENEURS
Informing, inspiring and celebrating __________________________ page 10
Making it easy to do business ________________________________ page 10
Reaching entrepreneurs across Canada ________________________ page 11
Getting businesses up and running ____________________________ page 12
Turning challenges into opportunities _________________________ page 14
Helping entrepreneurs up their game __________________________ page 15
BDC/EDC products and services ___________________________ page 21
DOING MORE TO SUPPORT ENTREPRENEURS __________________ page 22
Helping to improve competitiveness __________________________ page 23
Facilitating greater access to capital ___________________________ page 27
New powers under the BDC Act ___________________________ page 29
SUMMARY OF INITIATIVES ____________________________________ page 30
PERFORMANCE MEASURES ____________________________________ page 31
INDEX OF PARTNERS/BUSINESS RELATIONSHIPS _________________ page 32
APPENDICES TO THE CORPORATE PLAN
Appendix A: Governance ___________________________________ page 34
Appendix B: Risk Management _______________________________ page 38
Appendix C: Future Performance Measures_____________________ page 40
FINANCIAL PLAN ___________________________________________ page 41
Appendix A to the Financial Plan ____________________________ page 60
Appendix B to the Financial Plan _____________________________ page 63
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
4 | bdc.ca
Economic impact of BDC’s clients
ASPIRATION
To be a leader in making Canadian entrepreneurs the most
competitive in the world
75%
of clients have fewer
than 20 employees
80%
of clients said BDC had
an overall positive impact
on their business
4
5,701
are frst-time clients
(Financing and Growth
& Transition Capital)
2012 2013 2014
Annual revenues generated by BDC clients $176B $192B $200B
Estimated annual export revenues
generated by BDC clients
$21.6B $22.7B $21.9B
2,000
employees
$19.6B
assets
$206M
dividends paid
since 2009
BC & North Prairies Ontario Quebec Atlantic Total
Business centres and offces 14 17 31 26 13 101
Clients
1
3,805 5,190 8,345 11,481 3,906 32,727
Loans/investments
2
$2.4B $4.0B $5.8B $7.1B $1.9B $21.2B
1
# of Financing, Growth & Transition Capital, Consulting and Venture Capital clients and funds
2
$ committed for Financing, Growth & Transition Capital and VC clients and funds, excluding inactive companies
3
Sub-investment grade, which is rated BB+ or less, relates to BDC’s Financing portfolio in $ outstanding
4
Based on the Survey on BDC’s image, role and impact, October 2014
5
Through securitization and venture capital
6
Includes both BDC and non-controlling interests
7
Includes $15.1M invested in 31 inactive companies
8
F-PIL = Funding Platform for Independent Lenders
BDC profle: For 70 years, a steadfast supporter of Canadian entrepreneurs
BDC Business Lines
Financing
Growth &
Transition Capital
Venture
Capital
Consulting Securitization
Term loans
with fexible
repayment
schedules
$17.7B
outstanding
$19.7B
committed
Cash fow, mezzanine,
quasi-equity and
equity solutions for
growth and transition
projects
$601M
outstanding
6
$636M
committed
6
Direct and indirect
equity investments in
multiple technology
sectors
$535M
outstanding
$862M
committed
7
Affordable business
consulting, planning
and management
solutions
2,505
mandates in 2014
Debt fnancing that relies
on the pooling of illiquid
assets (under F-PIL
8
)
$336M
ABS outstanding
$530M
committed
Financing
Growth &
Transition Capital
Venture
Capital
Consulting Securitization
Term loans
with fexible
repayment
schedules
$17.7B
outstanding
$19.7B
committed
Cash fow, mezzanine,
quasi-equity and
equity solutions for
growth and transition
projects
$601M
outstanding
6
$636M
committed
6
Direct and indirect
equity investments in
multiple sectors
$535M
outstanding
7
$862M
committed
7
Affordable business
consulting, planning
and management
solutions
2,505
mandates in 2014
Debt fnancing that relies
on the pooling of illiquid
assets (under F-PIL
8
)
$336M
ABS outstanding
$530M
committed
BDC business centres
BDC clients
18%
of clients are
exporters
94%
of BDC’s portfolio
is sub-investment
grade
3
7,417
Canadian SMEs
receive indirect
support from BDC
5
DATA ARE AS AT MARCH 31, 2014, UNLESS OTHERWISE NOTED
bdc.ca | 5
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
? Diversifed (incl. FedDev) $112.9M
? Healthcare $93.0M
? Information technology $72.1M
? Industrial/clean/energytech $57.1M
? GO Capital
12
$25.6M
? Strategic investments (SIP) $9.7M
? Funds of funds
13
$432.4M
? Strategic investments (SIP) $59.1M
Manufacturing 23%
Wholesale & Retail 19%
Tourism 13%
Commercial properties 11%
Construction 9%
Transport & storage 6%
Business services 4%
Other 15%
Manufacturing 36%
Business Services 21%
Wholesale Trade 11%
Construction 7%
Retail Trade 6%
Tourism 2%
Transportation & Storage 2%
Other 15%
Financing commitment: $19.7B
Growth & Transition Capital commitment: $636M
Venture Capital commitment: $370M in direct investments and $492M in indirect
Consulting Securitization
9
Based on Statistics Canada input/output model results of direct and indirect economic activity generated by clients who were fnanced by BDC in fscal 2014
10
Based on the Survey on BDC’s image, role and impact, October 2014
11
Industry Canada, The State of Entrepreneurship, February 2010
12
Includes GO Capital 100% consolidation in BDC
13
Excludes BDC investment in GO Capital due to consolidation
14
Assets under management represents total committed capital of active portfolios, including anticipated commitments
Commitment by industry sector
Commitment by industry sector
%
Commitment by fund
Commitment by region
Commitment by region
Key metrics
Key metrics
11% are start-ups
(< 2 years) of which 60% survive
more than 5 years (vs. 51% of all
start-ups in Canada)
11
18%
of clients are mid-sized frms
(100 to 499 employees)
? Atlantic ? Quebec ? Ontario
? Prairies ? BC & North
? Atlantic ? Quebec ? Ontario
? Prairies ? BC & North
11%
8%
7%
3%
1%
50%
7%
13%
10%
6%
33%
42%
26%
33%
20%
14%
11%
5%
$53.9B
contribution to GDP
9
57%
of clients are exporters
7,012 SMEs have benefted indirectly
from BDC’s role in the securitization market
Clients gave BDC Consulting a score of 7.5 out of 10 for
understanding entrepreneurs’ needs
10
Each dollar invested by BDC VC
leveraged $5.13
from external investors
BDC VC has
$1.95 billion
assets under management
14
Clients gave BDC a score of
7.4 out of 10 for helping their
business through fnancial diffculties
10
52%
of clients are in
non-metropolitan areas
74%
of BDC VC’s investments were in
early stage frms (seed, start-up and
development phases)
Key metrics $
D
i
r
e
c
t
I
n
d
i
r
e
c
t
DATA ARE AS AT MARCH 31, 2014, UNLESS OTHERWISE NOTED
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
6 | bdc.ca
Operating Environment
BDC’s Corporate Plan is based on the following economic observations and assumptions
Global and selected regional growth forecasts
Share of global
GDP (%)
Real GDP growth (%)
2013 2014e 2015f 2016f
World 100 3.3 3.3 3.5 3.7
United States 16 2.2 2.4 3.6 5.3
Euro area 12 -0.5 0.8 1.2 1.4
China 16 7.7 7.4 7.0 6.9
Japan 5 1.6 0.1 0.6 0.8
Canada 1 2.0 2.4 2.1 2.4
Rest of the world 50 3.0 2.9 3.1 3.4
Source: International Monetary Fund and Bank of Canada, January 2015, e = estimate; f = forecast
GDP shares are based on International Monetary Fund (IMF) estimates of the purchasing-power-parity (PPP) valuation of country GDPs for 2013 from the IMF’s
October 2014 World Economic Outlook. This update has increased the weight of China and the rest of the world, which in turn has revised up World GDP
growth by approximately 0.1 percentage point relative to the July Report.
> Modest acceleration of the global economy is
expected in coming years.
> Crude oil prices have fallen by more than
55 percent since June 2014 due to oversupply.
This will negatively impact countries that are net
oil exporters and will reduce business investment
in the oil sector.
> While lower oil prices are expected to stimulate
global economic growth overall, they will widen
the differences among economies.
> In the Euro area and Japan, growth is forecast to
remain weak. However, in the U.S., the expansion
of the economy should continue:
– the drop in oil prices will be a net beneft to
consumers
– the housing sector is reviving
– job creation is strong, however, long-term
unemployment and involuntary part-time
employment levels remain elevated
– consumers have reduced their debt levels
– the federal budget defcit has been brought to a
more sustainable level
The global context
bdc.ca | 7
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Does your company expect to invest in new projects within the next 12 months?
? Yes ? No ? Don’t know
0
40
80
2012
55
59
78
41
37
20
3 4
2
2013 2014
Source: BDC Viewpoints, Business Investment Planning Survey, September 2014
The Canadian context
Economic growth
> A more robust U.S. economy should continue
to beneft Canadian exports. Therefore, export-
driven industries are expected to perform better,
supported by stronger global growth and a
lower Canadian dollar. However, competition
from emerging economies and loss of export
capacity mean that Canadian exports to the U.S.
should continue to underperform relative to past
recovery periods.
> The manufacturing sector has not reached its pre-
recession output level and continues to face stiff
competitive pressures; a lower Canadian dollar
will be benefcial but being more innovative and
productive will remain an imperative.
> In January 2015, the Bank of Canada estimated
that the lower price of oil will take one-third of
a percentage point off Canadian GDP growth in
2015. Oil-producing provinces would be negatively
affected, while other regions, such as those more
concentrated in manufacturing, would beneft from
a lower Canadian dollar. If the price of oil remains
depressed for an extended period, this will likely
reduce investments by major oil producers, which
would affect their suppliers negatively.
> Overall, economic conditions in Canada are sound
but long-term economic growth potential is
expected to be weaker than before the recession
at slightly more than 2 percent annually, due to an
aging population and lagging productivity.
Credit conditions
> Credit conditions should remain favourable to
Canadian businesses.
> However, based on Statistics Canada’s “Survey
on Financing and Growth of Small and Medium
Enterprises”, roughly 16 percent of SMEs—and
almost one in four manufacturers—believe that
diffculty accessing fnancing is an obstacle to
growth.
> Generally, frms with fewer physical assets, that
are more innovative, or that are start-ups have the
most diffculty accessing fnancing.
> The Governor of the Bank of Canada warned in
December 2014 that credit for new and small
businesses could be negatively affected as banks
adjust to tougher regulations.
Business investment
> Improved export opportunities should lead to
more business investment in the near term; a
BDC survey shows investment intentions among
SMEs have picked up over the past two years.
> The Canadian Federation of Independent Business
(CFIB) reported that optimism among SMEs
was negatively affected by lower oil prices in
December 2014.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
8 | bdc.ca
Executive Summary
C
anada’s small and medium-sized businesses
contribute signifcantly to the economy: they
account for almost three-quarters of private-sector
employment and more than half of gross domestic
product in the private sector.
The Business Development Bank of Canada (BDC)
helps to ensure that Canada continues to beneft
from its small and medium-size enterprises (SMEs).
It does so by providing entrepreneurs with fnancing,
investments and advisory services, paying particular
attention to SMEs that face market gaps, in accord-
ance with its complementary role.
As a pan-Canadian Crown corporation, BDC strives
to be visible in communities across the country,
including non-urban centres. To accomplish this,
BDC works with public- and private-sector partners,
including other fnancial institutions, private-sector
investment funds and technology accelerators. BDC
also provides educational resources and celebrates
the accomplishments of Canadian entrepreneurs,
including through four new awards announced in
Economic Action Plan 2013.
The report on BDC’s “10-Year Legislative Review:
2001-2010”, tabled by the Minister of Industry in
June 2014, found that BDC meets its mandate of
supporting Canadian entrepreneurs while playing
a complementary role in the market. The review
resulted in recommendations aimed at ensuring BDC
continues to meet its mandate and changes to the
Business Development Bank of Canada Act that will
better enable BDC to support entrepreneurs.
Over the planning period, BDC will continue to fulfll
its role so that Canada can beneft from a strong
entrepreneurial ecosystem.
At the same time, there is a pressing need for
Canadian SMEs to become more competitive
through innovation, productivity, growth and
internationalization. This is where BDC also has an
important role to play. As part of Digital Canada
150, BDC leverages its expertise and resources to
help SMEs innovate and increase effciency. It plays
a pivotal role in the innovation economy, including
implementing several government priorities such as
the Venture Capital Action Plan (VCAP). It assists
SMEs that make signifcant contributions to the
economy, such as high-growth frms and SMEs in
specifc sectors, including aerospace. Plus it helps to
ensure that promising frms have the opportunity to
grow, explore new markets and become the next
generation of Canadian champions.
Now, BDC believes it is important to do more
to enable Canadian entrepreneurs to make an
even greater contribution to the economy. It will
accomplish this by building on existing strategies and
proposing new initiatives to facilitate access to capital
and advisory services and help SMEs become more
competitive.
bdc.ca | 9
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Financial Plan Highlights
BDC Financing plays an important role in facilitat-
ing access to capital for entrepreneurs and sup-
porting the competitiveness of SMEs. Over the
planning period, it will work to ensure that it is
accessible to entrepreneurs across Canada, with a
focus on increasing its support to SMEs in Ontario
and Western Canada. To refect these efforts, BDC
Financing has increased its forecast for acceptances
and the portfolio is forecast to grow to $20.4 billion
in fscal 2016. Net income is expected to increase to
$458 million in fscal 2016.
BDC believes that entrepreneurs need to take
advantage of professional, qualifed advisory servi-
ces to grow, innovate and create effciencies. This is
why BDC Consulting is investing in advisory services
that will maximize impact on the competitiveness of
Canadian entrepreneurs. Annual revenues for BDC
Consulting are forecast to increase to $19 million in
fscal 2016. Net losses are expected to remain stable
in fscal 2016, refecting improved effciencies and
cost recovery.
BDC Growth & Transition Capital addresses the
needs of Canada’s fastest-growing companies and of
frms in transition. The forecast for acceptances is in
line with last year, which should bring the portfolio
at fair value to $732 million in fscal 2016. Due to
growth in the portfolio and improved effciency, net
income will increase to $34 million in fscal 2016.
