Bdc Corporate Plan Summary I Am An Entrepreneur

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BDC Corporate Plan Summary
2014-15 to 2018-19
OPERATING BUDGET | CAPITAL BUDGET
I am an entrepreneur
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
2 | bdc.ca
The Corporate Plan Summary is based on the 2014-2015 to
2018-2019 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 2014-15 TO 2018-19
contents
EXECUTIVE SUMMARY ________________________________________ page 4
BDC PROFILE _________________________________________________ page 8
STRATEGY MAP ______________________________________________ page 10
PERFORMANCE MEASURES ____________________________________ page 12
OPERATING ENVIRONMENT __________________________________ page 13
CATALYZE THE ENTREPRENEURIAL ECOSYSTEM _________________ page 18
Entrepreneurship _________________________________________ page 19
SUPPORT THE COMPETITIVENESS OF CANADIAN SMEs___________ page 26
Innovation _______________________________________________ page 27
Productivity ______________________________________________ page 35
Growth _________________________________________________ page 40
APPENDICES TO THE CORPORATE PLAN
Appendix A: Governance ___________________________________ page 46
Appendix B: Risk Management _______________________________ page 50
FINANCIAL PLAN ___________________________________________ page 53
Appendix A to the Financial Plan ____________________________ page 69
Appendix B to the Financial Plan _____________________________ page 72
Quotes appearing in this document are taken from the Survey on BDC’s image, role and impact conducted in October 2013
with 998 current and former clients of BDC Financing and BDC Consulting.
“
”
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
4 | bdc.ca
executive
summary
Opportunity awaits, but Canadian businesses must prepare them-
selves to seize the moment.
Under the lingering shadow of the global fnancial crisis, Canada’s economic
performance has been solid. Now, as the U.S. economy fnds its footing
and emerging markets present fresh opportunities, Canada is poised for
improved growth. However, for that growth to be realized, Canadian
businesses, including small and medium-size enterprises (SMEs), must
address the factors preventing them from becoming truly competitive on
the world stage.
The country’s 14
th
place ranking in the World Economic Forum’s Global
Competitiveness Index emphasizes Canada’s need to focus on innovation,
productivity and growth. Canada fell four places in factors related to in-
novation and business sophistication, in large part because businesses are
slow to adopt new technologies, do not spend enough on R&D, and face
insuffcient access to fnancing. The result is that Canadian businesses have
a limited capacity to produce, market and sell new and improved products
and services.
These issues may impact Canada’s future economic growth, despite the
stable fundamentals and relatively healthy corporate balance sheets that
have served the country well.
To be part of the solution, Canadian SMEs must take advantage of current
credit conditions to innovate, improve their productivity, grow and become
competitive with the best in the world.
Through 2008 and 2009, our business, as well as many others, went through some
very diffcult times. BDC was an instrumental part of our survival and growth after the
markets rebounded.
“
”
— a manufacturer in British Columbia
bdc.ca | 5
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
The Business Development Bank of Canada (BDC) plays an important role
in creating and supporting this environment. It inspires and celebrates entre-
preneurs. It provides free practical resources and guidance to SMEs and
makes them easily available online. It assists start-ups and small businesses,
including those that have diffculty accessing fnancing due to location, sector
or demographic. It is continuing to focus on small loans, while also sup-
porting the growth of medium-size frms and participating in larger fnan-
cial transactions through syndication. Over the planning period, BDC will
continue to address the needs of SMEs for tailored fnancing and advisory
services and to offer those services in a streamlined and effcient manner,
putting the focus on clients frst. In keeping with its counter-cyclical role,
BDC stands ready to increase its support if needed.
With Canada’s improved economic conditions, BDC is turning its attention
to the pressing need for Canadian SMEs to become more competitive. It is
leveraging its expertise and resources to help SMEs innovate, increase their
effciency, and explore new markets, at home and abroad. It is developing
and offering specialized fnancing tools and is refning its advisory services
to address the key competitive challenges faced by entrepreneurs. It plays a
pivotal role in markets such as venture capital and is exploring new ways to
ensure availability of fnancing for SMEs. It is identifying and assisting SMEs
with the potential to make signifcant contributions to the economy, such as
high-growth frms and SMEs in specifc sectors, including manufacturing and
aerospace. Plus it is helping to ensure that Canada’s most promising frms
remain in Canadian hands, contributing to local communities and to the
domestic economy. To accomplish this multi-faceted mandate, BDC works
with a wide variety of public- and private-sector partners to increase its
reach and effectiveness.
BDC is pleased to support the government by implementing the Venture
Capital Action Plan, the Venture Capital Strategic Investment Plan, a new
awards program celebrating entrepreneurship and initiatives to support the
adoption of technology and strengthen the ICT sector. BDC continues to
work with the government on the ongoing ten-year legislative review of
the BDC Act, and supports the government’s desire to return to a balanced
budget.
By helping Canadian SMEs become more competitive and contribute to
their fullest, BDC is supporting the government’s goals of economic growth
and prosperity, so that Canada may seize the opportunities ahead of it.
As a small business, our fnancing from BDC has allowed us to hire new staff when we
needed to expand; purchase new equipment to improve productivity; and maintain
control of our business through economic slowdowns.
“
”
— a fnance and insurance company in Ontario
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
6 | bdc.ca
Financial Performance
Following a strong rebound in the wake of the fnancial crisis, Canada’s eco-
nomic growth in recent years has been modest, waiting for the performance
of its main trading partners to improve. According to the Bank of Canada,
growth in Canada’s real gross domestic product (GDP) is forecast to pick up
in 2014, particularly as the U.S. economy fnds its footing.
With chartered banks active in the market but gaps remaining for fnancing
and advisory services tailored to SMEs, BDC is working to catalyze the
entrepreneurial ecosystem and support the competitiveness of Canadian
entrepreneurs, while continuing to focus on its complementary role.
BDC Financing is actively identifying and addressing market gaps, including
providing support to medium-size frms and participating in larger trans-
actions through syndication. It expects to again surpass corporate perform-
ance targets for small loans and has increased its forecast over the planning
period for the number of small loan acceptances. The forecast growth rate
of about 3% in the dollar amount of acceptances for BDC Financing balances
the need to improve the competitiveness of Canadian SMEs with current ex-
pectations for the Canadian economy and improving liquidity in the market.
BDC stands ready to increase its support to Canada’s SMEs if required.
BDC’s Financing portfolio is expected to grow by 8.1% in fscal 2014,
refecting lower payments and prepayments. Even with this growth, BDC
Financing’s operating expenses as a percentage of the average portfolio out-
standing will decrease from 2.0% in fscal 2014 to 1.9% in fscal 2015.
Net income for BDC Financing in fscal 2014 is forecast at $395 million,
$53 million more than last year’s Corporate Plan due primarily to lower
impairment losses and operating expenses.
BDC Subordinate Financing is playing an increasingly important role in
supporting the growth plans of SMEs through a diverse product offering.
The volume of acceptances is expected to reach $220 million by fscal 2015,
bringing the portfolio at fair value to $622 million.
BDC Consulting plans to increase its investment in value-added, affordable
advisory services to ensure maximum impact on clients. As a result of the
transition to a new approach, which involves revisiting solutions for which
a market gap may no longer exist, revenue for BDC Consulting is expected
to decrease before increasing through the planning period. BDC Consulting
BDC has rescued my business in this ongoing economy stagnation where the industry is
very unsteady and cash fow is in turmoil.
“
”
— a wholesaler in Alberta
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SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
expects that effciencies created by standardization of processes and reduc-
tions in administrative support will result in operating expenses remaining
stable as revenues increase.
In fscal 2014 and fscal 2015, BDC Venture Capital expects to authorize
$122 million and $160 million respectively in its direct and indirect invest-
ments and in its work to support the VC ecosystem. Disbursements for
BDC VC should be $122 million in fscal 2014 and $124 million in fscal
2015, with proceeds of $84 million and $30 million respectively.
BDC will continue its role in the securitization market to help SMEs access
fnancing for the vehicles and equipment needed to realize productivity
gains. In this portfolio, net revenue is forecast to remain stable at $8 million
from fscal 2014 to fscal 2015 as the portfolio grows from $368 million to
$498 million. Operating and administrative expenses will remain stable.
BDC was asked to carry out certain duties and functions to serve as the
agent of government under the Venture Capital Action Plan (VCAP). In fscal
2015, BDC forecasts that VCAP will incur a loss of $20 million, as a result of
the incentivized nature of the program. In the latter years of the program,
BDC expects VCAP to generate a net proft.
BDC has made substantial progress over the years in its efforts to contain
costs, which is refected in a continuous improvement in effciency. By fscal
2015, BDC is forecasting a reported effciency ratio of 39.7%, meaning that
BDC will spend 39.7 cents to generate a dollar of revenue. In fscal 2007,
BDC spent 50.6 cents to generate a dollar of revenue.
BDC consolidated net income is forecast to reach $372 million in fscal
2014, with a consolidated comprehensive income of $464 million. BDC
expects to make dividend payments of $60 million in fscal 2014.
BDC’s capital is expected to reach $4.381 billion by the end of fscal 2014.