BDC Venture Capital will build on its existing
strategy and address evolving needs in the market
by supporting a variety of companies and looking
for opportunities for early and late-stage investing.
Largely as a result of increased activity in direct
investing, the forecast for authorizations is higher
than last year. BDC VC’s forecast for net income
has improved from last year’s Corporate Plan, with
a net loss of $14 million expected in fscal 2016.
The portfolio at fair value is forecast to increase to
$668 million in fscal 2016.
In the Venture Capital Action Plan, BDC expects to
incur a net loss of $21 million in fscal 2016.
To help some of Canada’s most promising frms
contribute fully to the economy, BDC is proposing
the gradual implementation of a new initiative that
will facilitate access by these “high-impact” frms to
the best solutions available. As an investment in SME
competitiveness, the initiative will be funded from
retained earnings.
Even with these important investments in Canada’s
entrepreneurs, BDC remains fnancially sustain-
able. BDC consolidated net income is expected to
be $423 million in fscal 2016. In fscal 2016, BDC is
forecasting dividend payments of $60 million.
BDC’s 10-year moving average return on equity is
expected to remain stable in fscal 2016. The BDC
Financing reported effciency ratio is forecast to be
38.7 percent in fscal 2016, where a decrease in the
ratio represents improved effciency. This refects an
improvement in effciency compared to fscal 2007,
where BDC spent 50.6 cents to generate a dollar of
revenue.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
10 | bdc.ca
A healthy entrepreneurial ecosystem is critical for
Canada’s economic well-being. BDC reinforces this
ecosystem by raising awareness of entrepreneurship,
offering information and resources, supporting early
and seed stage investment groups, and celebrating
and inspiring entrepreneurs.
In Economic Action Plan 2013, the government
asked BDC to draw on its experience with the
Young Entrepreneur Award program to create and
administer a new awards program. In January 2014,
BDC launched the BDC Entrepreneurship Awards,
recognizing the contribution of entrepreneurs to the
Canadian economy in the areas of mentorship, in-
novation, resiliency and serial entrepreneurship.
In line with Economic Action Plan 2013, the object-
ives of these awards are to promote and celebrate
Canada’s entrepreneurial culture while inspiring
Canadian entrepreneurs to innovate, take risks and
grow their businesses.
The BDC Mentorship Award, presented by Futur-
preneur Canada, was awarded in May 2014 to Ryan
C. Jackson of Medicine Hat, Alberta. This award
recognizes an outstanding Canadian mentor who has
contributed to the success of his/her mentees.
The BDC Innovation Award, presented by the Can-
adian Venture Capital & Private Equity Association,
was awarded in May 2014 to Mirametrix of Mont-
real. This award recognizes Canada’s most innova-
tive start-up company that has reshaped its industry
in exciting and unforeseen ways.
The BDC Resiliency Award, presented in partner-
ship with the Turnaround Management Association,
was awarded during BDC Small Business Week in
October 2014 to Superior Cabinets of Saskatoon.
This award recognizes a Canadian business that has
successfully undergone a restructuring or pivotal turn
of events in the past year.
The fourth award, the BDC Entrepreneurship
Champion, recognizes a Canadian entrepreneur who
has created and grown many successful smaller busi-
nesses over the years, making a substantial contribu-
tion to the Canadian economy. The winner of this
award will be selected by an advisory committee of
Canadian business leaders and key infuencers and
announced in 2015.
Informing, inspiring and celebrating
Making it easy to do business
It is important to reduce “red tape” for business
owners to help them save time and money. BDC
continuously looks for ways to improve the client
experience, for example, by reducing disburse-
ment times and by making loan applications available
online. BDC’s website, BDC.ca, has been improved
over the past few years to make it more intuitive and
navigable for entrepreneurs.
BDC’s Agility and Effciency (A&E) program also
has improved the client experience. It started with
exploring how employees could devote more time
to clients and less time to process. In fscal 2015, the
centrepiece of A&E, the core lending solution, re-
placed older systems and is now fully operational. By
transforming BDC’s processes, it allows for better
automation, easier assignment of tasks, faster pro-
cessing times and more effcient service for clients.
bdc.ca | 11
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Reaching entrepreneurs across Canada
BDC’s fnancing, investments and advisory services
are accessible through more than 100 locations
across the country. BDC currently supports over
32,000 clients directly—and more than 7,400 in-
directly—about 20 percent of whom reside in
rural or remote areas. Ninety-six percent of BDC’s
clients have fewer than 100 employees and in fscal
2014 they generated approximately $200 billion in
revenues, including $22 billion in export revenues.
To ensure that it is able to help entrepreneurs
across Canada, BDC frequently reviews the number
and location of its offces (see page 27 for more
information). In rural markets, BDC works with
Community Futures Development Corporations
(CFDCs). Out of 268 CFDCs across the country,
BDC has partnership agreements with 236, including
in Canada’s North. From fscal 2013 to 2014, there
was a 74 percent increase in deals done in partner-
ship with CFDCs.
In fact, BDC relies on the expertise and cooperation
of a variety of organizations from the public and
private sectors to increase its reach and accessibility
(please see the Index of Partners/Business Relation-
ships on page 32). For example, in its work to
re-energize the venture capital ecosystem in Canada,
BDC works with accelerators and angel investor
groups, which are dedicated to helping promising
technology companies get off the ground.
An effective online presence is another way BDC
increases its reach. Recognizing that the adoption of
web technology is at an all-time high among entre-
preneurs, BDC wants to optimize its use of online
channels to increase its presence and provide more
value to SMEs. This involves developing the ability to
support entrepreneurs online in real-time and pub-
lishing value-added content that helps entrepreneurs
solve various business challenges.
A complementary approach
Working with fnancial institutions allows BDC to
increase credit availability for SMEs while playing its
complementary role.
In fscal 2014, BDC launched a pilot program for
asymmetric lending, where BDC’s terms and
conditions differ from those of the other lend-
ers in the transaction. This results in BDC taking a
greater share of the risk and helps to ensure that the
entrepreneur receives the fnancing. It differs from
pari passu lending, where terms and conditions for
each lender are equal. As at September 30, 2014,
BDC had authorized $28 million in 26 asymmetric
fnancing transactions. As part of the pilot, BDC is
partnering with fnancial institutions across Canada.
Loan guarantees are another way in which BDC
can improve access to fnancing. BDC is currently
exploring the potential of offering loan guarantees,
where BDC would repay a debt obligation to the
lender if the borrower defaults.
To help larger, growing companies access fnancing,
BDC offers subordinated fnancing solutions in con-
junction with other lenders and participates in bigger
transactions through syndication.
To ensure ongoing collaboration and complementar-
ity with fnancial institutions, BDC executives partici-
pate in the Lending Practitioners Forum, an initiative
spearheaded by the Canadian Bankers Association
that involves the major chartered banks and Export
Development Canada (EDC). BDC also participates
on the board and committees of the Canadian Ven-
ture Capital & Private Equity Association and works
closely with Credit Union Central of Canada.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
12 | bdc.ca
Typically, start-ups and small businesses fnd it dif-
fcult to access fnancing as they often lack manage-
ment experience and collateral. Many also cannot af-
ford or access advisory services that could help their
business grow and succeed. To address these market
gaps, as a complementary lender BDC offers tailored
fnancing products, which are often small loans of
less than $500,000, and advisory services.
BDC’s commitment to small businesses is paying
off, with 8,010 small loans authorized in fscal 2014,
well above the target of 6,500. BDC also helped
1,519 start-ups in fscal 2014, exceeding its corpor-
ate target of 1,400. For fscal 2014, BDC’s median
loan size was $100,000, another indicator of its
dedication to small loans and small business.
BDC also helps some of Canada’s most promising
technology frms get up and running through venture
capital (VC) and by working with accelerators and
angel investor groups. More on BDC’s VC activities
can be found starting on page 15.
Young entrepreneurs
Young entrepreneurs often cannot access traditional
fnancing due to a lack of experience and collateral.
BDC works with Futurpreneur (formerly the Can-
adian Youth Business Foundation) to match fnancing
and can provide up to $30,000, twice that provided
by Futurpreneur. As at March 31, 2014, BDC’s com-
mitment under this alliance was for $21 million to
969 young entrepreneurs.
BDC has helped develop and promote mentoring-
focused “crash courses” on Futurpreneur’s online
business resource centre. These interactive modules
provide in-depth, self-guided learning for both the
mentor and the young entrepreneur. For Futurpre-
neur, a measure of success is how many of its entre-
preneurs can access traditional fnancing.
BDC is involved in other programs for young entre-
preneurs:
> Junior Achievement (JA)—BDC supports
JA fnancially to develop and launch the “Be
Entrepreneurial” program, which promotes
entrepreneurship to Canadian youth
> Vanier College BDC Business Case Challenge—a
national business case competition for pre-
university students
> Enactus—BDC renewed its contribution to
Enactus through a three-year commitment of
$50,000 annually. The BDC Entrepreneurs First
Project will award $2,500 each to six Enactus
teams to implement projects in their communities
that accelerate the success of entrepreneurs. Since
2011, 244 students have been involved
Aboriginal entrepreneurs
Aboriginal entrepreneurs can have diffculty access-
ing fnancing and advisory services as they often
lack experience and can have challenges in offering
collateral. BDC supports Aboriginal entrepreneurs
through:
> Growth Capital for Aboriginal Business—fexible
term loans of up to $25,000 for new businesses
and up to $100,000 for existing businesses.
> Aboriginal Business Development Funds—a pro-
gram that provides funds through a community-
based organization. BDC has committed $1 million
to four funds that are delivered at the grassroots
level in various regions of Canada.
Getting businesses up and running
bdc.ca | 13
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
> Consulting—Aboriginal entrepreneurs have identi-
fed mentoring and improved management skills as
priorities. BDC Consulting draws on experienced
Aboriginal consultants to deliver entrepreneurial
training for Aboriginal entrepreneurs.
> E-Spirit—a national Aboriginal business plan com-
petition sponsored by BDC for Aboriginal youth in
grades 10 to 12. Since 2001, E-Spirit has intro-
duced over 6,500 students to entrepreneurship.
In the spirit of complementarity, BDC’s Aboriginal
banking unit works closely with Aboriginal fnancial
institutions across Canada to help ensure access to
fnancing and partners with Aboriginal Affairs and
Northern Development Canada (AANDC) to pro-
vide debt fnancing to First Nations businesses across
Canada with assets on a reserve. This reduces the
impact of one of the main impediments to First Na-
tion business development: Section 89 of the Indian
Act that prohibits use of personal or real property on
reserve land as collateral.
BDC’s Aboriginal banking unit has expanded to
include more specialized account managers across
Canada. Whether for fnancing or advisory services,
Aboriginal entrepreneurs deal consistently with
a specialist from the unit. As at March 31, 2014,
BDC’s commitment to Aboriginal businesses was
$188.1 million to 301 clients.
Immigrant entrepreneurs
For newcomers to Canada with international busi-
ness experience, self-employment is a way to con-
tribute to the economy. In a September 2014 survey
of more than 1,200 existing and former BDC clients,
50 percent of respondents who identifed themselves
as immigrants said fnancing from BDC helped them
create employment. However, immigrants often lack
access to the information and resources needed to
start a business.
Entrepreneurship Connections, a program helping
Greater Toronto Area immigrants start their own
business, was launched in 2011 through a partner-
ship between ACCES Employment and BDC. The
four-week program helps immigrants learn about
the Canadian market, including legal and regulatory
requirements and potential sources of fnance. Par-
ticipants receive coaching, learn to write a business
plan and are paired with a mentor in the Canadian
market. BDC is working with community partners to
establish similar programs.
Social purpose frms
BDC supports “social purpose” frms through pilot
projects in Quebec, Ontario and British Columbia
and by building relationships with organizations
across Canada that work with these frms. The busi-
ness models and plans of social purpose companies
include the creation of a social or environmental
value. Many of these frms seek certifcation as a
Benefcial corporation (B Corp), a new certifcation
similar to LEED for green buildings or Fair Trade for
coffee. Certifed B Corps (a group of 1,200 frms in
35 countries) must meet comprehensive standards
related to purpose, transparency and accountability.
BDC achieved this designation in 2014—the frst
Canadian fnancial institution to do so.
BDC support for small business as at March 31, 2014
# of start-ups
1
served over past 10 years 13,457
$ authorized for small businesses
2
over past 10 years $27B
$ authorized for start-ups over past 10 years $4.2B
# of BDC Entrepreneurship Centres serving small businesses 21
1
Defned as businesses Fundraising for Canadian GPs—a shortage of LPs
in the Canadian market has made it diffcult for
both established and emerging fund managers
to close their funds with an adequate amount
of investment. The Venture Capital Action Plan
(VCAP) should help in this regard.
> Late-stage funding gap—although there has been
signifcant momentum in VC investments, there
remains little capacity for later-stage investment,
which has encouraged U.S. VC frms to enter the
Canadian market to take advantage of strong later-
stage opportunities.
> Imbalanced VC ecosystem—new fund models and
emerging managers raising small funds of less than
$50 million are changing the landscape. This could
result in early stage capital not being suffciently
balanced by later-stage capital.
> Uneven sector momentum—while the information
technology sector has seen a blossoming of
VC fund managers and funding primarily at the
early stages, companies in the industrial and
clean energy sector, as well as in health care,
face signifcant funding gaps. At the same time,
promising new clusters of sectors and frms are
emerging.
Venture Capital Strategic Investment
Plan (VCSIP)
Under Economic Action Plan 2013, the government
asked BDC to invest $100 million of its own capital
in strategic partnerships with business accelerators
and co-investments in graduate frms. To fulfll this
BDC VC’s accelerator partners
Kitchener-
Waterloo
Toronto
Montreal
Moncton
accel-rx
Vancouver
Health Sciences
Montreal
IT / Tech
Execution Labs
Montreal
Digital / Mobile Gaming
CMF | FMC
Montreal
IT / Digital Media
Launch 36
Moncton
IT / Tech
Foresight Cleantech
Accelerator Centre
Vancouver
Cleantech
Highline
Vancouver & Toronto
IT / Tech
Velocity
Kitchener-Waterloo
IT / Tech / hardware
Communitech Hyperdrive
Kitchener-Waterloo
IT / Tech
Creative Destruction Lab
Toronto
Tech / Diversifed
bdc.ca | 17
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
priority, BDC VC’s SIP team is implementing the
Venture Capital Strategic Investment Plan (VCSIP) by
making direct and indirect investments that build on
its work in support of the ecosystem.
A portion of VCSIP funding is also directed to
ecosystem models and infrastructure that are the
foundation for high-growth, technology-driven
entrepreneurs and start-ups in innovation hubs
across Canada, for example, Montreal-based Not-
man House. In this way, VCSIP enables the building
of technology companies and broader connectiv-
ity within the startup community, facilitating the
creation of future VCSIP investments and a more
sustainable early stage innovation ecosystem.
Investments under VCSIP are complementary to
support from the Canada Accelerator and Incubator
Program (CAIP) and other government programs.
Venture Capital Action Plan (VCAP)
Working closely with Finance Canada, BDC has
made signifcant progress in operationalizing the
Venture Capital Action Plan (VCAP), designed to
help create a vibrant VC system in Canada, led by
the private sector.
In January 2013, the Prime Minister announced
that, under VCAP, a $350-million contribution from
the government would be used to leverage up to
$1 billion in private-sector capital to establish and re-
capitalize large, private-sector funds of funds. VCAP
also includes $50 million for a few high-performing
VC funds.
The government assigned a number of functions to
BDC under VCAP, including:
> serving in an advisory capacity to Finance Canada
and Industry Canada by leveraging its internal
expertise and resources to provide advice on
specifc elements of VCAP
> serving as the LP of record for the government
under VCAP, including carrying out such duties as
signing the requisite paperwork, communicating
with the GPs and other LPs, attending meetings
and generally acting on behalf of the government
> undertaking administrative duties including placing
investments on behalf of the government and
monitoring and reporting on the ongoing success
of VCAP to help determine its overall impact on
the economy
The frst stage in executing VCAP took place with
the selection of four high-performing funds in the
IT and life sciences sectors that have demonstrated
strong investment performance and are aligned with
the objectives of VCAP.
The second stage of VCAP involved the selection of
fund managers and negotiation of legal documenta-
tion surrounding the creation of new private-sector
funds of funds. BDC expects that all four VCAP
funds of funds will be closed by the end of fscal 2015
and three will be in active investment mode before
the end of March 2015.
BDC will continue to apply its usual rigour and high
standards in its capacity as agent of the government
and work proactively with the private sector to
ensure VCAP plays the critical role for which it was
designed.
Productivity
Entrepreneurs must invest in the fxed assets and
technology needed for operational effciency, wheth-
er it be state-of-the-art equipment, new facilities to
increase production capacity, or employee training. If
SMEs boost productivity at the frm level, collectively
these improvements can have a signifcant impact on
the domestic economy.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
18 | bdc.ca
BDC’s information and communication technology
(ICT) loans help SMEs improve productivity through
technology. In addition, in June 2012, BDC launched
a pre-approved Equipment Line that allows entre-
preneurs to purchase new or used equipment over a
12-month period with guaranteed terms and condi-
tions. The fexibility of this fnancing frees up cash
for entrepreneurs. The fact that it is pre-approved
is effcient and allows clients to act quickly when an
opportunity arises. BDC fnances up to 125 percent
of an equipment purchase, including training or other
such costs, while taking less security.
To further ease cash fows, BDC provides working
capital to complement an SME’s line of credit with
another fnancial institution. BDC offers amortization
periods suited to the project, seasonal or progressive
repayments, and deferred principal payments.
BDC Consulting also helps SMEs through continuous
process improvements, operational best practices,
and defned performance indicators and objectives.
Improving productivity with
securitization
By partnering with private-sector fnancing compan-
ies in the securitization market, BDC improves the
availability of fnancing and enables SMEs to purchase
vehicles and equipment to support productivity.
A partnership announced in April 2010 between
BDC and TAO Asset Management resulted in the
creation of the Funding Platform for Independent
Lenders (F-PIL) to ensure that smaller fnancing com-
panies could provide fnancing for the vehicle and
equipment needs of businesses and consumers.
The F-PIL’s approach is built on:
> using private-sector securitization techniques and
funding creditworthy companies
> deploying best practices around legal
documentation, due diligence and transaction
structures to increase confdence and improve
private-sector funding
> the requirement for a true risk-sharing
arrangement between BDC, the company
benefting from the fnancing, and the private-
sector partner, TAO
> a commitment to participate in this market for a
sustained period of time
As at March 2014, 7,012 SMEs had benefted in-
directly from this program. BDC’s role in the market
also supports employment at auto dealerships in
Canada.
BDC will continue to monitor and address needs
that may arise in the securitization market to ensure
liquidity for small fnancing companies and SMEs.
Growing and exploring new
markets
To create jobs and prosperity, Canada needs entre-
preneurs with the desire and ability to grow their
business. For SMEs, growth brings challenges that
require unique fnancing and advisory services.
BDC Growth & Transition Capital, formerly BDC
Subordinate Financing, offers cash fow, mezzanine,
and quasi-equity fnancing to larger, more mature
and growing frms with market traction, strong
management and sound fnancial reporting. These
fnancing solutions are particularly helpful for entre-
preneurs who have few tangible assets to pledge for
security and who don’t want to dilute their owner-
ship of the business. Where appropriate, BDC offers
equity solutions by investing in a minority ownership
stake of the company.
bdc.ca | 19
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
BDC Growth & Transition Capital solutions
Cash fow fnancing is designed for companies that have a consistent track record of positive and strong cash
fow and want to plan large-scale projects.
A mezzanine loan is debt fnancing that gives the lender the rights to convert to an ownership or equity
interest in the company. It is subordinated to debt provided by senior lenders.
With quasi-equity fnancing, BDC shares the risk with frms that have not reached positive cash fow but
forecast that they will generate strong cash fow in the near-term. This solution allows the frm to raise capital
and repay the loan at the end of the term to keep cash in the business for daily operations.
With an equity investment, BDC takes a minority ownership stake in the company. As a development
bank, BDC’s interest is in working with management to create a growing, successful company capable of
contributing to the economy.
The majority of BDC Growth & Transition Capital
transactions are done alongside other fnancial insti-
tutions; BDC’s security is subordinated to secured
lenders, meaning chartered banks and long-term
lenders are repaid frst in the event of default. With
BDC taking this additional risk, it helps to ensure
that the entrepreneur can access the fnancing
required. Since private-sector fnancial institutions
tend to consider BDC’s solutions as equity, this helps
SMEs stay within prescribed covenants, including
debt-to-equity ratios.
BDC has found that many entrepreneurs do not
understand these types of fnancial solutions and
their advantages, which led BDC to rename its
subordinate fnancing group to highlight the ways in
which it can help SMEs—with growth and transition
projects. With 83 employees managing a portfolio
of $600 million and more than 400 clients, BDC
Growth & Transition Capital has a pan-Canadian
reach with an emphasis on underserved and non-
urban markets. Its median transaction size in fscal
2014 was $900,000.
The portfolio has experienced strong growth since
2010 as it responds to a number of unmet needs:
> most players in the market are active in deals
above $10 million, leaving few options for
promising companies seeking quasi-equity
solutions in the $2 to $10 million range
> asset-light businesses, such as service businesses
and fast-growing frms, struggle to obtain suffcient
fnancing
> Canadian SMEs need to globalize but this involves
higher risks and solutions beyond senior debt
> access to capital for high-growth frms (HGFs) is
challenged
High-growth frms
In fact, subordinate fnancing is a powerful fuel for
growth and is one reason why about 30 percent of
clients in the BDC Growth & Transition Capital port-
folio are HGFs (defned as annualized growth greater
than 20 percent per year, sales or employees, over
a three-year period, with 10 or more employees at
the beginning of the period). These frms require
non-traditional, higher-risk fnancing tailored to their
cycle of fast growth, which can be followed by per-
iods of slow or no growth.
In fscal 2014, BDC authorized 46 transactions
with HGFs, helping support employment for about
6,000 Canadians. It is strengthening its support
through a pilot program that combines BDC’s
fnancial solutions with strategic advice from private-
sector experts tailored to the needs of HGFs.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
20 | bdc.ca
Ownership transition
As many Canadian entrepreneurs approach retire-
ment, BDC Growth & Transition Capital helps frms
transition from one owner to the next through suc-
cession fnancing, which comprises about 40 percent
of the portfolio.
BDC also helps Canadian entrepreneurs acquire
companies that might otherwise cease operations
or be bought by foreign interests. In these ways,
BDC helps to ensure that Canadian frms remain in
Canadian hands.
Exploring new markets
It is important for Canadian SMEs to internationalize,
which involves looking for opportunities to export,
joining a global value chain, or purchasing inputs from
abroad. Through advisory services, BDC helps SMEs
determine whether they are ready to international-
ize and what markets would best suit them. BDC
can also support internationalization projects with
fnancing; in fscal 2014, BDC authorized $80 million
to help SMEs expand abroad.
BDC works with Export Development Canada
(EDC) and the Department of Foreign Affairs and
Trade Development (DFATD) to help Canadian frms
expand abroad, in line with the government’s Global
Markets Action Plan. In venture capital, BDC works
with DFATD and the Canadian Trade Commissioners
Service to support the Canadian Technology Acceler-
ator (CTA) program, which helps Canadian high-
growth companies access global markets.
BDC increases its knowledge of foreign markets by
reaching out to development banks around the globe
and by spearheading initiatives such as The Montreal
Group and participating in groups such as QG100.
bdc.ca | 21
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
?
= offered;
?
= not offered
Solutions within Canada
for non-exporters/
investors
Solutions within Canada
for exporters/investors
here and abroad
Solutions outside Canada
for foreign buyers of
Canadian goods and services
BDC EDC BDC EDC BDC EDC
Insurance and bonding
Contract insurance
? ? ? ? ? ?
Foreign accounts receivable insurance
? ? ? ? ? ?
Performance guarantees and surety bond
reinsurance
? ? ? ? ? ?
Political risk insurance
? ? ? ? ? ?
Financing
Summary of services
? ? ? ? ? ?
Foreign buyer fnancing
? ? ? ? ? ?
Guarantee bank facilities
?
1
? ?
1
? ? ?
Supplier fnancing
? ? ? ? ? ?
Working capital fnancing
? ? ? ? ? ?
Commercial real estate fnancing
? ? ? ? ? ?
Machinery & equipment fnancing
? ? ? ? ? ?
Other capital assets fnancing
? ? ? ? ? ?
Subordinate fnancing
? ? ? ? ? ?
Financing to purchase or upgrade ICT
? ? ? ? ? ?
Equity/venture capital
Direct investment and via equity funds
? ? ? ? ? ?
Consulting/advisory services
Consulting (fee for service)
? ? ? ? ? ?
Economic intelligence
? ? ? ? ? ?
ICT diagnostic & consulting
? ? ? ? ? ?
Trade advisory services, supply chain
analyses & best practices (non-fee)
? ? ? ?
2
? ?
1
Under the BDC Act, BDC can offer guarantees but currently is not actively doing so
2
For existing EDC customers only
Note that this chart does not refect changes as a result of the 10-year legislative review
Growing and exploring new markets: BDC/EDC products and services
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
22 | bdc.ca
Doing more to support entrepreneurs
F
or Canada to get greater economic beneft from
its small businesses, more of these companies
must become competitive at home and abroad. BDC
believes it can do more to improve the competitive-
ness of Canadian entrepreneurs, allowing them to
contribute fully to the national economy.
Research shows that mid-sized and larger compan-
ies, particularly fast-growing ones, invest more,
create more jobs, offer better wages and benefts,
and are more likely to become exporters. A 2014
Harvard Business Review online article suggests that
high-growth frms drive disproportionately more
jobs, growth, value and sustainability. A 2014 report
from Endeavor Insight, a U.S.-based organization
dedicated to high-impact entrepreneurs, indicates
that, on average, an SME that grows into a large busi-
ness creates more than 200 jobs.
Given the global economic recession and a loss of
competitiveness due to a steep increase in the value
of the Canadian dollar prior to the recession, Canada
lost more than 1,500 mid-sized frms from 2006
to 2010. Canadian exporters, in particular, were
hit hard during the fnancial crisis. A 2013 report
on productivity from Deloitte suggests that more
Canadian start-ups “slow down or simply disappear,
in part because many of our business leaders are not
investing in activities required to sustain growth.”
In the World Economic Forum’s annual index,
Canada slipped down the ranks of the world’s most
competitive economies due, in part, to poor per-
formance in innovation. In 2014, Canada ranked
15th out of 144 countries in competitiveness, down
one position from last year and its lowest ranking
since 2006. At the same time, the U.S. reversed
its downward trend by rising two positions to ffth
place, fuelled by an extremely productive economy
and sophisticated, innovative businesses.
The Canadian government has taken important
steps, with a focus on innovation and the digital
economy, an active global trade agenda, efforts to
reduce “red tape” for smaller businesses, and other
programs to support entrepreneurs. That said, gaps
for services remain or are emerging, particularly for
fast-growing companies in non-traditional industries
where unique fnancing, investment and advisory
solutions are required.
For example, SMEs in the services sector require
specialized support, in part because they have few
tangible assets to offer as security. SMEs looking to
join global value chains need tailored fnancing and
advisory services. Entrepreneurs need to better
understand and have access to equity solutions,
which are a powerful fuel for growth. BDC has
found that the importance of advisory services for
SMEs of all types cannot be overstated.
BDC has been an effective lever for government
by improving access to fnancing, investments and
advisory services for SMEs across Canada. It fulflls its
mandate of supporting Canadian entrepreneurship
and has a signifcant impact on the economy. Over
the years, BDC has responded to government initia-
tives and priorities, including during the economic
crisis. Within a strong management and governance
framework, BDC is fnancially sustainable and com-
plementary to the market. BDC has been proftable
for 25 years and has paid $206 million in dividends to
its Shareholder since 2009.
Now, BDC is in a position to do more by helping
entrepreneurs become more competitive and by
facilitating access to capital.
bdc.ca | 23
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Focusing on high-impact frms
A healthy SME ecosystem is critical for long-term
competitiveness. While Canada has many of the right
ingredients, its competitiveness has been eroding,
especially when compared to the U.S. Some of the
problem can be explained by challenges at the SME
level and by the fact that many of Canada’s most
promising frms are not always able to reach their
full potential.