After deducting the capital required for BDC’s activities per Treasury Board
guidelines, capital will stand at $1.773 billion. In addition to the Treasury
Board guidelines on capital, BDC maintains an economic capital model to
ensure adequate capital to support its current and future business and to
safeguard its fnancial sustainability.
BDC allowed us to see the future with confdence by giving us the room to manoeuvre.
“
”
— a retailer in Quebec
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
8 | bdc.ca
Annual revenues generated by
BDC clients
$179B $176B $192B
Annual export revenues
generated by BDC clients
$22B $23B $22B
Small businesses served
as % of BDC’s portfolio
96% 96% 96%
First-time clients (Financing and
Subordinate Financing)
3,485 3,378 4,548
Financing Subordinate Financing Venture Capital Consulting Securitization
Term loans
with fexible
repayment
schedules
$18.3B
committed
Hybrid instrument
combining debt and
equity fnancing without
ownership dilution
$558M
committed
Direct and indirect
equity investments in
multiple technology
sectors
$822M
committed ($406M
direct, $416M indirect)
4
Customized and affordable
business consulting,
planning and management
solutions
2,180
mandates in 2013
Debt fnancing that relies on
the pooling of illiquid assets
$438M
ABS outstanding under CSCF
and F-PIL
5
$705M
outstanding net authorizations
under F-PIL
5
Economic impact of BDC 2011 2012 2013
MISSION
Help create and develop Canadian business through fnancing,
venture capital and consulting services, with a focus on SMEs
81%
of clients believe that BDC
contributes to the economic
development of Canada
3
100
of Proft Magazine’s 500 fastest growing companies
of 2013 benefted from BDC support
75%
of clients have fewer
than 20 employees
1,990
employees
$18.2B
assets
$303M
dividends paid
since 1997
BC & Yukon Prairies Ontario Quebec Atlantic Total
Business centres and offces 15 17 31 25 13 101
Clients
1
3,259 4,364 7,269 10,051 3,664 28,605
Loans/investments
2
$2.2B $3.5B $5.5B $6.7B $1.8B $19.7B
BDC business centres
BDC clients
DATA ARE AS AT MARCH 31, 2013, UNLESS OTHERWISE NOTED
1
# of Financing, Subordinate Financing and VC clients and funds
2
$ committed for Financing, Subordinate Financing and VC clients and funds, excluding inactive companies
3
Based on the Survey on BDC’s image, role and impact, October 2013
4
Includes inactive companies
5
CSCF = Canadian Secured Credit Facility; F-PIL = Funding Platform for Independent Lenders
BDC profle: For 69 years, a steadfast supporter of Canadian entrepreneurs
BDC Business Lines
bdc.ca | 9
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Manufacturing 23%
Wholesale & Retail 20%
Tourism 12%
Commercial properties 12%
Construction 8%
Transport & storage 6%
Business services 4%
Other 15%
$18.3B
commitment
$398M
committed in
117 active companies
12
$416M
committed in
32 active funds
Financing
Venture Capital
6
Based on Statistics Canada input/output model results of direct and indirect economic activity generated by clients who were fnanced by BDC in fscal 2013
7
Based on the Survey on BDC’s image, role and impact, October 2013
8
Measuring BDC’s Impact on its Clients, July 2013, from 2001-2010
9
Industry Canada, The State of Entrepreneurship, February 2010
10
Includes GO Capital 100% consolidation in BDC
11
Excludes BDC investment in GO Capital due to consolidation
12
BDC portfolio also includes 47 inactive companies with $8 million committed
13
Based on BDC authorizations in 2012 (direct investments only) versus total industry authorizations taken from Thomson Reuters
Realty Working Capital
Commitment
Direct Investments
? Diversifed (including FedDev) $135.8M
? Health $126.5M
? Information technology $62.9M
? Energy/Cleantech $53.3M
? GO Capital Funds
10
$21.4M
? BDC Strategic Initiatives $5.4M
Indirect Investments
? BDC Fund Investments
11
$387.2M
? BDC Strategic Initiatives $29.2M
Commitment by industry sector Key Metrics
BDC Financing clients had 14%
higher sales growth than non-clients
BDC clients of both Financing and
Consulting had up to 25% higher
sales growth than non-clients
8
11%
are start-ups (< 2 years)
of which 61%
survive more than 5 years
(vs. 51% of all start-ups in Canada)
9
? Atlantic ? Quebec ? Ontario
? Prairies & North ? BC & Yukon
15%
8%
6%
2%
0.5%
47%
3%
18%
10%
33%
27%
19%
11%
$48.8B
contribution to GDP
6
53%
of BDC Subordinate Financing
clients said that BDC had a con-
siderable impact on their business
7
BDC was active in
13%
of reported
VC transactions (#)
in Canada
13
79%
of BDC VC’s
investments were
in early stage frms
(seed, start-up and
development phases)
Key Metrics $
> New or used long-term assets
> Equipment
> ICT
> Purchase
> Construction
> Expansion
> Growth
> Innovation
> Market expansion
> Business transition
> Restructuring
> Infrastructure (support for SMEs)
> Lending in partnership with other
fnancial institutions
Machinery & Equipment/ICT Other
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
10 | bdc.ca
strategy map
The strategy map is the foundation of BDC’s Corporate Plan and fows
from BDC’s mission and vision. The map is built around two key objectives:
1. Catalyze the entrepreneurial ecosystem: With an aging demographic,
it is important that a new generation of Canadians pursue entrepreneur-
ship and that the ecosystem has the resources it requires to support
economic growth and prosperity. BDC plays an important role in ensuring
the health of the ecosystem.
2. Support competitiveness of Canadian SMEs: For Canadian SMEs to
be competitive and contribute to economic prosperity, they must improve
their productivity, incorporate innovation into their business, grow and
achieve scale, and be sensitive to global opportunities and threats. BDC is
increasing its efforts to improve the competitiveness of SMEs.
To achieve the two key objectives, BDC has identifed fve strategic actions:
> Entrepreneurship: Increase entrepreneurial intensity in Canada
> Innovation: Support the creation and adoption of innovation
> Productivity: Facilitate frm-level effciency improvements
> Growth: Enable clients to achieve full potential
> Partnerships: Work with partners to increase collective impact
The Corporate Plan describes a number of business initiatives that BDC is
undertaking or planning to undertake in support of the strategic actions.
BDC’s Organizational Foundation plays a critical role in supporting the key
objectives and strategic actions. It represents BDC’s internal resources,
including its values and culture, that are needed to achieve business
objectives. The Organizational Foundation also includes important aspects of
BDC’s operations and mandate, namely risk management, complementarity,
and fnancial sustainability. BDC supports the Organizational Foundation
with enabling initiatives, such as its Agility & Effciency program, the goal of
which is to transform BDC into a more effcient, fexible and resourceful
development bank.
The ultimate outcome of the strategic actions and key objectives is to create
shared value for Entrepreneurs, Stakeholders, and Canadians.
The performance measures on page 12 allow BDC to assess progress towards
achieving its strategic actions and key objectives.
bdc.ca | 11
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
CREATE SHARED VALUE FOR
Catalyze the
entrepreneurial ecosystem
Support the competitiveness
of Canadian SMEs
Entrepreneurs Stakeholders Canadians
PARTNERSHIPS
Work with partners to increase collective impact
VISION
Accelerate the success
of entrepreneurs
MISSION
Help create and develop Canadian business through ?nancing,
venture capital, and consulting services, with a focus on SMEs
ENTREPRENEURSHIP
Increase
entrepreneurial
intensity in Canada
INNOVATION
Support the
creation and adoption
of innovation
PRODUCTIVITY
Facilitate ?rm-level
ef?ciency
improvements
GROWTH
Enable clients
to achieve their
full potential
RESOURCES
Capital
Brand
Systems
& processes
VALUES & CULTURE
Relationship-
oriented
Engaged
employees Client-focused
Impact-
driven
RISK
MANAGEMENT
FINANCIAL
SUSTAINABILITY
COMPLEMENTARITY
B
U
S
I
N
E
S
S

I
N
I
T
I
A
T
I
V
E
S
E
N
A
B
L
I
N
G

I
N
I
T
I
A
T
I
V
E
S
KEY OBJECTIVES
STRATEGIC ACTIONS
BDC’S ORGANIZATIONAL FOUNDATION
> page 19 > page 27 > page 35 > page 40
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
12 | bdc.ca
performance measures
Entrepreneurship
Increase entrepreneurial intensity in Canada
Target
F2014
F2014
YTD
1
Target
F2015
> # of loans ?$500,000 for Financing and Subordinate Financing based on
commitment size of ?$750,000
6,500 6,246 8,000
> # of authorizations to new businesses (?2 years) (Financing and Subordinate
Financing)
1,400 1,479 1,500
> % of BDC-fnanced start-ups that survive fve years 65% 61%
2
65%
> Client Value Index (Financing and Consulting) 100 114
3
118
Innovation
Support the creation and adoption of innovation
Target
F2014
F2014
YTD
1
Target
F2015
> # of ICT interventions (online web and ICT assessments, Consulting mandates,
Financing and Subordinate Financing authorizations, downloads of e-Books and
other informational materials from BDC.ca and attendance at BDC-hosted ICT
events)
35,000 47,800 55,000
> Venture Capital return of capital (ROC) 1.00 1.00 1.00
Productivity
Facilitate frm-level effciency improvements
Target
F2014
F2014
YTD
1
Target
F2015
> # of loans authorized for equipment purchase (Equipment Line and loans with
“equipment purchase” as purpose)
2,000 1,274 2,000
Growth
Enable clients to achieve full potential
Target
F2014
F2014
YTD
1
Target
F2015
> % of high-growth frms in BDC Subordinate Financing portfolio (high-growth
frm defned as having annualized sales growth greater than 20% per year over a
three-year period)
30% 27% 30%
Partnerships
Work with partners to increase collective impact
Target
F2014
F2014
YTD
1
Target
F2015
> # of transactions authorized with and from partners (syndications, pari passu,
loan referrals and alliances) 2,000 1,755 2,400
BDC Effciency
Target
F2014
F2014
Forecast
Target
F2015
> BDC Financing reported effciency ratio 42.5% 41.1% 39.7%
BDC strives to measure its impact on Canadian entrepreneurs. As a result, its performance measures continue to evolve to properly capture public policy impacts.
1
Unless otherwise noted, 2014 YTD numbers are as at December 31, 2013
2
Fiscal 2013 - data available on an annual basis only
3
As at September 30, 2013 - data available on a quarterly basis only
bdc.ca | 13
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Following a strong rebound in the wake of the fnancial crisis, Canada’s
growth in recent years has been modest, however better than the major-
ity of its OECD counterparts. According to the Bank of Canada, growth in
Canada’s real gross domestic product (GDP) is forecast to pick up in 2014.
While Canada retains the strong economic fundamentals that served it
well during the crisis, resolving its trade defcit continues to be its focus.
The country’s14th place ranking in the World Economic Forum’s Global
Competitiveness Index emphasizes Canada’s need to focus on innovation,
productivity and growth. Canada fell four places in factors related to innova-
tion and business sophistication, in large part because businesses are slow to
adopt new technologies, do not spend enough on R&D, and face insuffcient
access to fnancing. The result is that Canadian businesses have a limited cap-
acity to produce, market and sell new and improved products and services.
Economists agree that, for Canada to take advantage of improving economic
conditions and its own solid fundamentals, the public and private sectors
must address the barriers to competitiveness.
Global outlook: U.S. recovery expected to strengthen,
Europe on the upswing
With economic activity varying across major economies, growth is expected
to be modest in the near term. Overall, the global economy is projected
by the Bank of Canada to grow by 2.8% in 2013 and accelerate to 3.4% in
2014 and 3.6% in 2015.
operating
environment
Figure 1: Global and selected regional growth forecasts
Share of global
GDP (%)
Real GDP growth (%)
2011 2012 2013f 2014f
World 100 3.9 3.1 2.8 3.4
United States 20 1.7 2.8 1.5 2.5
Eurozone 14 1.5 -0.6 -0.4 1.0
China 15 9.3 7.7 7.7 7.4
Canada 2 2.5 1.7 1.6 2.3
Source: International Monetary Fund and Bank of Canada, October 2013
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
14 | bdc.ca
Eurozone
Economic growth has resumed in the Eurozone, ending 18 months of
recession. Data from the Bank of Canada suggest that a recovery will
proceed slowly, refecting the need to rebuild private-sector balance sheets,
ongoing fscal consolidation, tight credit conditions and depressed labour
markets. Sustained recovery will require progress in structural, fscal and
banking reforms.
United States
Recovery in the U.S. will be slower than expected in the second half of
2013 but pick up going forward. The near-term softness is the result of
dampened consumer spending, a slowdown in housing activity, and the
partial government shutdown brought about by the failure to reach a timely
agreement on how to fund government operations. Business investment
has increased, but by less than expected, despite strong corporate balance
sheets. Government spending continues to contract. Overall, U.S. economic
activity is expected to strengthen; the Bank of Canada projects that the U.S.
economy will grow by 1.5% in 2013, 2.5% in 2014 and 3.3% in 2015.
China
Real GDP growth in China increased in the third quarter of 2013, but a con-
tinued reliance on investment activity, rapid growth of credit, and increases
in housing prices may affect the sustainability of economic growth. Real GDP
growth through 2015 is projected to remain close to 7.5%. Economic activ-
ity in other emerging markets has slowed and in the near term will be held
back by tighter fnancial conditions and heightened uncertainty. Economic
growth for these economies is expected to pick up modestly over 2014?15.
Figure 2: Real GDP trend in Canada
(Quarterly % change, 2007 dollars)
2008
II III IV
2009
II I III IV
2010
II I III IV
2011
II I III IV
2012
II I III IV
2013
II I
0
-1
-2
1
2
Source: Statistics Canada
bdc.ca | 15
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Canada: exports and business investment must improve for
growth to take hold
Economic growth in Canada is projected to be slower than expected in the
latter half of 2013 due to weakness in exports and business fxed invest-
ment. The projected expansion of U.S. business and residential investment
in 2014 should help, but with Canadian frms waiting to see a sustained
increase in demand, investment intentions remain subdued. At the same
time, corporate balance sheets are healthy, with low aggregate leverage and
strong levels of working capital.
The Bank of Canada Summer 2013 Business Outlook Survey suggests a
modest increase in investments in machinery and equipment by Canadian
businesses over the next 12 months. Many frms indicated that economic
uncertainty has caused them to delay projects, to manage risks by target-
ing new or different segments of demand, or to choose investments with
smaller capital outlays.
Figure 4: Investing in machinery and equipment – Balance of opinion
(% of frms expecting higher investment minus the % expecting lower investment)
Higher: 35% Same: 39% Lower: 26%
2001 2011
0
20
-20
-40
40
2009 2007 2005 2003 2013
Source: Bank of Canada
Figure 3: Real GDP variation by major component
(% change, Q2 2012 – Q2 2013)
1 0 3 2
Total GDP Change
Exports less imports of goods and services
Government expenditures
Government investments
Business investments in machinery and equipment
Business investments in non-residential structures
Residential investments
Household expenditures
Source: Statistics Canada
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
16 | bdc.ca
A BDC survey of 735 entrepreneurs in November 2013 showed that almost
60% plan to invest in the next 12 months, with 50% saying they are in a
better position to invest this year than they were last year. About 60% of
those planning to invest would have liked to invest more, but insuffcient
working capital and limited access to credit were obstacles to doing so.
Overall, the Bank of Canada forecasts improved economic growth through
2014 as external demand strengthens and business confdence rises. Real
GDP growth in Canada is projected to increase from 1.6% in 2013 to
2.3% in 2014 and 2.6% in 2015. The pickup will be driven by a rebound in
exports, which in turn is expected to stimulate business fxed investment.
The economy will be supported by moderate growth in consumer spending,
while residential investment will remain relatively fat. Government spending
is expected to contribute marginally to real GDP growth, in line with the
plans of federal, provincial and local governments to achieve fscal balance.
In a September 2013 outlook, the Conference Board of Canada presented a
similar forecast, suggesting that the domestic economy would grow by 1.7%
in 2013, but that improvements in the U.S. would boost economic growth in
Canada to 2.4% in 2014.
Credit conditions: favourable, but uncertainty lingers
Credit conditions for Canadian frms remain favourable and balance sheets
are healthy. Figure 6 compares business credit granted by chartered banks
to the growth in BDC’s outstanding Financing portfolio. The increase in
BDC’s activity is below that of the chartered banks as a result of BDC’s
continued focus on complementarity and its counter-cyclical role.
Figure 5: Main reasons for not investing a greater amount, undertaking more investments, or investing earlier
% response, ?2013 (n=364) ?2012 (n=247)
Insuf?cient working capital
Limited access to credit
Not enough staff to work on investment plan
Uncertain national economy
Company’s position satisfactory for time being
Unfavourable company ?nancial indicators
Uncertain global economy
Government/regulatory compliance too restrictive
Can’t ?nd right supplier, product or service
Unfavourable exchange rate
Other
I don’t know
20% 0% 40% 60%
new
Source: BDC Viewpoints Panel survey
bdc.ca | 17
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
BDC helped us in a time that market fnancing was otherwise not available to private
Canadian companies.
“
”
— a technology company in Ontario
$B
12-month
% change
Short-term business credit from chartered banks 316 9.8
Long-term business credit from chartered banks 47 11.2
BDC outstanding (Financing) 17 8.9
Source: Bank of Canada, October 2013
Figure 6: Evolution of business credit
The Survey on Financing and Growth of Small and Medium Enterprises, released
in February 2013 by Industry Canada in conjunction with Statistics Canada,
shows that, overall, SMEs have good access to fnancing characterized by
strong approval rates. However, 37% of respondents had trouble main-
taining suffcient cash fow, 18% faced debt management issues, and 17%
said diffculty in obtaining fnancing was hindering their business growth.
The survey also indicated that some market segments continued to face dif-
fculties in obtaining fnancing, for example, start-ups, youth-led companies
and frms in knowledge-based industries faced lower loan approval rates.
Conclusion: now is the time for SMEs to invest
Overall, Canada’s SMEs are doing well, but are uncertain about the timing
and magnitude of future economic growth. Some continue to face barriers
to fnancing and many still feel the impact of the recession. Increased local
and international competition is exacerbated by a stronger currency.