In general, Canadian entrepreneurs demonstrate
lower risk tolerance through less investment,
which leads to lower productivity. This situation
is worsened by diffculties obtaining higher-risk
fnancing, particularly for service-based and
knowledge-based frms. There is also a need for
improved management capabilities, for example,
due to a smaller domestic market, Canadian SMEs
need to export sooner than their U.S. counterparts
but often lack the skills and support to do so.
BDC is part of the solution. It already helps SMEs
innovate, become more productive, and grow, both
domestically and globally. However, for Canada to
further strengthen its competitiveness, more must
be done for those frms with the most potential
to make a signifcant contribution. To address this,
BDC is proposing the gradual implementation of a
new initiative that will remove or lessen the barriers
to competitiveness experienced by some of Canada’s
most promising frms.
To truly understand the needs and challenges of
these frms, BDC conducted extensive research, in-
cluding interviews with high-potential entrepreneurs
and Canadian thought leaders, a survey of about
1,000 growing and mid-size SMEs across Canada and
the U.S., and case examples from around the world.
Challenges of high-impact frms
“We don’t have the skills or the experi-
ence to check out and challenge the sales
talent in the market”
—Optics technology developer
“I don’t have time for strategic planning;
where do we see this going over the next
7-10 years and how do we get there?”
—Sports equipment distributor
“My business has more demand than it
can meet right now but I can’t get the
money to hire enough people, I just don’t
have the collateral”
—Telecom company
“I need someone who understands our
business to help identify the right markets
to enter and to give us an idea of how to
get there and when to go”
—Architectural services frm
Helping to improve competitiveness
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
24 | bdc.ca
BDC found that, to have the most impact, support
should be focused on larger, growing and ambitious
frms, which have a disproportionate effect on eco-
nomic growth. These “high-impact” frms account
for about 5 percent of Canadian SMEs. They tend to
be mid-sized (100 to 500 employees); grow more
quickly than their overall sector; and have a manage-
ment team that exhibits higher ambition and higher
risk tolerance. However, there are no defnitive par-
ameters; smaller frms that show high growth could
also ft the profle.
High-impact frms can be found in many sectors.
They share barriers to competitiveness, including the
need to:
> optimize operations to improve effciency
> attract, develop and retain the talent required
> develop and execute marketing and sales plans,
including in foreign markets
> fnd employees with technical skills
> secure higher-risk fnancing for new products,
services, and/or processes; acquire other
companies; purchase machinery or technology to
improve productivity; expand capacity
> set the overall strategy of the company
In recent years, the government has taken signif-
cant steps to support these types of frms and the
economic prosperity they represent for current
and future generations of Canadians. Now, BDC
proposes building on this foundation to become the
“go-to” partner for these frms that otherwise might
not be able to identify or fnd the support they need
to succeed.
With a strong pan-Canadian network of partners and
a deep knowledge of entrepreneurs and SMEs, BDC
believes it is in a position to leverage its knowledge
and expertise to further support high-impact frms,
which can be found among BDC’s existing clients
and also identifed through local networks, associa-
tions and professional services frms.
By working with both the public and private sectors,
BDC will ensure that these frms can access the best
solutions available at each stage of their develop-
ment. BDC will provide these frms with dedicated
advisors to accompany them over the long term,
offering advice and facilitating access to various eco-
system solutions, whether from government pro-
grams, private-sector institutions including chartered
banks, or from BDC’s own offering. These advisors
will facilitate the development of new solutions if
none currently exists and help the frm’s manage-
ment build the skills needed to overcome barriers.
Creating this capacity to act as a “gateway” to a
wide variety of solutions in the ecosystem would
involve deepening relationships with key stakehold-
ers, including Export Development Canada (EDC).
While BDC would initially build this capacity for high-
impact frms, it could eventually make it available
throughout the bank, with a view to benefting even
more Canadian entrepreneurs.
As part of the initiative, BDC will develop specifc
success metrics, starting with the number of high-
impact SMEs on-boarded, solutions delivered and by
whom, and impact on the growth of SMEs compared
to the SME’s plan.
This initiative is a signifcant one for BDC that will be
funded from retained earnings. Once fully rolled out,
it is forecast to have a positive impact on Canada’s
economic growth by improving the ability of high-
impact frms to innovate, become more productive,
and to grow, ultimately becoming among the most
competitive in the world.
bdc.ca | 25
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Strengthening competitiveness
through advisory services
To help SMEs become more effcient and competi-
tive, BDC is also transforming the way in which it de-
livers advisory services. BDC has found that smaller
businesses have unmet needs for a broad range of
these services and often have trouble identifying and
addressing their own requirements. This can serious-
ly impact the ability of these businesses to compete.
BDC also has learned that the most successful
businesses use formal mechanisms such as advisory
boards and consultants and that businesses that are
proactive in seeking outside help to deal with chal-
lenges have better chances of remaining sustainable.
An October 2014 study from Waterloo-based
Centre for Digital Entrepreneurship and Economic
Performance examined a sample of Canada’s fastest-
growing small frms and found that a majority cited a
lack of seasoned management talent as their num-
ber-one inhibitor of growth.
As a development bank, BDC’s advisory services are
complementary to the market in that they:
> support the development of small consulting frms
by partnering with them to offer services to SMEs
> complement other consulting frms by offering a
range of services aligned to the reality of SMEs
> are offered to all types of entrepreneurs in every
region, including rural Canada
In fscal 2014, BDC began implementing a new ap-
proach to its provision of advisory services based on
a desire to increase SME competitiveness by maxi-
mizing client impact while also improving internal
effciencies and responsiveness. A key element has
been to reorganize around three teams:
1. Market-facing team—responsible for identifying
client needs and proposing appropriate solutions.
The team is organized by geographic region and
collaborates within BDC to provide value-added
solutions and services to entrepreneurs.
2. Pillar team—responsible for identifying and
developing advisory solutions and for delivering
Custom
Diagnostics
Training &
Group Program
Free tools, ebooks,
web events, events, blogs
Standardized
solutions
Solutions tailored to address needs of
more sophisticated small business
Time taken to understand client needs and
send a proposal is most important
Greater involvement of experts (internal
and external)
Every solution is unique
BDC standardized methodology and
tools that adapt to client-speci?c
situations. Time to submit proposal
is lower. Proven tool sets that are
ef?cient.
Free/low cost to reach
largest audience
Transfer knowledge, skills,
tools and templates
Highly dependent on
technology
>
>
>
>
>
>
>
>
Offer
depth &
impact
Offer
reach
Tens of
thousands
Thousands
# of
small
businesses
Advisory services solutions
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
26 | bdc.ca
mandates to entrepreneurs with a balanced
combination of internal and external resources.
3. Strategy and operations support team—a
centralized operations support group that
provides an effcient, standardized approach to
solution deployment and consulting resource
management, including qualifying, on-boarding
and developing the partner network.
Solutions will be designed to help SMEs:
> drive growth, for example, through sales and
marketing, innovation and developing new markets
> improve agility and productivity, for example,
through lean concepts, process improvements and
technology adoption and development plans
> build organizational capabilities, for example,
through coaching, strategy planning, HR
management, implementing business management
practices and advisory boards
BDC Consulting is also enhancing its internal busi-
ness capabilities by making its project delivery more
effcient, enhancing the quality of delivery, focusing
on segments where it can create the most impact,
and continuously innovating its solution offering.
To ensure the changes being implemented align with
the goal of creating impact for clients, BDC Consult-
ing plans to measure results with fnancial and non-
fnancial metrics. It will assume the majority of costs
associated with the delivery of advisory services,
ensuring they are affordable to SMEs.
Helping women grow their
businesses
BDC addresses market gaps by supporting demo-
graphics that traditionally have diffculty accessing
services, such as youth and Aboriginal entrepreneurs.
BDC believes that women entrepreneurs also can
face unique challenges, especially in growing their
business.
In Economic Action Plan 2014, the government
indicated its intention to provide more support to
women entrepreneurs. BDC has been working with
government offcials to develop a strategy aimed at
women-owned businesses (defned as more than
50 percent ownership). As part of this work, BDC
examined the characteristics of women-owned busi-
nesses in its portfolio, as well as women-owned busi-
nesses in the larger economy. Observations include:
> self-employment among women is increasing at a
faster rate than among men, but women are less
likely to incorporate and hire so their businesses
tend to start and stay small
> women operate frms in industries less likely
to experience high growth, such as retail,
accommodation and food services
In general, women-owned frms lack scale, which
means that they can pose more risk for lenders.
BDC believes it can build on its understanding of
women entrepreneurs and help more of them grow
their businesses by:
> capitalizing on existing BDC fnancing and advisory
service solutions
> creating an internal committee of employees
with experience and knowledge of women
entrepreneurs
> solidifying partnerships and sponsorships with
organizations targeting female-owned businesses
at the regional and national levels
> devising a communication strategy about how
BDC helps women entrepreneurs
> being more rigorous at tracking and mining data
related to women-owned businesses
bdc.ca | 27
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Being accessible to entrepreneurs
To ensure that it is able to help entrepreneurs across
Canada, BDC frequently reviews the number and
location of its offces and has launched an initiative
aimed at increasing its reach, specifcally in Western
Canada and Ontario, where BDC believes that its
presence should be better aligned with market real-
ities. The initiative will entail opening new business
centres and shared offces to ensure that entrepre-
neurs in these regions are not under-served; increas-
ing BDC’s profle and visibility through advertising
and public relations; and strengthening relationships
with stakeholders and partners in those regions.
In Ontario, BDC believes it can help improve the
province’s declining share of exports to the U.S.,
while encouraging SMEs to export to emerging
markets. BDC will continue to support manufactur-
ers and other sectors in Ontario hard hit by recent
economic conditions. In Western Canada, BDC
recognizes that there has been signifcant economic
growth, which has increased the number of SMEs,
some of which are supporting key sectors such as
oil and gas, which could face challenges if oil prices
remain depressed. BDC wants to ensure entrepre-
neurs in these regions have access to the resources
they require to grow and succeed.
Addressing emerging needs in
growth capital
In response to changing market dynamics, BDC Ven-
ture Capital will build upon its strategy of direct and
indirect investments, complemented by investments
and partnerships in the VC ecosystem. It will do so
by addressing a variety of emerging “white spaces”,
where promising Canadian companies are not ad-
equately supported by growth capital. For example,
BDC VC will address an emerging imbalance be-
tween early and later-stage investing by considering
ways to make more later-stage direct investments. It
will also look for opportunities to invest indirectly in
select later-stage funds that help growing Canadian
companies reach their full potential.
There are also promising companies in important
emerging sectors in Canada that lack the fnancial
support required to compete on the world stage.
BDC VC will address this by considering ways to
provide more value-added fnancial support to these
companies. This could include reaching into its exist-
ing indirect fund investments and supporting some
of the “best and brightest” frms through a strategy
known as “direct co-investment”, where BDC
supports these private-sector frms with additional
direct investments.
BDC’s Growth & Transition Capital portfolio also
has a role to play in addressing emerging needs for
growth capital among Canada’s most promising
frms, many of which exist outside of the technology
sector and as such are not usually candidates for VC
support. In growth capital, the following gaps have
been observed:
> later-stage technology and other asset-light
businesses that don’t ft a venture capital profle
> small frms in sectors of less interest to private
equity
> family and privately controlled mid-sized frms
facing succession issues and/or challenges in
funding their development into a larger business
> private frms that are unwilling to give up majority
control to an outside private equity fund
Facilitating greater access to capital
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
28 | bdc.ca
> smaller businesses needing small amounts of
working capital that don’t ft the profle of private-
sector mezzanine or equity providers
To address these needs, BDC Growth & Transi-
tion Capital will increase its quasi-equity and equity
investments, including prospective quasi-equity,
which takes a forward-looking view of a company’s
potential versus looking at historical performance.
With these types of solutions, BDC can increase the
confdence of entrepreneurs to grow; extend the
growth phase and domestic control of mid-sized
frms; and fll a void for equity in the range of $2 to
$10 million suitable for smaller frms.
As a development bank, BDC would position itself
as a management-friendly “growth partner”, sharing
in the entrepreneur’s vision as a long-term minority
investor and tailoring solutions to the entrepreneur’s
needs. BDC will provide these higher-risk invest-
ments with the goal of creating more mid-sized com-
panies from a variety of sectors capable of becoming
Canadian champions.
Immigrant Investor Venture Capital
Pilot Program
Economic Action Plan 2014 proposed replacing the
federal Immigrant Investor Program with a new
Immigrant Investor Venture Capital pilot program.
Under the proposed program, immigrant investors
would be required to place a $2-million, at-risk in-
vestment in a closed-end fund, which is expected to
target an initial fund size of $100 million.
In May 2014, the government appointed an expert
panel to provide advice on the creation of the fund.
Based on the panel‘s recommendations, the program
will be managed by BDC Capital, the investment arm
of BDC, and by participating fund managers. Discus-
sions between the government and BDC on the
bank’s role will continue into 2015 as the program
unfolds.
bdc.ca | 29
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
New powers under the BDC Act
As a result of the 10-year legislative review, amendments to the BDC Act received Royal
Assent on December 16, 2014. The amendments:
> modernize the scope of management services and require that these services be
complementary to those offered by the private sector
> allow BDC to make loans or give guarantees to a corporation, trust, partnership or joint
venture outside Canada, under limited circumstances
> allow BDC to invest in investment funds or other investment vehicles legally established
outside Canada that have an ongoing commitment to invest in Canada, under limited
circumstances
> allow BDC to provide fnancial services to not-for-proft organizations
> modernize certain governance provisions
In addition, amendments to the BDC Act would allow BDC, through prescribed regulations, to:
> extend credit or provide liquidity to SMEs
> provide additional management services
> make direct investments in a corporation, trust, partnership or joint venture outside Canada,
under limited circumstances
BDC also recognizes that the “10-Year Legislative Review: 2001-2010”, tabled by the Minister
of Industry on June 16, 2014, contains recommendations in four specifc areas that could
improve the impact of the BDC’s efforts going forward. These areas are:
> extending more support to underserved markets
> increasing accessibility and enhancing client service for SMEs
> focusing on complementarity
> enhancing performance measurement
BDC has already taken steps to increase its reach and visibility across Canada, improve the
client experience and work toward better measuring its impact on entrepreneurs and the
economy. Over the planning period, BDC will continue to take the recommendations of the
review under consideration, while also exploring how best to use its expanded powers in
support of Canadian SMEs, in collaboration with partners and other stakeholders. BDC will
communicate with the government on its proposed use of the new powers and their impact.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
30 | bdc.ca
> Gradually deploy a new initiative aimed at
removing the barriers to competitiveness for
high-impact frms in Canada (page 23).