At the same time, credit conditions are generally favourable and corporate
balance sheets show reduced debt and strong liquidity. For SMEs to become
truly competitive and take advantage of future growth opportunities, they
must innovate, invest in technology and equipment, ensure productive and
effcient operations, and explore new market opportunities.
BDC’s role: reducing barriers to SME competitiveness
Over the past two years, BDC has introduced a number of initiatives to help
entrepreneurs improve their competitiveness by investing in technology,
equipment and growth. Over the planning period, BDC intends to increase
its support to SMEs in an effort to further reduce the barriers to competi-
tiveness, while remaining responsive to the overall needs of the entrepre-
neurial ecosystem. These concepts form the basis of BDC’s strategy map.
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
18 | bdc.ca
Canada owes much to its entrepreneurs and will continue to rely on
hardworking Canadians with the spirit and ability to forge their own path.
To ensure that Canadian entrepreneurs can contribute to their fullest, BDC
plays an important role in catalyzing the entrepreneurial ecosystem.
It does so by supporting today’s entrepreneurs with the advice and resour-
ces they need to grow and succeed, paying particular attention to SMEs
that traditionally have diffculty accessing fnancing due to location, sector or
demographic. BDC is maintaining its focus on small loans, while also sup-
porting the growth of medium-size frms and participating in larger fnancial
transactions through syndication. BDC will continue to identify and address
markets gaps and emerging needs to ensure that all Canadian SMEs have the
opportunity to succeed.
BDC also strives to maintain a healthy ecosystem by inspiring and enabling
the next generation of Canadian business owners to start their entrepre-
neurial journey. BDC shares success stories, celebrates entrepreneurial
achievements, reaches out to young Canadians and provides the practical
guidance needed before choosing an entrepreneurial path.
To accomplish this mandate and play a truly effective role in the entrepre-
neurial ecosystem, BDC takes a “clients frst” approach. It is optimizing its
organizational resources and exploring ways to more effectively measure its
success in meeting entrepreneurs’ needs and contributing to the economy.
It will continue to apply innovation to its own processes and procedures to
reduce “red tape” and better reach out to clients through new channels with
a range of fexible products and services.
To fully play its role, BDC looks to the expertise and cooperation of a variety
of partners. From the public to private sectors, partners add to BDC’s
understanding and appreciation of entrepreneurs and provide a gateway to
supporting SME needs. BDC will continue to maximize its reach and impact
through these partnerships, which allow it to offer the most effective suite of
solutions to Canadian entrepreneurs.
In these ways, BDC is able to catalyze the entrepreneurial ecosystem and re-
spond to a variety of government priorities, for the beneft of all Canadians.
catalyze the
entrepreneurial
ecosystem
BDC’s Future Focus
> Provide more pre-approved and
online solutions.
> Maximize indirect channels,
including partnerships.
> Explore the potential of loan
guarantees.
> Pursue asymmetric lending.
> Refne value-added advisory
services.
> Implement a new awards
program recognizing Canadian
entrepreneurs.
bdc.ca | 19
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Canada has much to offer its entrepreneurs. According to The EY G20
Entrepreneurship Barometer 2013, the cost of starting a business in Canada is
among the lowest in the G20. Canadian entrepreneurs spend fewer hours
on taxes and enjoy lower labour costs and better access to funding than
their global peers. As a result, levels of new business activity and start-ups in
Canada are above the G20 average.
That said, almost three-quarters of Canadian entrepreneurs surveyed for
the EY report said access to funding is diffcult, particularly bank fnancing.
Many suggested that coordinated support, such as incubators and men-
tors, is lacking. One-third cited fear of business failure as a barrier to future
ventures.
The report suggests that, given low levels of self-employment, there is
scope for encouraging more entrepreneurs in Canada. At the same time,
the perception of entrepreneurship as a career choice is weak in Canada. To
address these issues, the report recommends strengthening the relationship
between the entrepreneurial community and government, including creating
better access to government services.
This is where BDC plays an important role. It supports today’s entrepre-
neurs with the advice and resources they need and it helps a new generation
of Canadian business owners to start their entrepreneurial journey.
Keeping the focus on clients
BDC’s relationship with its clients is at the heart of its daily business. To
ensure this relationship is as effective and effcient as possible, BDC continu-
ously looks for ways to improve the client experience. For example, BDC
believes it is important that its processes be clearly explained and easy to
navigate and that clients understand how decisions are made. As part of its
client experience strategy, over the past year, BDC has:
> surveyed more than 8,000 clients to gain their feedback and insights;
> created a map of the client journey to identify “pain points” during the
loan application process with a view to making improvements;
> tested the impact of mobile applications on client experience; and,
> improved navigation on BDC.ca to provide a better client experience.
The client experience strategy will evolve as BDC gathers feedback and
defnes new initiatives.
entrepreneurship
BDC Support for Small Business
as at March 31, 2013
# of start-ups
1
served
over past 10 years
13,031
$ authorized for small
businesses
2
over past
10 years
$25.2B
$ authorized for start-
ups over past 10 years
$3.8B
BDC Entrepreneurship
Centres serving small
businesses
20
1
Defned as businesses new site old site <
Without the fnancing I received, I would not have been able to hire my two employees
and I would likely have had to borrow from family to keep my business alive. Banks are
too afraid to take a risk on me ... BDC did.
“
”
— a management company in Quebec
bdc.ca | 21
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Ensuring BDC can respond
The Agility and Effciency (A&E) program is transforming BDC into a more
effcient, fexible and resourceful development bank able to have a greater
impact on entrepreneurs. The program started with exploring how BDC
staff could be more task-effcient and devote more time to clients and less
time to process. A&E will allow BDC to:
> provide a more consistent client experience;
> build business development capabilities and deliver more value for
clients;
> have the fexibility to respond to market needs;
> prepare for a web-based channel;
> spend more time at a client’s place of business;
> simplify business processes; and,
> increase speed of execution.
Responding to the needs of a variety of entrepreneurs
An important role for BDC within the entrepreneurial ecosystem is to
ensure that Canadian SMEs – regardless of location, sector, size or demo-
graphic – have access to fnancial and advisory services. This is why BDC
pays special attention to start-ups and smaller businesses and loans; rural
and remote SMEs; sectors facing slow market growth and those that are
cyclical or seasonal; and to specifc demographics such as youth and Ab-
original entrepreneurs. BDC works with the private sector to ensure these
SMEs have the opportunity to grow and succeed.
Inspiring young entrepreneurs
The health of Canada’s entrepreneurial ecosystem depends on young
people with an interest in business ownership. BDC provides support to
young entrepreneurs, recognizing that many cannot access traditional fnan-
cing due to a lack of experience and collateral. BDC is involved in several
programs to support young entrepreneurs:
> Junior Achievement (JA) – BDC supports JA fnancially to develop
and launch the “Be Entrepreneurial” program, which promotes
entrepreneurship to Canadian youth. BDC employees help deliver the
program to high school students.
> Vanier College BDC Business Case Challenge – a national business case
competition for pre-university students.
> Enactus, formerly ACE (Advancing Canadian Entrepreneurship) –
BDC pledged $150,000 over three years to support Students in Free
Enterprise (SIFE). The BDC SIFE Entrepreneurs First! Project fund
BDC works with the Canadian
Youth Business Foundation
(CYBF), a national organization
dedicated to tomorrow‘s
entrepreneurs. In this alliance,
BDC offers fnancing up to
$30,000, or twice that provided
by CYBF. As at March 31, 2013,
BDC’s commitment under CYBF
was for $15 million to 710 young
entrepreneurs.
BDC has seen a signifcant
increase in the number of
entrepreneurs it is helping
through this partnership. At the
halfway point in fscal 2014, BDC
has already authorized 200 loans,
the same number it authorized in
all of fscal 2013. A new measure
of success for CYBF is how many
of its entrepreneurs “graduate”
to become mainstream clients of
BDC.
BDC also has helped to develop
and promote mentoring-focused
“crash courses” on CYBF’s online
business resource centre. These
interactive modules provide
in-depth, self-guided learning for
both the mentor and the young
entrepreneur.
BDC is exploring new ways in
which it can support CYBF and
assist young entrepreneurs.
partnerships
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
22 | bdc.ca
will award grants of $2,500 each to eight SIFE teams to develop and
implement projects in their communities that accelerate the success of
Canadian entrepreneurs. Since 2011, 147 students have been involved.
Supporting Aboriginal entrepreneurs
Canada has more than 27,000 Aboriginal entrepreneurs who make a signif-
cant contribution to the economy. However, they can have diffculty ac-
cessing capital and management support, partly because they often require
tailored solutions. BDC supports Aboriginal entrepreneurs with:
> Growth Capital for Aboriginal Business – fexible term loans of up to
$100,000 for existing businesses and $25,000 for start-ups, which BDC
further supports with customized management assistance. BDC refunds
a portion of the interest paid on a loan to the community organization or
charity chosen by the borrower.
> Aboriginal Business Development Fund (ABDF) – combines fnancing
with management training and ongoing mentorship. Funds up to $20,000
are directed to local Aboriginal organizations, allowing them to allocate
the money to local entrepreneurs. BDC has agreements with four
ABDFs across Canada and has committed $1 million to them.
> Peer lending – based on the principle of group borrowing, peer lending
encourages community initiatives and shared responsibility.
> Advisory services – Aboriginal entrepreneurs identify mentoring and
improved management skills as priorities. BDC draws on experienced
Aboriginal consultants across Canada to deliver this support.
> Financing – to purchase real estate or expand facilities, buy new or used
equipment, and long-term working capital for growth.
> E-Spirit – an online national Aboriginal youth business plan competition
for students in grades 10-12, designed to help them learn about
entrepreneurship, e-commerce and business planning. Since 1999, more
than 5,900 students have participated.
To ensure that Aboriginal entrepreneurs receive tailored support, BDC’s
Aboriginal Banking Unit has expanded to include more specialized account
managers across Canada, concentrated in the West and Ontario. The unit
is changing its business model to enable these account managers to take full
ownership of the client fle, instead of sourcing it and then referring it to the
closest BDC business centre. Whether for fnancing or advisory services,
Aboriginal entrepreneurs will continue to deal with a specialist from the unit.
Over the planning period, the unit will continue to work with Aboriginal
fnancial institutions to increase cooperation. As at October 31, 2013, BDC’s
commitment to Aboriginal businesses was $176.8 million to 280 clients.
To support entrepreneurs in
Canada‘s North, BDC works
with federal and provincial
government partners, including
Aboriginal Affairs and Northern
Development Canada (AANDC,
formerly INAC). These
partnerships help BDC extend
its reach into remote regions
of Canada and support BDC‘s
Aboriginal entrepreneur strategy
by, for example, encouraging
Aboriginal youth to participate
in BDC‘s E-Spirit Business Plan
Competition.
On March 30, 2012, BDC
renewed its partnership with
AANDC to continue providing
debt fnancing to First Nations
businesses across Canada with
assets on a reserve. This helps
reduce the impact of one of the
main impediments to First Nation
business development: Section
89 of the Indian Act that prohibits
use of personal or real property
on reserve land as collateral.
partnerships
BDC hosts seminar for global
development banks
In September 2013, BDC hosted
a Training and Information Sharing
Program for development banks,
attended by 20 delegates from 10
foreign development banks. The
objective of the seminar was to
share expertise and experience
with other development
bankers. The program covered
a range of topics, including:
risk management, governance
practices, products and services
for SMEs, and best practices in
promoting entrepreneurship.
bdc.ca | 23
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Tailored solutions to ensure credit availability for SMEs
Entrepreneurs seeking small loans often have trouble accessing fnancing.
This is because processing and servicing small loans can be challenging for
the private sector, particularly if clients are outside of urban centres.
To address this need, BDC is using tailored fnancing products to increase
authorizations of small loans. It is developing stronger ties to small and rural
communities and, in areas like the Greater Toronto Area, is reaching out to
a growing immigrant community, which tends to be highly entrepreneurial.
With loans under $250,000 now being processed at BDC business centres,
disbursement times have been reduced from 10 days to as few as three.
BDC’s commitment to small loans is paying off, with 6,390 small loans au-
thorized in fscal 2013, above the target of 5,400.
BDC is exploring other fnancial products to increase its reach to entrepre-
neurs. For example, BDC has launched a pilot program for “asymmetric
lending”, where BDC partners with fnancial institutions to offer credit to
SMEs. Whereas in pari passu transactions the terms and conditions for each
lender are equal, with asymmetric lending BDC will tailor its terms and
conditions to take into account those required by other fnancial institutions
to ensure the best solution for the entrepreneur.
Loan guarantees are another way in which BDC could increase its reach and
improve credit availability for entrepreneurs. In broad terms, a loan guaran-
tee is when a third party, in this case BDC, offers to repay a debt obligation
to the lender if the borrower defaults. BDC believes that loan guarantees
could ease fnancing for SMEs by encouraging private-sector fnancial institu-
tions to work more with smaller and younger companies and pursue other
SME services and solutions. During the planning period, BDC will explore
the possibility of offering loan guarantees, while avoiding overlap with the
Canada Small Business Financing Program.
Finally, with the success of its online application process for information and
communication technology (ICT) loans less than $50,000, BDC is consid-
ering expanding this capability to include other types of loans and for larger
amounts.
Helping entrepreneurs through diffcult times
BDC’s Business Restructuring Unit supports entrepreneurs through chal-
lenging times and helps return their business to commercial viability. The
unit focuses on diagnosing the root of the problems threatening the busi-
ness; provides expertise and advice to help the entrepreneur develop a
turnaround plan and assesses the plan; provides support and monitoring
during the execution phase; and proposes, when appropriate, new fnancing
options.
— a transportation and warehousing
BDC enjoys strong working
relationships with a variety
of private-sector fnancial
institutions. To strengthen
these relationships, BDC senior
executives participate in the
Lending Practitioners Forum,
an initiative spearheaded by the
Canadian Bankers Association
that involves the major chartered
banks and Export Development
Canada (EDC). The forum meets
three times a year and focuses
on the credit needs of Canadian
businesses. It also allows private-
sector offcials to discuss concerns
at a high level.
BDC participates on the board
and committees of the Canadian
Venture Capital & Private Equity
Association and works closely
with Credit Union Central of
Canada as a participant in its
liaison committee.
partnerships
To increase the number of
small loans and focus on
rural markets, BDC works
with Community Futures
Development Corporations
(CFDCs). Out of 268 CFDCs
across the country, BDC has
229 partnership agreements.
From fscal 2012 to fscal 2013,
there was a 60% increase in
deals done in partnership with
CFDCs. While BDC has business
centres in Whitehorse and
Yellowknife, its partnership with
CFDCs contributes to its reach
in Canada‘s North, where BDC
has agreements with 14 CFDCs
servicing Yukon, Nunavut and
NWT.
partnerships
company in Ontario
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
24 | bdc.ca
Since its inception in April 2010, the unit has assisted 183 entrepreneurs
with an estimated success rate of 84% as at March 31, 2013.
Advisory services that address the needs of entrepreneurs
Another way in which BDC strengthens the entrepreneurial ecosystem is by
providing advisory services. 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.
As a federal development bank, BDC is well-placed to address the market
gap for affordable advisory services tailored to SMEs, particularly small frms.
In 2011, BDC undertook a review and determined that it should invest in its
advisory services to have a greater impact on SMEs. Based on the review,
BDC’s model for advisory services is evolving to help SMEs:
> drive growth, for example, through marketing, innovation and
developing new markets;
> improve productivity, for example, through process improvements,
quality management, lean manufacturing, fnancial management,
equipment selection, and technology development; and,
> build organizational capabilities, for example, through management
and fnancial coaching, strategic planning, fnancial management,
organizational design, HR management, and advisory boards.
BDC is improving its ability to diagnose and offer solutions and will refne its
approach over the planning period to help SMEs improve competitiveness.
Celebrating Canada’s entrepreneurs
In a healthy entrepreneurial ecosystem, it is important to recognize the
contribution of Canadian entrepreneurs to economic growth. In Economic
Action Plan 2013, the government asked BDC to create and administer a
new awards program recognizing the achievements, mentorship, risk-taking
and resilience of Canadian entrepreneurs. In response, BDC is developing
four new awards, each celebrating a different element of entrepreneurship.
Achievement Award: For a Canadian entrepreneur who has created and
grown many successful businesses. The recipient will be designated the Can-
adian “Entrepreneurship Champion” of the year and will have commitments
such as mentoring and speaking engagements. The award will be decided on
We are not pretty, we are not clean, we turn wrenches on cars and trucks all day. But
we have kept 13 people working in a small town ... BDC has been with us from the start.
“
”
— a transportation and warehousing company in Ontario
In September 2013, BDC and
Small Industries Development
Bank of India (SIDBI) signed a
memorandum of understanding
(MoU) that will see the two
development banks collaborate
to increase their understanding of
issues related to micro, small and
medium enterprises. The MoU
followed a visit in March 2013 to
SIDBI by three BDC employees,
who offered training on
subordinate fnancing to the SIDBI
management team and regional
managers to help them improve
their offerings. While in India, the
BDC team also met with Export
Development Canada’s chief
representative in India.
partnerships
bdc.ca | 25
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
the basis of a short-list of candidates drawn from various sources by BDC.
The winner will be selected by a committee composed of BDC representa-
tives and stakeholders in the business community. The 2014 “champion” will
be announced in October 2014 during BDC Small Business Week.
Mentorship Award: For a business mentor credited by his or her peers with
providing valuable advice that has led to the creation and growth of Can-
adian frms. BDC will partner with the Canadian Youth Business Foundation
to implement this award. The focus will be on identifying mentors who have
contributed to the entrepreneurial success of their mentee. This award was
opened for nominations in January and the winner will be announced in May
2014.
Innovation Award: For a start-up company that has reshaped its industry in
exciting and unforeseen ways. To support the implementation of this award,
BDC will partner with the Canadian Venture Capital & Private Equity As-
sociation. Nominations for this award will open in February 2014.
Entrepreneurial Resiliency Award: For a business or entrepreneur that has
recovered from failure in a way that is bold and inspiring. Nominations for
this award, offered in partnership with the Turnaround Management Asso-
ciation, will open in March 2014.