> Refne its offering of value-added advisory
services designed to improve the
competitiveness of SMEs (page 25).
> Open new business centres and optimize
online resources and partnerships to ensure
its fnancing, investment and advisory
service solutions are accessible and visible to
entrepreneurs in Canada (page 27).
> Increase its equity offering to address the
needs of growth-oriented frms (page 23).
> Invest and co-invest in a variety of promising
Canadian technology companies from early
to late stages while continuing to invest in its
three internal direct investment funds
(page 15).
> Help support emerging fund models while
ensuring that all types of funds are well-
capitalized and able to support the growth of
Canadian champions (page 27).
> Play a role in the Immigrant Investor Venture
Capital Pilot Program (page 28).
> Support the government’s intention to provide
increased assistance to women-owned frms
(page 26).
> Explore options for strategies related to
intellectual property.
> Constantly evolve its offering of fnancing
solutions to meet the needs of entrepreneurs.
> Address market gaps for fnancing and
advisory services, with a focus on small loans.
> Provide educational tools and resources and
offer awards programs recognizing Canadian
entrepreneurs.
> Make the most of online capabilities and
indirect channels, including partnerships.
> Offer solutions such as asymmetric and pari
passu lending and syndicated transactions.
> Offer ICT products and advisory services to
help SMEs innovate and improve productivity.
> Provide tailored support to important sectors
such as aerospace and to high-growth frms.
> Offer advisory services and fnancing to help
SMEs explore new markets.
> Offer fexible fnancing solutions to help
companies grow and transition to new
owners.
> Implement the Venture Capital Action Plan
(VCAP) and the Venture Capital Strategic
Investment Plan (VCSIP) and a VC strategy
designed to return the ecosystem to health
and support innovative technology companies.
Over the planning period, BDC will... While continuing to...
Summary of Initiatives
bdc.ca | 31
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Performance Measures
Entrepreneurship
Target
F2015
F2015
YTD
1
Target
F2016
> # of loans ?$500,000 for Financing and Growth & Transition Capital
based on commitment size of ?$750,000
8,000 6,464 8,200
> # of authorizations to new businesses (?2 years)
(Financing and Growth & Transition Capital)
1,500 1,720 2,000
> % of BDC-fnanced start-ups that survive fve years 65% 60%
2
65%
> % of very satisfed clients
3
n/a 56% 57%
> # of transactions authorized with and from partners
(syndications, pari passu, loan referrals and alliances)
2,400 1,857 2,500
Productivity
> # of loans authorized for equipment purchase
(Equipment Line and loans with “equipment purchase” as purpose)
2,000 1,312 1,750
Growth
> % of high-growth frms in BDC Growth & Transition Capital portfolio
(high-growth frm defned as having annualized sales growth greater
than 20% per year over a three-year period)
30% 32% 30%
Innovation
> Support for Digital Canada 150
– Financing: $200M in acceptances annually to 2017
– VC: $300M in authorizations by 2017 (% of objective reached)
n/a
n/a
$190.7M
30%
$200M
60%
> Venture capital return of capital (RoC) 1.00 1.04 1.01
Effciency
> BDC Financing reported effciency ratio
4
39.7% 37.8% 38.7%
BDC strives to measure its impact on Canadian entrepreneurs. As a result, its performance measures continue to evolve to properly capture public policy impacts.
Appendix D presents a new framework and proposed measures toward which BDC is working.
1
Unless otherwise noted, fscal 2015 YTD numbers are as at December 31, 2014
2
Fiscal 2014—data available on an annual basis only
3
“Very satisifed” clients gave a score of 9 or 10 out of 10 for overall satisfaction pertaining to BDC’s services
4
A decreasing result indicates improved effciency
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
32 | bdc.ca
Index of Partners/Business Relationships
PARTNERSHIPS
Accelerators Various
BDC VC supports accelerators across Canada, including Extreme Startups,
FounderFuel, GrowLab Ventures, Communitech Hyperdrive, Launch36,
Execution Labs, Creative Destruction Lab
Canadian Technology
Accelerator
CTA
Initiative managed by the Canadian Trade Commissioners Service that
provides Canadian high-growth companies with support to access global
markets. BDC connects top technology SMEs coming out of Canadian
accelerators to the most relevant CTAs.
Community Futures
Development
Corporations
CFDC
CFDCs support community economic development. By working closely
with CFDCs across Canada, BDC reaches entrepreneurs in areas where it
does not have a physical location.
C100
BDC participates in this organization dedicated to supporting Canadian
technology entrepreneurship and investment. Members include executives
of Apple, Cisco, eBay, Facebook, Google, Microsoft and Oracle.
Department of Foreign
Affairs, Trade and
Development
DFATD
In 2011, BDC signed an agreement with DFATD to share business
intelligence about global markets and collaborate on marketing. BDC and
DFATD signed a strategic partnership in 2013 to expand the Canadian
Technology Accelerator (CTA) program in the United States. Seven
DFATD trade commissioners are co-located in BDC business centres
across Canada.
Export Development
Canada
EDC
BDC and EDC share an important relationship, including a two-way
referral system that ensures Canadian companies access the services of
the organization whose competencies best meet their needs. An MOU
between BDC and EDC was fnalized in late 2011.
Futurpreneur Canada
Futurpreneur is a national, non-proft organization that supports business
owners aged 18 to 39. Futurpreneur and BDC collaborate to offer
fnancing to young entrepreneurs.
National Angel Capital
Organization
NACO
BDC works with NACO to strengthen Canada’s angel investing
community.
National Research
Council—Industrial
Research Assistance
Program
NRC/
IRAP
BDC is a partner in NRC/IRAP’s Concierge service, which is a single
access point to help entrepreneurs access support for growth.
Ontario Centres of
Excellence
OCE
OCE help drive entrepreneurial growth in Ontario. BDC assists their
clients in accessing fnancing.
TAO Asset Management TAO
BDC partners with TAO in the securitization market to deliver the
Funding Platform for Independent Lenders.
bdc.ca | 33
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
STRATEGIC RELATIONSHIPS
Aboriginal Affairs and
Northern Development
Canada
AANDC
BDC works with AANDC to provide debt fnancing to First Nations
businesses across Canada with assets on a reserve.
Canadian Bankers
Association
CBA
BDC maintains a sound working relationship with the CBA, which
contributes to the development of public policy on issues that affect
fnancial institutions.
Canadian Manufacturers
and Exporters
CME
BDC and CME are building on a pilot project called Export Experts, a
series of on-site workshops that highlight best practices in international
trade.
Credit Union Central of
Canada
Canadian
Central
BDC maintains a sound working relationship with Canadian Central, the
national forum for the Canadian credit union system.
FedDev Ontario FedDev
BDC works with the federal economic development agency in southern
Ontario to support entrepreneurs.
MaRS Centre for Impact MaRS
Through MaRS, BDC increases its knowledge and involvement with social
entrepreneurship.
National Research
Council of Canada
NRC
BDC works with NRC and NSERC to increase opportunities for joint
funding; improve access to complementary federal funding; improve
access to investment capital; and, increase awareness of partnership
opportunities and available funding programs.
Natural Sciences and
Engineering Research
Council of Canada
NSERC
Small Industries
Development Bank of
India
SIDBI
SIDBI is the principal institution for the promotion, fnancing and
development of micro, small and medium-size businesses in India. BDC
and SIDBI signed a memorandum of understanding in 2013 to share
knowledge and best practices.
MEMBERSHIPS
Association of Develop-
ment Financing Institu-
tions in Asia and the
Pacifc
ADFIAP
BDC partners with associations around the world such as ADFIAP and
ALIDE to gain insight into foreign markets and assist Canadian businesses
with their global expansion plans.
Latin American Asso-
ciation of Development
Financing Institutions
ALIDE
Canadian Venture
Capital & Private Equity
Association
CVCA
BDC maintains a sound working relationship with the CVCA, which is a
leading source for advocacy and professional development for venture
capital and private equity professionals.
Centre for Business
Innovation
CBI
Part of the Conference Board of Canada, the CBI conducts research on
how Canadian companies incorporate innovation into their operations.
BDC is a member of the CBI.
Global Commerce Centre GCC
Part of the Conference Board of Canada, the GCC examines issues related
to trade and international business. BDC is a member of the GCC.
Lending Practitioners
Forum
BDC participates in this initiative spearheaded by the Canadian Bankers
Association that involves the major chartered banks and Export
Development Canada (EDC).
QG100
BDC participates in this private group of chief executive offcers from
Quebec that supports the development of global leaders.
The Montreal Group TMG
Initiated by BDC, TMG is a global forum of state-supported fnancial
development institutions. The goal is to encourage an exchange of ideas
and best practices with the aim of assisting micro, small and medium-sized
enterprises with their business challenges.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
34 | bdc.ca
Within the context of its incorporating and governing legislation, its approved Corporate
Plans, and specifc instructions that it may be given by the Government of Canada, BDC
operates at arm’s length from the government with ultimate accountability to Parliament
through the Minister of Industry.
An independent Board of Directors, supported by various committees, ensures a high
standard of corporate governance. BDC’s president and CEO sits on and reports to the
Board. The Board’s duties are to:
> approve BDC’s strategic direction and Corporate Plan to meet its public policy
mandate;
> set performance targets and monitor progress;
> ensure that BDC is identifying and managing its risks;
> ensure the highest standards of corporate governance;
> establish compensation policies;
> review and approve management’s succession plan and evaluate the performance of
the president and CEO;
> review BDC’s internal controls and management information systems;
> oversee communications and public disclosure;
> oversee BDC’s pension plans and establish its fund policies and practices;
> approve fnancing and investment activities beyond management’s authority; and,
> ensure that BDC is meeting the provisions of the BDC Act.
BDC‘s internal structure includes the Senior Management Committee, which comprises
the president and CEO, the executive fnancial and operating offcers, and designated
senior vice presidents. Its responsibilities include:
> setting, recommending to the Board for approval and implementing the vision,
corporate strategy, objectives, and priorities of BDC;
> establishing and ensuring respect for sound risk management practices;
> overseeing BDC’s disclosure obligations and practices;
> allocating enterprise-wide resources; and,
> reporting and making recommendations to the Board.
Governance
Compliance
Appendix A to the Corporate Plan: Governance
As a federal Crown Corporation, BDC is fully compliant in displaying the “Canada”
wordmark in all of its corporate identity applications. BDC respects the Offcial Languages
Act and its operations adhere to the regulations and policies implemented by the Treasury
Board Secretariat, giving special attention to the economic and social development of
minority offcial language communities.
bdc.ca | 35
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
MINISTER OF INDUSTRY
BOARD OF DIRECTORS
Audit
Committee
Compliance and Security
Committee
Board Credit and
Risk Committee
Risk Management
Committee
Human Resources
Committee
Client Experience
Committee
Leaders
Council
Pension Funds
Investment Committee
Employee Experience
Committee
Governance and
Nominating Committee
Venture Capital
Investment Committee
Project Portfolio
Committee
Credit Risk & Valuation
Committees
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EVP Financing & Consulting
EVP BDC Capital
EVP, Chief Financial and Risk
Offcer
SVP Human Resources
SVP Legal Affairs, Corporate Secretary
SVP Marketing & Public Affairs
SVP & Chief Information Offcer
SENIOR MANAGEMENT COMMITTEE
Ombudsman
Chief Audit
Executive
with direct
reporting to the
Audit Committee
VP,
Offce of the
President
BDC governance structure
Disclosure
Committee
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
36 | bdc.ca
Audit
This committee promotes an
overall corporate culture of qual-
ity fnancial reporting and ethical
behaviour. Its main duties are to:
> review and advise the Board
on fnancial statements before
BDC discloses them to the
public;
> review fnancial disclosures;
> review the adequacy and
effectiveness of internal
control, and, in particular,
major accounting and fnancial
reporting systems;
> oversee BDC’s standards of
integrity and conduct;
> oversee the process for
disclosing wrongdoing;
> give advice and
recommendations about the
appointments and terms of
auditors and special examiners;
> review the terms of
engagement of auditors and
special examiners who report
directly to the committee and
are accountable to the Board;
> review and advise the Board on
the audit of the annual fnancial
statements, the scope of the
special examination and the
special examination report;
> consider the appointment
and work of the chief audit
executive, who reports
directly to the committee
and administratively to the
president and CEO; and,
> review directors’ and offcers’
expenses.
Board
Credit and Risk
This committee’s main duties are
to:
> identify and manage BDC’s
principal risks;
> regularly review the enterprise
risk management policy and
other policies concerning
key risks, such as credit,
market, strategic, reputational,
operational and other principal
risks;
> review reports and indicators
related to enterprise risk
management, portfolio risk
management, capital adequacy
and treasury operations risks;
> approve new business
activities, except those related
to venture capital;
> periodically review the business
continuity plan;
> approve loans and transactions
that exceed the delegated
authorities of senior
management; and,
> review policies and guidelines
related to the delegation
of authority for all fnancial
products, except venture
capital products.
Governance and
Nominating
This committee helps the Board
fulfll its corporate governance
oversight responsibilities. Its main
duties are to:
> continually review best
practices and regulations
related to governance and, if
necessary, recommend changes
to BDC’s approach;
> review BDC’s corporate
governance policies, including
the board code of conduct and
the employee code of conduct,
ethics and values;
> annually assess the Board’s
compliance with these policies;
> regularly review the mandates,
structures and memberships of
the Board and its committees;
> develop selection criteria
for the president and CEO
position;
> recommend candidates for the
president and CEO position, as
well as directors;
> review and annually approve
the list of skills required by
directors;
> develop processes to assess the
performance of the Board, its
committees and its individual
members; and,
> ensure that comprehensive
director orientation and
continuous training programs
are in place.