BDC will create and plan national outreach activities to promote the cre-
ation and winners of each of the new awards. Nominees will be considered
from every province and territory, and selection committees will be gender-
balanced and representative of different demographics and regions. The
number of applicants, traffc to awards’ websites, and media coverage will
be used to measure the success of each award.
The Montreal Group, initiated by
BDC, 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.
The seven founding members
are: BDC (Canada), BNDES
(Brazil), China Development
Bank, Nafnsa (Mexico), Bpifrance
(France), SIDBI (India) and
Vnesheconombank (Russia).
Micro, small and medium-sized
enterprises represent a signifcant
part of the economic activity of
each of these nations.
The Montreal Group will
encourage other global
development institutions to
become members.
partnerships
Over the planning period
BDC will ...
> Explore the potential of loan guarantees.
> Pursue asymmetric lending.
> Provide more pre-approved and online solutions.
> Refne its value-added advisory services to SMEs.
> Maximize indirect channels, including partnerships.
> Implement a new awards program recognizing
Canadian entrepreneurs.
While continuing to ...
> Address market gaps for fnancing and advisory
services, with a focus on small loans.
> Provide educational tools and resources.
> Celebrate entrepreneurship.
> Improve the client experience and reduce red tape.
> Make the most of online capabilities.
> Implement A&E.
E
N
T
R
E
P
R
E
N
E
U
R
S
H
I
P
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
26 | bdc.ca
In a climate of global economic uncertainty, Canada has fared well. After
emerging from recession, the domestic economy has grown modestly,
grounded by a sound banking system and relatively healthy corporate
balance sheets.
Against the backdrop of a world economy in transition, Canada’s competi-
tive position needs to be strengthened. Its record on productivity is not
improving. Canadian businesses are relatively slow to invest in innovation
and technology and the ability of domestic companies to become global
players needs to be improved.
To address these issues, BDC is actively identifying ways in which it can help
SMEs become more competitive and tailoring its fnancing and advisory solu-
tions in response. It invests in innovative concepts and technologies, while
encouraging and helping SMEs to apply innovation to their business. It offers
fnancing and advisory services that enable SMEs to improve their competi-
tiveness through productivity gains. And it is identifying and assisting SMEs
that make signifcant contributions to the economy, such as high-growth
frms and SMEs in specifc sectors, including manufacturing and aerospace.
BDC will continue to develop and offer targeted support to help improve
SME competitiveness, including through the evolution of its advisory servi-
ces, which are increasingly being geared toward helping entrepreneurs apply
innovation, improve productivity and pursue growth, including penetrating
new markets.
BDC will support its competitiveness strategy by reaching out to a variety
of partners, who offer invaluable learning, mentoring and networking
opportunities.
In these ways, BDC supports government priorities such as the digital
economy and innovation agenda, in addition to enabling Canada’s
entrepreneurs to contribute fully to economic growth and prosperity.
support the
competitiveness
of Canadian
SMEs
BDC’s Future Focus
> Implement the Venture Capital
Action Plan (VCAP) and the
Venture Capital Strategic
Investment Plan (VCSIP).
> Refne the F-PIL program.
> Tailor working capital loans to
SME needs.
> Make BDC solutions more
accessible online.
> Build advisory services to
improve SME competitiveness.
> Increase support to the
manufacturing and aerospace
sectors.
> Provide improved support to
high-growth frms.
> Increase equity offering.
bdc.ca | 27
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Innovation gives a competitive edge, increases productivity and helps a
frm to grow. Innovation can be radical, which generally involves the creation
of something that did not exist before, often fuelled by R&D and venture
capital investments. But it can also be incremental, for example: improve-
ments to existing products, different ways of marketing, or new business
processes. Incremental innovation usually requires tools to implement a new
approach; this is where information and communication technology (ICT)
can come in.
Innovating with the help of ICT
Despite the growing prevalence of ICT, entrepreneurs are not always aware
of how to use it to their advantage. A BDC survey of more than 500 entre-
preneurs (both clients and non-clients of BDC) in April 2013 showed that,
although many planned to invest in ICT, amounts allocated were modest and
did not always consider more sophisticated solutions. Almost all respondents
had concerns about ICT, including return on investment, performance, reli-
ability and security. And even as more consumers shop online, three out of
fve businesses said they do not earn any revenue from online sales.
For SMEs with limited money, expertise and time, it can be a challenge
to take full advantage of the benefts of ICT. They need fnancing and
specialized consultants, but they also require a basic understanding of ICT
and how other entrepreneurs have used it effectively.
BDC’s ICT offering recognizes that entrepreneurs need educational
resources before they can integrate ICT into their business. BDC addressed
this by providing free informational tools on a dedicated website, Smart
Tech. Another important aspect of the approach is specialized advisory
services to help SMEs evaluate their current use of ICT and plan for next
steps. In addition, BDC provides the capital to make these plans happen (see
page 37 for more information on ICT fnancing).
BDC has increased its use of social media, including new blogs, to promote
the benefts of ICT. BDC has reached out to provincial governments, cham-
bers of commerce and the private sector to spread the word about ICT.
BDC’s impact on my business has been positive, from the ICT diagnostic and follow-up
coaching, ICT and management training, to the loan I currently have.
“
”
— a telecommunication construction company in P.E.I.
BDC’s ICT approach
? Awareness – BDC’s Smart Tech
site includes tools such as:
> e-Books – highlight how
businesses can beneft from ICT
> Ask a Pro – how-to articles, Q&As
> one-pagers demonstrating how
technology does not have to be
complicated or costly
> free online website assessments
> free online ICT assessments
? Consideration – BDC offers
advisory services that include:
> Website diagnostic – an evaluation
of the SME‘s current site
> ICT diagnostic – an evaluation of
the current level of ICT adoption
? Adoption
Once entrepreneurs have learned
about ICT and considered their op-
tions, BDC can help put their plans
into action. BDC‘s Internet strategy
service helps businesses set concrete
objectives, defne online strategies
and develop a plan to promote their
website and leverage the Internet. It
also assists them with system selec-
tion, or choosing the best provider
for their needs. In October 2011,
BDC announced that it would offer
fnancing to help entrepreneurs with
ICT purchases, including hardware,
software and advisory services.
innovation
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
28 | bdc.ca
Since the launch of BDC’s ICT products and services in October 2011, BDC
has met or exceeded corporate performance expectations in terms of visits
to Smart Tech, uptake of free resources, and numbers of loan authorizations
and advisory service mandates for ICT.
Over the planning period, BDC will continue to tweak its ICT products and
services or develop new ones to help improve SME competitiveness, build
on the expertise of internal consultants, and expand its network of qualifed
external consultants.
Venture capital: investing in the innovation ecosystem
Innovation also means creating the disruptive technologies and business
models that lead to new products and services. Much of this work is pur-
sued by smaller frms, many of which struggle to fnd fnancing.
Venture capital (VC) investors take the high risks necessary to fnance these
frms, with the expectation of high returns. However, in recent years, Can-
adian VC investors have not been able to realize the returns they require for
the risk they take.
Recognizing that the market had ceased to function effectively, BDC has
taken a more active role. Over the past year, BDC Venture Capital has
continued to implement its strategy of direct and indirect investing, comple-
mented by strategic partnerships and investments.
VC market: signs of improvement, but challenges remain
With a general increase in VC investment activity, more Canadian frms are
receiving venture funding. Private and institutional venture funds have led
the growth in domestic VC activity. Larger deals are now getting done in
Canada (for example, D-Wave for $35 million) and exit markets have gained
some momentum, driven largely by strategic acquisitions and sales.
Perhaps the most important development was the growth in VC fundraising
activity in 2012. Even with this growth, the pool of capital remains limited
and fundraising is diffcult for frst-time and experienced fund managers alike;
many funds struggle to raise enough capital to close.
This scarcity of capital has led to the emergence of new funding models
across Canada, including “micro VC” or “super angel” funds. These models
provide a combination of seed capital and mentorship to entrepreneurs
and bridge the gap to traditional venture funding. However, because their
structures and activities often depart from the traditional VC investment
model, they pose a challenge for most institutional investors.
What are venture capitalists?
Venture capitalists are professional
investors who specialize in funding
and building young, innovative tech-
nology enterprises.
Where do venture capitalists get
their money?
Most VC frms raise their funds
from institutional investors, such as
pension funds, insurance companies,
endowments and high net worth in-
dividuals. The investors who invest in
VC funds are referred to as “limited
partners (LPs).” Venture capitalists,
who manage the fund, are referred
to as “general partners (GPs).”
How are venture capitalists
different from other investors?
Venture capitalists are long-term
investors who take a very active
role in their portfolio companies.
When a venture capitalist makes an
investment he/she does not expect a
return on that investment for seven
to 10 years, on average. Venture cap-
italists often are invaluable in building
strong management teams, managing
rapid growth and facilitating strategic
partnerships.
How do venture capitalists realize
a return on their investment?
The companies that venture capital-
ists invest in are private enterprises.
Typically, the venture capitalist
realizes a return on their invest-
ment when the company goes public
(through an initial public offering, or
IPO) or is merged or purchased by
another company.
How does angel investing differ
from venture capital?
Venture capitalists dedicate their
time to investing and building
companies on behalf of their LPs.