Board Committees
bdc.ca | 37
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Human
Resources
This committee’s main duties are
to:
> oversee the human resources
strategy to ensure it is aligned
with the Corporate Plan;
> review — and, if appropriate,
recommend to the Board
for approval —the CEO’s
recommendations for
appointments of senior
management committee
members, the chief audit
executive and the ombudsman;
> set and assess the CEO’s
objectives and performance;
> review compensation for senior
executives;
> review and approve the design
of compensation programs and
material payments;
> approve performance measures
and metrics;
> receive and examine actuarial
evaluation reports and
fnancial statements related
to BDC pension plans, as
well as recommend funding
contributions; and,
> ensure there is a valid succession
plan in place.
Pension
Funds
This committee’s main duties
are to:
> monitor and advise the Board
on all matters related to the
investment of the funds’
assets;
> recommend asset allocation
and investment policies and
strategies;
> ensure that investments
comply with established
policies;
> recommend to the Board the
appointment, termination
and replacement of external
investment managers; and,
> monitor the performance of
these managers.
Venture Capital
Investment
This committee’s duties are
to:
> regularly review the
venture capital investment
policy and other policies
and processes for venture
capital activities and related
risks;
> approve the business plan
of the three venture capital
internal funds, as well as
investment strategies and
guardrails;
> review strategic initiatives
aimed at improving the
venture capital ecosystem;
> review and recommend
capital allocations for the
internal funds;
> review and recommend
delegations of authority;
> monitor portfolio
performance; and,
> approve investments that
exceed the delegated
authorities of senior
management.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
38 | bdc.ca
A strong risk management culture enables BDC
to take appropriate risks while offering relevant
services to entrepreneurs. BDC manages risk
through formal risk review processes, which include
a Board-approved risk appetite statement, risk
policies and delegated authorities and limits.
The risk appetite statement enables BDC to
articulate and monitor its risk profle against defned
risk appetite limits, taking action as needed to
maintain a balance of risk and return. The statement
is based on qualitative and quantitative measures that
demonstrate the Board’s vision for managing the
risks that BDC is willing to accept in the execution of
its mandate.
The Internal Audit Department promotes sound risk
management practices. Through its annual audit plan,
the department works to ensure that BDC follows
these practices. BDC’s Legal Affairs department also
plays a role in managing risk by ensuring compliance
to various legal obligations and by establishing an
employee code of ethics and values.
BDC’s three risk management functions are enter-
prise risk management (ERM), credit risk manage-
ment (CRM) and portfolio risk management (PRM),
which includes treasury risk management. These
three functions:
> ensure that BDC applies sound risk management
principles, appropriate policies and corporate
directives to manage signifcant and emerging risks,
according to risk thresholds outlined in the risk
appetite statement;
> develop tools to measure, monitor and report on
these risks; and,
> provide timely and complete reports on these risks
to the organization’s risk management committees,
the senior management committee and the Board.
Using an ERM framework protects BDC by
managing risk exposure, resolving uncertainty
and building reputational equity. It ensures that
BDC makes risk-related decisions in a methodical,
consistent way.
The ERM policy outlines the way BDC manages
risk through a governance framework of Board and
senior management committees, and by identifying
and assessing signifcant risks, and managing them on
an enterprise-wide basis.
Appendix B to the Corporate Plan: Risk Management
bdc.ca | 39
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
IDENTIFY
Every quarter, risks at the corporate and functional levels are identifed, as-
sessed, documented and classifed. They are then presented to the Risk Man-
agement Committee, the SMC and the Board of Directors for discussion. Risks
related to all signifcant projects, new products or services, and policy changes
are also assessed and discussed.
RISK
MANAGEMENT
Ide
n
t
i
f
y
A
n
a
l
y
z
e
a
n
d
m
e
a
s
u
r
e
M
o
n
i
t
o
r
,
d
i
s
c
l
o
s
e
a
n
d
r
e
p
o
r
t
>
>
>
>
ANALYZE AND MEASURE
The risks posed by BDC’s activities
are quantifed and qualitatively
assessed. BDC updates related tools
and models, taking into consideration
best practices in the fnancial services
industry. Risks across the organization
are measured to ensure they refect
BDC’s policies, corporate directives,
standards and tolerance limits. Board
members and senior managers use
this information to understand BDC’s
risk profle and portfolio performance.
CONTROL AND MITIGATE
Risk tolerance thresholds are set to refect BDC’s object-
ives and strategies. BDC also uses policies and guidelines to
codify its governance and risk management culture.
BDC has the following methods for mitigating risks:
> adequate and clear roles, responsibilities, processes,
policies, corporate directives and procedures
> risk management functions and committees that provide
oversight and monitoring
> risk mitigation activities, such as hedging, insurance risk
management, business continuity planning, information
technology recovery planning, and anti-fraud and anti-
money laundering programs
> quality reviews and audits to ensure that BDC is using
appropriate and sound risk management practices (every
quarter, the Internal Audit Department presents the results
of the audits to the Audit Committee)
MONITOR, DISCLOSE AND
REPORT
BDC monitors activities affecting its risk
profle, material risk exposures and loss
events, and acts to align risk exposures with
risk appetites.
Risk process owners monitor, disclose and
report risks, with support and oversight
from the Risk Management Committee and
risk management functions. They prepare
monthly or quarterly reports on all signif-
cant risks, and they meet through risk man-
agement and board committees to report
and discuss the risks they manage.
C
o
n
t
r
o
l and
m
i
t
i
g
a
t
e
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
40 | bdc.ca
Appendix C to the Corporate Plan: Corporate Plan Performance Measures
BDC recognizes that its performance measures are important in allowing Parliamentarians and the public
to gauge the impact of BDC activities on entrepreneurs and on the economy. In light of this, and mindful of
the recommendations from the Minister’s report on the legislative review of the BDC Act, BDC is working
towards a new framework and measures to be incorporated in future Corporate Plans.
To respond to Treasury Board guidelines and in light of the recommendations made by the Minister of Industry
as part of the legislative review, BDC proposes using three categories for the performance measures that ap-
pear in its Corporate Plan.
Core measures—Measures central to BDC’s mandate that would remain the same from year to year, ensur-
ing continuity, and for which annual targets would be set. Examples include number of small loans, number of
mid-sized frms in BDC’s portfolio, and percentage growth in the number of fnancing transactions with part-
ners. In this way, BDC would refect the basic tenets of its mandate, including support for small and medium-
size businesses, complementarity, client experience and fnancial sustainability.
Initiative measures—Measures related to specifc initiatives, such as Digital Canada 150 or the Venture
Capital Strategic Investment Plan (VCSIP), that would refect evolving priorities and allow latitude for change
within the measures. Annual targets would be set. Examples include ICT interventions.
Impact measures—Measures that would demonstrate the public policy role of BDC and its impact on clients
and the economy. These measures would be tracked annually, but an annual target would not be set; instead,
a fve-year “goal” would be identifed. Examples include percentage of clients who said BDC had a positive
impact on their business following the services they received, and percentage of clients who found that BDC
helped them expand to new markets.
BDC is working toward presenting a new framework and measures in Corporate Plan 2017-2021, and will
continue to work with the government to ensure the relevance and viability of its approach.
bdc.ca | 41
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Financial Plan
T
he Financial Plan is based on the following assumptions regarding economic conditions:
> Modest acceleration of the global economy is
expected in coming years.
> In January 2015, the Bank of Canada estimated
that the lower price of oil will take one-third of
a percentage point off Canadian GDP growth in
2015.
> Long-term economic growth potential in Canada is
expected to be weaker than before the recession
at slightly more than 2 percent annually, due to an
aging population and lagging productivity.
> In the U.S., the expansion of the economy should
continue.
> A more robust U.S. economy should continue to
beneft Canadian exports.
> Improved export opportunities should lead to
more business investment.
> Credit conditions should remain favourable to
Canadian businesses, however, frms with fewer
physical assets, that are more innovative, or that
are start-ups continue to have the most diffculty
accessing fnancing.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
42 | bdc.ca
BDC Financing plays an important role in facilitating
access to capital for entrepreneurs and supporting
the competitiveness of SMEs. Over the planning
period and in line with its complementary role, BDC
Financing will continue to assist small businesses,
including those that have diffculty accessing fnan-
cing due to location, sector or demographic. It is
maintaining a focus on small loans, often for less than
$250,000, to help entrepreneurs buy equipment
to increase productivity, innovate through ICT, and
grow and explore new markets. BDC’s commitment
to small loans is paying off, with 8,010 small loans
authorized in fscal 2014, well above the Corporate
Plan target of 6,500.
Given strong credit conditions, BDC Financing will
continue to facilitate access to capital for SMEs by
collaborating with other fnancial institutions, which
includes providing support to medium-size frms and
participating in larger transactions through syndica-
tion.
In fscal 2015, BDC embarked on an initiative to
increase its reach and visibility, specifcally in West-
ern Canada and Ontario, where BDC feels that its
geographic presence should be better aligned with
market realities. The initiative will entail opening new
business centres and shared offces to ensure that
entrepreneurs in these regions are not under-served;
increasing BDC’s profle and visibility through
advertising and public relations; and strengthening
relationships with stakeholders and partners. This
initiative is not only about reaching more entrepre-
neurs, but also about providing value-added support
to have a real impact on the growth and success of
Canada’s SMEs.
To refect these efforts, BDC Financing has increased
its forecast for the number of acceptances. In dollars,
acceptances are expected to increase to $4.8 billion
in fscal 2016, and in numbers to 11,900.
As a result, the BDC Financing portfolio is forecast
to grow to $20.4 billion in fscal 2016.
BDC has reduced its provisions for credit losses
compared to last year’s Corporate Plan, which will
contribute to rising net income over the period, even
with the investments to implement the reach and
visibility initiative. However, as can be seen in Table
4, the provision for credit losses as a percentage of
the average outstanding portfolio increases, refect-
ing current volatility in oil prices and the potential
impact on economic growth. As of fscal 2017, BDC
expects the provision to stabilize at a level repre-
sentative of the somewhat higher risk being assumed
by BDC.
Net income for BDC Financing in fscal 2015 is esti-
mated at $475 million, higher than last year’s Cor-
porate Plan forecast due mainly to lower provisions.
As a result of BDC’s efforts to reduce costs and fnd
effciencies, including through its Agility & Effciency
(A&E) program, operating expenses as a percent-
age of the average portfolio decrease in the latter
years of the planning period, even with the additional
investments made in support of Canada’s SMEs.
BDC Financing
bdc.ca | 43
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 1: Net Planned Acceptances ($M)
Actual
2014
Estimate
2015
Proposed
2016
CP 2015-16 to 2019-20 4,102 4,600 4,800
Table 2: Net Planned Acceptances (#)
Actual
2014
Estimate
2015
Proposed
2016
CP 2015-16 to 2019-20 10,976 11,200 11,900
Table 3: Portfolio Outstanding ($M)
Actual
2014
Estimate
2015
Proposed
2016
CP 2015-16 to 2019-20 17,815 19,100 20,433
Table 4: Net Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net interest income 830 884 958
Fee and other income 15 15 16
Net realized gains (losses) on other fnancial instruments 1 1 –
Net revenue 846 900 974
Provision for credit losses (73) (83) (138)
Net unrealized gains (losses) on other fnancial instruments – (2) (1)
Income before operating and administrative expenses 773 815 835
Operating and administrative expenses 339 340 377
Net income 434 475 458
As a % of average outstanding
Net interest income 4.8 4.8 4.8
Fee and other income 0.1 0.1 0.1
Net realized gains (losses) on other fnancial instruments – – –
Net revenue 4.9 4.9 4.9
Provision for credit losses (0.4) (0.5) (0.7)
Net unrealized gains (losses) on other fnancial instruments – – –
Income before operating and administrative expenses 4.5 4.4 4.2
Operating and administrative expenses 2.0 1.9 1.9
Net income 2.5 2.5 2.3
Average portfolio outstanding 17,222 18,372 19,802
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
44 | bdc.ca
BDC Securitization
By partnering with private-sector fnancing compan-
ies in securitization, BDC ensures that smaller fnan-
cing companies can remain active in the market and
able to provide fnancing for the vehicle and equip-
ment needs of businesses and consumers, ultimately
helping SMEs improve their productivity.
BDC partners with TAO Asset Management to offer
the Funding Platform for Independent Lenders (F-
PIL). Under this program, BDC Securitization fore-
casts authorizations of $450 million in fscal 2016.
Since F-PIL involves fewer deals for larger amounts,
authorizations can be diffcult to forecast and can
fuctuate throughout the planning period. Net in-
come is forecast to be lower than last year’s Corpor-
ate Plan, at $3 million in fscal 2016. Operating and
administrative expenses remain stable through the
planning period.
As at March 31, 2014, 7,012 SMEs had benefted
indirectly from this program. BDC will continue to
monitor and address the needs of smaller fnancing
companies in the securitization market to ensure
liquidity for SMEs.
Table 5: Securitization ($M)
Actual
2014
Estimate
2015
Proposed
2016
Authorizations (175) 315 450
Disbursements 200 207 231
Portfolio at cost 334 405 457
Fair value allowance 2 2 3
Portfolio at fair value 336 407 460
Net revenue 8 6 5
Operating and administrative expenses 2 2 2
Net income 6 4 3
bdc.ca | 45
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
BDC Growth & Transition Capital, formerly BDC
Subordinate Financing, offers cash fow, mezzanine,
and quasi-equity fnancing to larger, more mature
and growing frms with market traction, strong
management and sound fnancial reporting. Where
appropriate, BDC offers equity solutions by investing
in a minority ownership stake of the company.
These types of higher-risk fnancing solutions can be
a powerful fuel for frms experiencing rapid growth
and useful for entrepreneurs planning management
succession. They are suited to businesses with few
tangible assets and entrepreneurs who don’t want to
dilute their ownership of the business.
To further address the needs of entrepreneurs for
higher-risk growth capital, BDC Growth & Transi-
tion Capital will offer more equity and quasi-equity,
including prospective quasi-equity, which takes a
forward-looking view of a company’s potential ver-
sus looking at historical performance.
The forecast for acceptances is in line with last year’s
Corporate Plan, increasing to $240 million in fscal
2016, bringing the portfolio at fair value to $732 mil-
lion. Over the following years, BDC expects operat-
ing and administrative expenses as a percentage of
the average outstanding portfolio to decrease.
Due to growth in the portfolio and improved ef-
fciency, net income for BDC Growth & Transition
Capital is expected to increase and is higher than
forecast in last year’s Corporate Plan. Net income is
expected to be $34 million in fscal 2016.
BDC Growth & Transition Capital
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
46 | bdc.ca
Table 6: Growth & Transition Capital ($M)
Actual
2014
Estimate
2015
Proposed
2016
Acceptances (#) 126 165 164
Acceptances ($) 187 220 240
Growth (%) (1.4%) 17.6% 9.1%
Portfolio at fair value 577 635 732
Net interest income 50 51 62
Net realized gains (losses) on investments and write-offs (6) (26) (26)
Fee and other income 22 25 24
Net revenue 66 50 60
Net fair value change (17) (10) (21)
Fair value adjustments due to realized gains (losses) and write-offs – 19 26
Income before operating and administrative expenses 49 59 65
Operating and administrative expenses 26 25 31
Net income 23 34 34
Net income attributable to:
BDC’s shareholder 16 32 34
Non-controlling interests 7 2 –
Net income 23 34 34
As a % of average outstanding
Net interest income 8.6 8.2 8.9
Net realized gains (losses) on investments and write-offs (1.0) (4.2) (3.7)
Fee and other income 3.8 4.0 3.5
Net revenue 11.4 8.0 8.7
Net fair value change (2.9) (1.6) (3.0)
Fair value adjustments due to realized gains (losses) and write-offs – 3.0 3.7
Income before operating and administrative expenses 8.5 9.4 9.4
Operating and administrative expenses 4.5 4.0 4.5
Net income 4.0 5.4 4.9
*Non-controlling interests are in AlterInvest Inc., AlterInvest L.P. and AlterInvest II L.P.
bdc.ca | 47
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
BDC VC’s strategy of direct and indirect investing
complemented by innovative work in the VC eco-
system has made progress in supporting Canadian
technology companies and returning the VC market
to health.
BDC VC’s three internal direct investment funds
emulate the best practices of the private sector and
are focused on building leading Canadian technology
businesses in the IT, health-care, and industrial/clean/
energy-tech sectors. Each fund was “seeded” with
promising companies from BDC’s legacy portfolio
that meet the objectives of the respective fund strat-
egies. The remaining direct legacy investments are be-
ing managed within BDC VC’s Diversifed Portfolio.
BDC VC’s indirect, or fund of funds, approach is
focused on building and supporting at-scale, world-
class Canadian VC funds. This is being done with
larger commitments by BDC VC to private-sector
funds that have a clear sector focus and recognized
expertise. BDC VC will use its indirect investments
to complement those made by the Venture Capital
Action Plan (VCAP) to help ensure the success of the
program. BDC VC is also invested in GO Capital, a
fund designed to support the creation of companies
in all sectors of science and technology in Quebec.
GO Capital’s investment period is complete and it
will only invest to support its existing portfolio.
To help rebuild the VC ecosystem, BDC VC cre-
ated the Strategic Investments and Partnerships
(SIP) team. It is developing innovative initiatives to
reinforce key areas of the ecosystem and making
direct and indirect investments that fll fnancing
gaps, focusing on early stage investments, angels and
accelerators.
Over the planning period, BDC VC will build upon
its existing strategy to address evolving needs in the
VC market by:
> Supporting a variety of technology companies—
BDC VC will complement investments made by
its three sector-specifc internal funds by making
direct “development” investments, including co-
investments, in companies from other sectors with
the potential to contribute to the economy.
> Supporting both early and late-stage investing—
BDC VC has noted the emergence of new fund
models and emerging managers raising small funds
of less than $50 million. This could result in a
situation where early stage capital is insuffciently
balanced by later-stage capital. To address this,
BDC VC will look for opportunities to do more
later-stage investing, including through its three
internal funds, while also supporting less traditional
funds in emerging sectors through its indirect
investments.
Largely as a result of increased activity in direct
investing, the forecast for authorizations is higher
than last year’s Corporate Plan. As the portfolio
matures over the planning period, BDC VC expects
more exits. This should result in disbursements being
almost equally matched by proceeds and relatively
stable cash fow. The portfolio at fair value is ex-
pected to increase due to strong investments, lower
expected write-offs and fair value depreciation.
It should be noted that the risk associated with esti-
mating proceeds is signifcant as the value and timing
of exits are diffcult to predict.
BDC VC’s forecast for net income has improved
from last year’s Corporate Plan. As mentioned, it is
diffcult to forecast the timing and value of exits and
the amount and timing of fair value changes. While
BDC is optimistic about the direction of its strategy
over the planning period, these factors may cause
signifcant variation from plan.
BDC Venture Capital
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
48 | bdc.ca
Table 7: Venture Capital - Authorizations ($M)
Actual
2014
Estimate
2015
Proposed
2016
Diversifed 9 9 5
GO Capital 4 5 –
Healthcare 6 25 24
IT 22 19 26
Industrial, Clean and Energy Technology 11 21 15
Development Investments – – 5
SIP (Strategic Investments and Partnerships) – – –
VCSIP (Venture Capital Strategic Investment Plan) 6 9 7
Direct investments 58 88 82
Fund of funds 67 75 100
SIP 14 12 15
VCSIP 16 10 13
Indirect investments 97 97 128
Total authorizations 155 185 210
Table 8: Venture Capital - Net Investing Activity and Portfolio ($M)
Actual
2014
Estimate
2015
Proposed
2016
Proceeds 97 40 90
Disbursements (excludes operating and administrative expenses) (118) (151) (138)
Net investing activity (21) (111) (48)
Portfolio at cost 535 625 665
Portfolio at fair value 495 613 668
Fair value / cost 93% 98% 100%
bdc.ca | 49
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 9: Net Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net realized gains (losses) on investments 42 (1) 14
Write-offs (61) (20) (22)
Net realized gains (losses) on investments and write-offs (19) (21) (8)
Fee and other income 4 2 2
Net realized gains on other fnancial instruments (9) – –
Net revenue (loss) (24) (19) (6)
Net fair value change (27) 4 (4)
Fair value adjustments due to realized gains (losses) and write-offs 47 21 20
Net unrealized foreign exchange gains (losses) on investments 15 3 –
Net unrealized (losses) gains on fnancial instruments – (2) –
Income before operating and administrative expenses 11 7 10
Operating and administrative expenses 23 22 24
Net income (loss) (12) (15) (14)
Net income (loss) attributable to:
BDC’s shareholder (11) (13) (13)
Non-controlling interests* (1) (2) (1)
Net income (loss) (12) (15) (14)
*Non-controlling interests represent 80% of GO Capital net income
Table 10: Net Income by Fund ($M)
Actual
2014
Estimate
2015
Proposed
2016
Healthcare (18) (4) (3)
IT 17 (10) (1)
Industrial, Clean and Energy Technology (1) 8 (2)
Development Investments – – –
Direct internal investments (2) (6) (6)
Diversifed (10) 5 10
GO Capital (2) (5) (2)
Direct legacy investments (12) – 8
Total direct investments (14) (6) 2
Fund of funds 7 (2) (13)
SIP (includes direct and indirect investments) (5) (4) (3)
VCSIP (includes direct and indirect investments) – (3) –
Net income (loss) (12) (15) (14)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
50 | bdc.ca
Table 11: Consulting ($M)
Actual
2014
Estimate
2015
Proposed
2016
Revenue from activities 22 17 19
Delivery costs 10 8 11
Margin 12 9 8
Operating and administrative expenses 28 31 35
Net income (loss) before transition costs (16) (22) (27)
Transition costs 1 3 3
Net income (loss) (17) (25) (30)
BDC Consulting
BDC believes that entrepreneurs need to take
advantage of professional, qualifed advisory services
to grow, innovate, create effciencies and ultimately
become more competitive.
However, from its experience in the market, BDC
has found that small business owners have unmet
needs for a broad range of these services and often
have trouble identifying and addressing their own
requirements.
To address this market gap, BDC is investing in
advisory services that will maximize impact on the
competitiveness of Canadian entrepreneurs by
enabling them to take advantage of growth, pro-
ductivity and innovation projects. In its role as a
development bank, BDC will assume a portion of
costs associated with the provision of such services,
which often entails working with an external frm to
provide the services to the entrepreneur. In this way,
BDC leverages the private sector, helping to ensure
the complementarity of its approach.
Revenue for BDC Consulting is expected to be
$19 million in fscal 2016 and will continue to rise,
refecting increased reach in the marketplace. Net
losses are expected to remain stable, refecting in-
creased effciency and improved cost recovery.
bdc.ca | 51
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
To help some of Canada’s most promising frms
contribute fully to the economy, BDC is proposing
the gradual implementation of a new initiative that
will facilitate access by these “high-impact” frms
to the best solutions available at each stage of their
development. With a strong pan-Canadian network
of partners and a deep knowledge of entrepreneurs,
BDC believes it can leverage its knowledge and
expertise to further support high-impact frms, in
collaboration with the public and private sectors.
This initiative is a signifcant one for BDC that will
be funded from retained earnings. As an investment
in SME competitiveness, the initiative is expected to
incur a net loss of $7 million in fscal 2016.
Operating and administrative expenses will be com-
prised of salaries as well as investments in systems
and tools and in strengthening and developing new
partnerships required to support this initiative, in
addition to standard operating costs and overhead.
It is important to note that, as this initiative is new
to BDC and has yet to be operationalized, these
forecasts and estimates are preliminary and will be
reviewed as more details become known.
Also, while support for high-impact frms is pre-
sented as a separate segment in this Corporate Plan,
BDC does not have suffcient information at this
time to determine whether a separate segment is
required under IFRS. It should be noted that report-
ing on this segment in this Corporate Plan may differ
from upcoming annual reports.
Support for High-Impact Firms
Table 12: Support for High-Impact Firms ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net revenue – – –
Impairment reversals (losses) on loans – – –
Net change in unrealized appreciation (depreciation) of investments – – –
Operating and administrative expenses – – 7
Net income (loss) – – (7)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
52 | bdc.ca
Venture Capital Action Plan
Recognizing the importance of venture capital to
Canada’s economic prosperity, in Economic Action
Plan 2012 the government announced $400 million
to help increase private-sector investment in early
stage risk capital and to support the creation of
large-scale VC funds led by the private sector.
In January 2013, the Prime Minister announced the
Venture Capital Action Plan (VCAP), which will make
available:
> up to $350 million to establish or recapitalize
as many as four large funds of funds led by the
private sector in partnership with institutional and
corporate strategic investors, as well as interested
provinces
> an aggregate investment of up to $50 million in
existing high-performing VC funds in Canada
BDC was asked to carry out certain duties and
functions to serve as the agent of government under
VCAP and has created a small team dedicated to
implementing this initiative.
The frst stage in executing VCAP took place with
the selection of four high-performing funds in the
IT and life sciences sectors that have demonstrated
strong investment performance and are aligned with
the objectives of VCAP. The second stage of VCAP
involved the selection of fund managers and negotia-
tion of legal documentation surrounding the creation
of new private-sector funds of funds. BDC expects
three of the four VCAP funds of funds to be in active
investment mode before the end of March 2015.
Disbursements commenced in fscal 2014 with
$6 million for two of the high-performing funds and
one of the fund of funds.Through the issuance of
common shares that are not included in the calcula-
tion of dividends, BDC received a capital injection
of $50 million in fscal 2014. BDC expects a capital
injection of $150 million in fscal 2016.
Due to a change in the methodology for calculating
fair value, the net income forecast differs from that
presented in last year’s Corporate Plan. The new
methodology of fair value is based on expected dis-
tributions from the funds determined from the net
asset values. The result is that forecasted losses in
fscal 2015 are less than last year’s Corporate Plan.
With $387.5 million to be committed by BDC, it
is expected that more than $1 billion will be raised
from other partners, for a total commitment of
$1.4 billion. However, it should be noted that the
fundraising environment remains diffcult.
Given the nature of the industry and that VCAP is
in the early stages of implementation, it is diffcult
to forecast the overall fnancial performance of the
program. BDC continues to collaborate with offcials
from Industry Canada and Finance Canada on oper-
ational details.
BDC supports the overarching goal of VCAP to
encourage private-sector involvement in the VC
asset class through a new source of funds and is
committed to working with all the players involved
to ensure the success of the program. BDC believes
that the combined effect of VCAP, VCSIP and its own
VC investing activities will have a signifcant positive
impact on the VC market in Canada.
bdc.ca | 53
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 13: VCAP ($M)
Actual
2014
Estimate
2015
Proposed
2016
Authorizations 210 178 –
Disbursements 6 51 99
Proceeds – – –
Portfolio at cost 6 57 156
Portfolio at fair value 5 50 127
Net revenue – – 2
Net fair value changes (1) (7) (22)
Income before operating and administrative expenses (1) (7) (20)
Operating and administrative expenses 1 1 1
Net income (loss) (2) (8) (21)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
54 | bdc.ca
8.1%
7.8%
2%
6%
10%
14,000
23,000
32,000
2014
(actual)
2015 2016
VCAP Securitization Venture Capital
Growth & Transition Capital Financing Growth %
Table 14: Consolidated BDC Portfolio—as at March 31 ($M)
Table 14 shows the composition and growth of
BDC’s consolidated outstanding portfolio in dollars
from fscal 2014 to 2016. Growth of the portfolio
increases to refect the impact of the initiative to
improve reach and visibility.
BDC consolidated net income is expected to be
$423 million in fscal 2016. Consolidated net income
will be impacted as BDC makes the investments
required to support the competitiveness of Canadian
SMEs, but remains at a fnancially sustainable level.