The angel investment community is
a more informal network of invest-
ors who invest their own money in
companies.
bdc.ca | 29
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
BDC VC believes that its investing activities, combined with the Venture
Capital Action Plan (VCAP) and the Venture Capital Strategic Investment
Plan (VCSIP), will have a signifcant impact in addressing the ongoing challen-
ges of the VC market in Canada.
BDC VC’s strategy being deployed as planned
BDC VC’s direct investing
BDC VC’s direct investments are conducted through three internal general
partners (GPs), or funds, addressing the information technology, energy/
cleantech, and health-care sectors, in addition to BDC’s Diversifed
Portfolio. In the past year, the three internal funds received capital
allocations approved by BDC’s Board of Directors.
BDC VC IT Fund
The IT Fund has been active in the market over the past year. As at Sep-
tember 30, 2013, the fund had made, since inception, 18 of 26 anticipated
lifetime investments. It also works closely with and leverages the early suc-
cesses of BDC VC’s Strategic Initiatives and Investments (SII) team in sup-
porting some of the country’s most interesting and innovative IT businesses
emerging from accelerator programs.
This fund continues to perform well, with signifcant high-profle exits from
investments like Q1 Labs, Radian6 and, most recently, Layer 7.
BDC VC Energy/Cleantech Fund
The BDC VC Energy/Cleantech Fund has focused its investment scope to
electronics, materials and IT that enable cleantech and energy technology
companies. The fund will lead or co-invest with partners, with the intention
of investing throughout the lifecycle of companies to maintain a meaningful
ownership percentage at exit. The fund will primarily be a syndicate invest-
or, but will be prepared to continue to invest on its own.
BDC’s VC strategy
In 2010, BDC completed a review of the national VC industry and its own VC operations. Based on the results, BDC VC established
a new approach to build on its existing role and better align it with the private sector. BDC VC‘s strategic objectives are to:
> invest in and support BDC‘s investee companies to help build leading Canadian technology companies in digital technologies and
ICT, health care, energy and clean/environmental technologies, and other high-growth sectors;
> maximize the exit value of BDC VC‘s existing VC portfolio and remain responsive to specifc government requests;
> build and sustain world-class Canadian venture capitalists by investing in high-performing fund managers;
> develop strategic initiatives to reinforce key areas in the VC and innovation ecosystem; and,
> demonstrate the viability of the Canadian VC industry to encourage private-sector participation.
In fscal 2014, BDC VC
announced a strategic partnership
with the Department of Foreign
Affairs, Trade and Development
(DFATD) to expand the Canadian
Technology Accelerator (CTA)
program in the U.S. BDC
VC’s involvement with the
CTA program ties in with its
role, especially its work with
Canadian accelerators. BDC
VC will connect top technology
SMEs coming out of Canadian
accelerators to the most relevant
CTAs.
partnerships
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
30 | bdc.ca
The fund is actively pursuing new investments while managing a promising
legacy portfolio of companies in which BDC was an early investor. These
include businesses like quantum computing leader D-Wave; PC over IP
semiconductor company Teradici; and innovative fusion energy pioneer
General Fusion.
BDC VC Healthcare Fund
The BDC VC Healthcare Fund has a substantial legacy portfolio of 11 invest-
ments under management. The recent public launch of the fund has resulted
in a signifcant pipeline of new investment opportunities. The fund’s invest-
ments include companies that are experiencing positive clinical trials and
that have the potential to offer solutions in the feld of cancer treatment,
among others.
Diversifed Portfolio
Created in 2011 as a portfolio of 50 active operating companies, the Diversi-
fed Portfolio has a mandate to maximize the value of the remaining legacy
portfolio. It includes companies from all sectors and has late-stage, early
stage and pre-revenue companies.
Since January 2011, the number of actively managed fles has been reduced
from 50 to 31. The majority of the better opportunity companies have been
reviewed and funded and plans put in place for greater value creation.
BDC VC’s indirect investing
Fund of funds
As one of the few limited partners (LPs) in Canada with a national focus,
BDC VC’s goal in indirect, or fund, investing is to attract more institutional
LPs back to the market by helping to increase the number of quality, at-scale
GPs producing strong returns. BDC VC believes that VCAP will have a sig-
nifcant positive impact on its ability to attain this goal.
BDC VC will identify and support fund management teams with the abil-
ity to produce consistent, substantial, venture-level returns for investors.
BDC VC will engage actively with these fund managers, providing a range of
resources to help meet mutual investment return goals.
As at November 30, 2013, BDC was invested in 33 active funds and experi-
enced four successful fund closings in 2012 (Rho Canada II, Celtic House IV,
Lumira II and TVM Capital VII). The market continues to be diffcult, with
only three large Canadian LPs remaining active.
In parallel, BDC VC plans to create a global network of institutional LPs,
who will be provided with information on the Canadian VC market and the
fund managers BDC VC supports. As positive returns appear, BDC VC will
partnerships
BDC collaborates with the
National Research Council of
Canada (NRC) and the Natural
Sciences and Engineering
Research Council of Canada
(NSERC), with the objective of
strengthening commercialization.
The partnership works on:
> increasing opportunities for joint
funding by the partners;
> improving access to
complementary federal funding
programs;
> improving access to investment
capital; and,
> increasing awareness of
partnership opportunities and
available funding programs.
bdc.ca | 31
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
invite these investors to participate in backing successful fund managers.
This will expand the supply of VC and enable the continuing expansion of
the innovation funding ecosystem.
GO Capital
The GO Capital fund supports the creation of companies in the science and
technology sector in Quebec. It is a partnership between fve organizations:
FIER Partners; BDC; Caisse de dépôt et placement du Québec; Solidarity
Fund QFL; and Fondaction CSN. BDC VC is an investor in the fund, but was
also chosen by the partnership to manage the fund on its behalf.
With the investment period for the fund now over, BDC is concentrating on
supporting the portfolio’s active companies.
BDC VC’s Strategic Initiatives and Investments
BDC VC’s Strategic Initiatives and Investments (SII) team focuses on stra-
tegic investments, fosters entrepreneurial development, encourages global
connectivity for entrepreneurs, and acts as a VC industry facilitator. SII
works closely with BDC VC’s direct and indirect investment teams.
Strategic Initiatives
A focus of SII’s partnership efforts has been to support international initia-
tives to accelerate the growth of Canadian start-ups on a global scale. Key
partnerships include C100 as well as the Canadian Technology Accelerator
(CTA) program.
Strategic Investments
Working with private-sector co-investors, the SII team invests in specialized
funds and investment vehicles that fll fnancing gaps at the early stage, with a
particular focus on accelerators, emerging models, emerging teams/GPs and
angel capital.
BDC VC commits to
Sanderling Ventures
In September 2013, BDC VC and the Fonds de solidarité FTQ announced a US$30-million commitment to Sanderling Ventures, an
investment frm with a 35-year track record of building new biomedical companies. BDC VC is contributing US$20 million to the
fund as part of this fnancing round, while the Fonds will put in an additional US$10 million.
As a result of this transaction, Sanderling will create a permanent facility for the development of early stage life science projects in
Montréal. This facility will help shepherd very early stage life science projects further along the path to commercialization.
SII Indirect Investments
Emerging Models / GPs & Strategic Funds
> Provide an institutional LP
presence in the seed/early stage
VC market
> Support high-quality teams capable
of bridging fnancing/mentoring
gaps
> Identify, groom and grow emerging
GPs
> Support emergence of innovative
funding models
> Support funds/projects with
compelling national, regional or
strategic relevance
SII Direct Investments
Convertible Notes
> Enable the emergence of new
technology frms
> Mentor entrepreneurs and
improve their chances of
commercialization success
> Help bridge the seed/early stage
gap
> Help enable emerging start-up/
innovation clusters
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
32 | bdc.ca
SII direct investments
To support graduates of accelerators, SII pioneered a unique convertible
note program. Under this program, a $150,000 convertible note investment
is offered to select graduates of GrowLab (Vancouver), FounderFuel (Mont-
real), Hyperdrive (Kitchener/Waterloo), Extreme Startups (Toronto) and
Launch36 (St. John) who meet BDC’s eligibility requirements; access to this
program is also being afforded to Execution Labs (Montreal) on an interim
basis. The notes, which start out as debt fnancing but can be “converted”
to equity, help take start-ups to the stage where they can access angel or
venture capital.
As at September 30, 2013, SII had issued convertible notes to 56 early stage
companies, totalling $8.4 million in fnancing.
SII indirect investments
SII’s indirect approach includes emerging vehicles, models and teams.
Examples are investments made through accelerators and seed funds such
as SII’s $5-million commitment to TandemLaunch Technologies, as well as
its $3-million commitment to BrandProject. In both cases, BDC, as the sole
institutional investor, enabled the fund GPs to secure private capital from
other sources.
Venture Capital Strategic Investment Plan (VCSIP)
Under Economic Action Plan 2013, the government asked BDC to make
available an additional $100 million of its own capital for strategic partner-
ships with business accelerators and co-investments in graduate frms. To
fulfll this government priority, BDC created and is implementing the Ven-
ture Capital Strategic Investment Plan (VCSIP).