Consolidated Portfolio and Net Income
bdc.ca | 55
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 16: Consolidated Comprehensive Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net income 432 465 423
Other comprehensive income (loss)
Items that may be reclassifed subsequently to proft or loss
Net change in unrealized gains (losses) on cash fow hedges (3) – –
Total items that may be reclassifed subsequently to net income (3) – –
Items that will not be reclassifed to OCI
Remeasurements of net post-employment beneft liability 53 (59) –
Other comprehensive income (loss) 50 (59) –
Total comprehensive income 482 406 423
Total comprehensive income (loss) attributable to:
BDC’s shareholder 476 406 424
Non-controlling interests 6 – (1)
Total comprehensive income 482 406 423
Table 15: Consolidated Net Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Financing 434 475 458
Securitization 6 4 3
Growth & Transition Capital 23 34 34
Venture Capital (12) (15) (14)
Consulting (17) (25) (30)
Support for High-Impact Firms – – (7)
Venture Capital Action Plan (2) (8) (21)
Net income 432 465 423
Net income (loss) attributable to:
BDC’s shareholder 426 465 424
Non-controlling interests 6 – (1)
Net income 432 465 423
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
56 | bdc.ca
Table 17: BDC Financing Operating Expenses ($M)
Actual
2014
Estimate
2015
Proposed
2016
Total operating expenses 339 340 377
Less:
Pension expense 46 41 50
Adjusted operating expenses (excluding pension) 293 299 327
Reported effciency ratio 40.0% 37.8% 38.7%
Adjusted effciency ratio (excluding pension) 34.6% 33.2% 33.5%
41.0%
43.7%
41.4%
40.3%
43.5%
40.0%
37.8%
38.7%
44.7%
38.3%
38.0%
39.2%
36.7%
38.3%
34.6%
33.2%
33.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016
20%
40%
0%
47.8%
60%
Table 18: BDC Financing Historical Effciency Ratio—as at March 31 (%)
Effciency ratio
Effciency ratio
excluding pension
Over the years, BDC has made a concerted effort
to achieve effciencies while fulflling its role as a
development bank and implementing government
priorities. In fscal 2015, BDC Financing expects
to surpass the target for its reported effciency
ratio due to lower staff levels than anticipated and
reduced costs in the areas of communication and
meals, travel and accommodations made possible
by investments in videophones, instant messaging,
videoconferencing and voice-over-Internet protocol.
While it remains committed to ongoing improve-
ments in effciency, BDC expects to incur increased
operating expenses related to initiatives such as its
efforts to improve reach and visibility. Implementa-
tion of this initiative will result in an increase in fscal
2016 in the effciency ratio for BDC Financing, which
is expected to decrease in the following years.
Cost Containment and Effciency Measures
bdc.ca | 57
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Capital Budget
In an effort to remain effcient and responsive to
client needs, BDC invests in information technology
and in its business facilities across Canada. Capital
expenditures in IT are expected to be lower than
anticipated with the adoption of cloud solutions
as opposed to in-house application development.
Combined with the fact that the implementation of
the Agility & Effciency (A&E) program is complete,
capital expenditures are forecast to be lower than in
past years.
Projected Return on Common
Equity
BDC is required to achieve a return on equity (ROE)
at least equal to the government’s long-term cost of
capital. To meet this requirement, BDC follows the
10-year moving average returns for Government of
Canada three-year bonds, which is currently 2 per-
cent.
For fscal 2015, BDC expects its 10-year moving
average ROE to be 9.1 percent due to strong results
in BDC Financing.
Table 21: Dividends ($M)
Actual
2014
Estimate
2015
Proposed
2016
Dividends* 60 55 60
*Common dividends are declared, booked, and paid in the following fscal year
Table 19: Capital Budget ($M)
Actual
2014
Estimate
2015
Proposed
2016
Facilities 1 4 5
Information technology 11 3 5
Agility & Effciency (A&E) 24 – –
Total 36 7 10
7.8%
7.4%
6.1%
5.2%
7.6%
8.9% 9.1%
9.0%
8.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016
4%
8%
0%
12%
Table 20: ROE 10-year Moving Average (%)
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
58 | bdc.ca
Dividend Policy, Statutory
Limitations and Capital Adequacy
Dividend Policy
Common dividends are payable annually and fuctu-
ate based on BDC performance. In fscal 2016, BDC
is forecasting dividend payments of $60 million. BDC
has paid $237.4 million in dividends in the past fve
years (including a $55-million payment in June 2014)
to the Government of Canada.
Statutory Limitations
The BDC Act requires that the aggregate of bor-
rowings and contingent liabilities in the form of
guarantees provided by BDC not exceed 12 times its
equity. Growth in earnings should ensure that BDC
will not exceed this statutory requirement over the
planning period.
The debt-to-equity ratio is projected at 3.4:1 in fscal
2015 and should move to 3.3:1 by fscal 2016, well
below the statutory limit. The total equity of BDC
should increase from $4.726 billion in fscal 2015 to
$5.222 billion by the end of fscal 2016.
BDC’s paid-in capital limit was raised by the Budget
2009 Implementation Act to $3 billion from $1.5 bil-
lion, as originally set out in the BDC Act. BDC’s
paid-in capital is currently at $2.166 billion, but will
increase to $2.516 billion following the capital injec-
tion required for VCAP.
Capital Status
In line with its requirement for fnancial sustainability,
BDC provides for an additional capital safeguard to
help Canadian entrepreneurs withstand diffcult eco-
nomic conditions without requiring further invest-
ment by the Government of Canada. This approach
observes Treasury Board guidelines dated March 28,
1996, which state that, “the Bank maintain capital
and loss provisions suffcient to ensure that BDC
can withstand unfavourable economic circumstances
without requiring additional government funding.”
In a decision dated May 14, 2009, Treasury Board
reconfrmed BDC’s capital adequacy ratios (percent-
age of net portfolio assets) of at least:
> 10 percent for term loans
> 25 percent for quasi-equity loans (defned as
venture loans, patient capital, working capital
support program)
> 100 percent for venture capital investments
(including VCAP)
> 10 percent of the fair value of F-PIL assets
BDC’s available capital is expected to reach
$4.667 billion by the end of fscal 2015. BDC’s capital
status under Treasury Board guidelines is expected
to be $1.708 billion in fscal 2015. BDC believes it is
also prudent to reserve capital for loans and invest-
ments already committed to entrepreneurs but not
yet disbursed by BDC. These undisbursed amounts
should represent $665 million of capital by the end
of fscal 2015. In addition, BDC reserves capital for
the investments it expects to make in its three inter-
nal VC funds and in VCSIP, for which the government
requested that BDC set aside $100 million of capital.
BDC also uses an economic capital model to man-
age risks by ensuring appropriate capital to support
its current and future business and to safeguard its
fnancial sustainability. The philosophy behind this
model is to balance the requirement for BDC to
fulfll its public policy mandate while remaining fnan-
cially self-suffcient. It also provides a benchmark for
the Treasury Board assessment guidelines.
bdc.ca | 59
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Stress Testing
In keeping with industry practices and the core tenets
of sound fnancial and risk management, particu-
larly during times of uncertainty, BDC conducts
entreprise-wide stress tests on its signifcant risks
and portfolios to determine an appropriate level of
capital to withstand a sustained economic downturn.
Specifc scenarios are selected based on historical and
estimated impact on the current portfolios.
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
60 | bdc.ca
Table 22: Consolidated Statement of Income ($M)
Actual
2014
Estimate
2015
Proposed
2016
Interest income 1,020 1,087 1,316
Interest expense 132 146 291
Net interest income 888 941 1,025
Net realized gains (losses) on investments (25) (47) (34)
Consulting revenue 22 17 19
Fee and other income 41 42 44
Net realized gains (losses) on other fnancial instruments (8) 1 –
Net revenue 918 954 1,054
Provision for credit losses (73) (83) (138)
Net change in unrealized appreciation (depreciation) of investments* 3 27 (1)
Net unrealized foreign exchange gains (losses) on investments 15 3 –
Net unrealized gains (losses) on other fnancial instruments (1) (4) (1)
Income before operating and administrative expenses 862 897 914
Operating and administrative expenses 430 432 491
Net income 432 465 423
Net income (loss) attributable to:
BDC’s shareholder 426 465 424
Non-controlling interests 6 – (1)
Net income 432 465 423
*Includes net fair value change and fair value adjustment due to realized gains (losses) and write-offs
Appendix A to the Financial Plan
The following table presents BDC’s fnancial highlight. In fscal 2016, BDC expects total revenues of $1.054 bil-
lion and a net income of $423 million, of which $424 million is attributable to BDC’s shareholder.
bdc.ca | 61
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Table 25: Projected Statement of Cash Flows ($M)
Actual
2014
Estimate
2015
Proposed
2016
Net cash fows provided by operating activities (957) (805) (797)
Net cash fows used in investing activities (3) (321) (331)
Net cash fows provided by fnancing activities 935 1,160 1,222
Net increase (decrease) in cash & cash equivalents (25) 34 94
Cash & cash equivalents at beginning of year 702 677 711
Cash & cash equivalents at end of year 677 711 805
Table 23: Total Revenues by Business Line ($M)
Actual
2014
Estimate
2015
Proposed
2016
Financing 846 900 974
Securitization 8 6 5
Growth & Transition Capital 66 50 60
Venture Capital (24) (19) (6)
Consulting 22 17 19
Support for High-Impact Firms – – –
Venture Capital Action Plan – – 2
Net revenues 918 954 1,054
Table 24: Operating Budget - Expenses ($M)
Actual
2014
Estimate
2015
Proposed
2016
Financing 339 340 377
Securitization 2 2 2
Growth & Transition Capital 26 25 31
Venture Capital 23 22 24
Consulting (incl. delivery and transition costs) 39 42 49
Support for High-Impact Firms – – 7
Venture Capital Action Plan 1 1 1
Total operating budget 430 432 491
Operating expenses as a % of the average total loans and investments
portfolio
2.3 2.2 2.3
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
62 | bdc.ca
Table 26: Consolidated Statement of Financial Position (unaudited, in $M)
Actual
2014
Estimate
2015
Proposed
2016
ASSETS
Cash and cash equivalents 677 711 805
Asset-backed securities 336 407 460
Loan Portfolio 17,749 19,095 20,423
Allowance for credit losses (508) (507) (559)
Loan Portfolio (net) 17,241 18,588 19,864
Growth & Transition Capital investments 577 635 732
Venture Capital investments 495 613 668
Venture Capital Action Plan 5 49 126
18,654 20,292 21,850
Post-employment beneft asset 84 21 35
Other assets 155 152 147
Total assets 19,570 21,176 22,837
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued liabilities 106 115 124
Short-term notes 14,057 15,511 16,860
Long-term notes 775 542 337
Borrowings 14,832 16,053 17,197
Post-employment beneft liability 188 222 229
Other liabilities 55 60 65
Total liabilities 15,181 16,450 17,615
Equity
Share capital 2,138 2,138 2,288
Contributed surplus 28 28 28
Retained earnings at beginning of year 1,748 2,167 2,518
Net income 426 465 424
Remeasurements of net post-employment beneft liability 53 (59) –
Dividends on common shares (60) (55) (60)
Retained earnings 2,167 2,518 2,882
Accumulated other comprehensive income 5 5 5
Equity attributable to BDC’s shareholder 4,338 4,689 5,203
Non-controlling interests 51 37 19
Total equity 4,389 4,726 5,222
Total liabilities and equity 19,570 21,176 22,837
Debt/Equity ratio 3.4 3.4 3.3
bdc.ca | 63
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
Future accounting changes
Information is provided below on new standards,
amendments and interpretations to existing stan-
dards that are not yet effective but that are expected
to impact BDC’s fnancial results. BDC is currently
assessing the impact of these changes on its consoli-
dated fnancial statements.
IFRS 9—Financial Instruments
On July 24, 2014, the International Accounting
Standards Board (IASB) issued the fnal version of
IFRS 9—Financial Instruments, bringing together the
classifcation and measurement, impairment and
hedge accounting phases of the IASB’s project to
replace IAS 39 Financial Instruments: Recognition and
measurement and all previous versions of IFRS 9. The
fnal version amends classifcation and measurement
of fnancial assets and introduces a new expected
loss impairment model. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018 and
will be applied retroactively subject to certain excep-
tions.
Since 2008, the IASB has been working to replace
IAS 39 and structured the project in three phases:
1. Classifcation and measurement of fnancial
assets and fnancial liabilities
2. Impairment
3. Hedge accounting
The new standard introduces new presentation and
extensive new disclosure requirements.
1. Classifcation and measurement of fnancial
assets and fnancial liabilities
IFRS 9 applies one classifcation approach for all
types of fnancial assets to determine whether the
fnancial asset is measured at amortized cost or at
fair value, based on both the entity’s business model
for managing the fnancial assets and the fnancial
asset’s contractual cash fow characteristics. IFRS 9
contains three principle classifcation categories for
fnancial assets: amortized cost, fair value through
other comprehensive income (FVOCI), and fair value
through proft or loss (FVTPL). The existing IAS 39
categories of held-to-maturity, loans and receivables,
and available-for-sale are removed.
2. Impairment
IFRS 9 replaces the current “incurred loss” model
in IAS 39 with an “expected credit loss” model. The
new model applies to fnancial assets that are meas-
ured at amortized cost or FVOCI, such as loans,
lease and trade receivables, debt securities, contract
assets and most loan commitments and fnancial
guarantee contracts. The model uses a dual meas-
urement approach under which the loss allowance
will be for either 12-month expected credit losses
or lifetime expected credit losses, the latter applic-
able if credit risk has increased signifcantly since
initial recognition. A simplifed approach is available
for trade and lease receivables and contract assets,
allowing the recognition of lifetime expected credit
losses at all times.
3. Hedge accounting
The new standard carries forward the general hedge
accounting requirements originally published in
2013. The objective is to more closely align the ac-
counting with risk management activities. The IASB
is continuing to work on its macro hedge accounting
project.
Appendix B to the Financial Plan
SUMMARY OF THE BDC CORPORATE PLAN 2015-16 TO 2019-20
64 | bdc.ca
IFRS 15—Revenue from contracts with
customers
On May 28, 2014, the IASB issued a new standard,
IFRS 15—Revenue from contracts with customers,
replacing IAS 18—Revenue. The new standard is
effective for annual periods beginning on or after
January 1, 2017.
The new revenue model applies to all contracts with
customers except those that are within the scope
of other IFRS standards, such as leases and fnancial
instruments. The core principle of the standard is
that an entity will recognize revenue when it trans-
fers promised goods or services to customers in an
amount that refects the consideration to which the
entity expects to be entitled to in exchange for those
goods and services.
The new standard establishes a fve-step model that
will apply to revenue earned from a contract with a
customer (with limited exceptions), regardless of the
type of revenue transaction or the industry. Exten-
sive disclosures will be required, both qualitative and
quantitative. The objective is to disclose suffcient
information to enable the users of fnancial state-
ments to understand the nature, amount, timing and
uncertainty of revenue and cash fows arising from
contracts with customers.
doc_272862615.pdf