Incremental efforts under VCSIP are planned at $20 million per year, starting
in fscal 2014 and ending in fscal 2018. Over the planning period, the SII
team will use the additional capital to make direct and indirect investments
that build on its work in support of the VC ecosystem.
Strategic investments
Strategic investments under VCSIP will focus on expanding and strength-
ening existing accelerators and supporting emerging models, including funds
or other investment vehicles that embody the principles of business accel-
eration. VCSIP will also result in more capital being available for the SII team
to invest in its convertible note program.
VCSIP Direct Investments
> Enhanced support for graduates
of BDC-backed accelerator
partners - BDC is committed
to using its partner accelerators
as its primary direct investment
channel. BDC will support the
highest-potential graduates of
these accelerators via its innovative
convertible note funding program.
> Expansion of convertible
note program to include new
accelerator partners - VCSIP will
enable BDC to extend its national
reach and evolve the current
framework to include regions or
sectors not currently covered by
BDC’s accelerator strategy.
VCSIP Indirect Investments
> Continued support for BDC-
backed accelerators – VCSIP will
enable BDC to provide enhanced
fnancial support to its existing
accelerator partners.
> Emerging models – BDC
will build industry funding and
entrepreneur development
capacity. BDC believes these
vehicles to be the most likely
sources of follow-on funding for
accelerator graduates and BDC’s
convertible note investees.
bdc.ca | 33
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
VCSIP has already had an impact on SII’s direct investment activities by al-
lowing it to expand its geographical scope and make direct investments in
graduate frms from Launch36 in Moncton and Execution Labs in Montreal.
VCSIP investment pacing will be subject to ongoing review by BDC, includ-
ing from the perspective of changing marketplace conditions and economic
viability.
Ecosystem infrastructure
Some VCSIP funding will be directed to the ecosystem models and infra-
structure that are the foundation for high-growth, technology-driven entre-
preneurs and start-ups in key innovation hubs across Canada. Examples
include Montreal-based Notman House and DFATD’s CTA program. BDC
is also considering potential partnerships in Atlantic Canada, Toronto and
Vancouver.
Investments under VCSIP will be complementary to support provided under
the Canada Accelerator and Incubator Program (CAIP), to be delivered
under the Industrial Research Assistance Program (IRAP) of the National
Research Council (NRC).
The Venture Capital Action Plan
In its role as agent for the Venture Capital Action Plan (VCAP), BDC has
made progress in deploying the program, 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
$400-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 resources for high-per-
forming VC funds interested in securing investments from the government.
BDC has been asked to carry out certain duties and functions to support this
initiative. In this role, BDC will:
> Support VCAP in an advisory capacity by leveraging its internal expertise
and resources and working alongside the Department of Finance,
Industry Canada and the Expert Panel appointed by the Minister of
Finance, while also providing advice on specifc VCAP elements, such as
selecting GPs and funds; and,
> Undertake administrative duties, including placing investments on behalf
of the Government and monitoring and reporting on the ongoing success
of VCAP.
In November 2013, BDC
VC and the National Angel
Capital Organization (NACO)
announced the renewal of their
national partnership for the third
consecutive year. This partnership
focuses on strengthening Canada’s
angel investing community by
identifying, standardizing and
sharing industry best practices
across the country.
NACO accelerates a thriving,
early stage investing ecosystem in
Canada by connecting individuals,
groups and other partners that
support angel-stage investing.
NACO provides intelligence, tools
and resources for its members;
facilitates key connections and
networks across borders and
industries; and promotes a strong
Canadian angel investment asset-
class.
partnerships
partnerships
BDC is an active member of the
Conference Board of Canada’s
Centre for Business Innovation,
which conducts research into
how Canadian companies
incorporate innovation into their
operations. BDC also participates
in the Conference Board’s Global
Commerce Centre, which
examines issues related to trade
and international business.
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
34 | bdc.ca
In September 2013, the frst step in executing VCAP took place with the
announcement of the selection of four high-performing funds in the ICT and
life sciences sectors that have demonstrated strong investment performance
and are aligned with the objectives of VCAP.
The second stage of VCAP, involving the creation of new, large-scale funds
of funds led by the private sector, is also well underway. BDC will apply its
usual rigour and high standards in its capacity as agent of the government
and will continue to work proactively with the private sector to ensure
VCAP plays the critical role for which it was designed.
Over the planning period
BDC will ...
> Implement the Venture Capital Action Plan (VCAP)
and the Venture Capital Strategic Investment Plan
(VCSIP).
While continuing to ...
> Implement its VC strategy designed to return
the ecosystem to health and support innovative
Canadian technology companies.
> Refne its ICT products and advisory services to
help SMEs apply innovation to their business.
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BDC VC is a founding partner
of C100, an organization
dedicated to supporting Canadian
technology entrepreneurship and
investment. C100 is comprised
of Canadians based primarily in
Silicon Valley, including executives
of leading technology companies,
start-up entrepreneurs and
VC investors. C100 members
leverage their expertise and
relationships to mentor and grow
a new generation of Canadian-led
technology companies. Members
include executives of companies
such as Apple, Cisco, EA, eBay,
Facebook, Google, Microsoft
and Oracle, as well as venture
investors, representing more than
$8 billion in capital.
partnerships
bdc.ca | 35
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
productivity
In a basic sense, productivity means getting the most output from the least
input. Poor productivity detracts from competitiveness and can lead to a
lower standard of living. Data from the Centre for the Study of Living Stan-
dards show that business productivity in Canada has fallen by 15% versus
the U.S. over the past 25 years.
In December 2012, BDC surveyed more than 400 entrepreneurs about
issues related to productivity. When presented with the statement “Can-
adian businesses aren’t as productive as their American counterparts”, 46%
of respondents disagreed. In fact, the majority believed their business was
at least as productive as their competitors at the regional, national, North
American and international levels.
At the same time, a recent study by Deloitte, The Future of Productivity,
states that “a signifcant portion of Canadian frms believe they are making
competitive levels of investment (in R&D and machinery and equipment,
including ICT) when they are not – causing them to slip behind their peers.”
In Paradox Lost: Explaining Canada’s Research Strength and Innovation Weak-
ness, the Council of Canadian Academies argues that Canada cannot sustain
its prosperity indefnitely without healthy productivity growth and its neces-
sary prerequisite — an aggressively innovative business sector.
BDC believes it can have an impact by encouraging clients to improve their
productivity, so that collectively they can make a difference in the economy.
Providing fexible fnancing for equipment
Recognizing the need for businesses to invest in machinery and equipment
(M&E) to increase productivity, BDC launched a pre-approved Equipment
Line in June 2012 that allows entrepreneurs to make equipment purchases
over a 12-month period with guaranteed terms and conditions. Financing
covers new or used equipment, including: production line M&E; specialized
technology such as lab equipment; and commercial vehicles.
BDC helped us expand our facility and buy state-of-the-art equipment, which in turn is
opening new doors for our company.
”
— a manufacturer in Saskatchewan
“
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
36 | bdc.ca
The fexibility of this fnancing frees up cash for entrepreneurs, allowing
them to grow their business and pursue other projects. The fact that it is
pre-approved saves time and reduces red tape and allows clients to act
quickly when a good opportunity arises. BDC is willing to fnance up to
100% of an SME’s equipment purchase, plus training or other related costs,
while taking less security.
With the introduction of the Equipment Line in fscal 2013, BDC was able to
more than double the number of loans it authorized to help SMEs purchase
machinery and equipment.
Ensuring access to fnancing for vehicles and equipment
BDC played an important role during the economic crisis at the request of
the government by working with the private sector to offer the Canadian
Secured Credit Facility (CSCF), which had the broad goal of increasing
liquidity in the securitization market and augmenting investor confdence in
asset-backed securities. This program is now over, all transactions have been
repaid in full.
As a result of its work on CSCF, BDC and the Canadian Finance and Leasing
Association identifed an ongoing market defciency for smaller players in the
domestic independent fnancing and leasing market for vehicles and equip-
ment. After consideration of the market situation, the Minister of Finance’s
advisory committee on fnancing recommended that this gap be addressed
through public-private partnerships.
As a result, a partnership was announced in April 2010 between BDC and
TAO Asset Management. The Multi-Seller Platform for Small Originators,
Net Authorized
($M)
%
of Total
?Manufacturing 68.2 46.6
?Construction 16.8 11.5
?Non-Business Services 15.3 10.4
?Resources 11.9 8.1
?Wholesale 9.1 6.2
?Transportation and Storage 9.1 6.2
?Retail 6.3 4.3
?Food & Recreation 3.5 2.4
?Business Services 4.2 2.9
?Other 1.5 1.0
?Hotel 0.5 0.3
?Supplier of Premises 0.1 0.0
146.4 100%
Figure 8: Equipment line authorizations by industry for fscal 2013
We became fully automated and BDC was there to provide the backing. The new auto-
mation improved our product and we were able to penetrate the U.S. market more easily.
”
“
— a manufacturer in Ontario
bdc.ca | 37
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
now called the Funding Platform for Independent Lenders (F-PIL), was
created to ensure that smaller companies could provide fnancing for the
vehicle and equipment needs of businesses and consumers. BDC expects
that this will be a longer-term initiative given ongoing constraints in the
Canadian market.
As at September 2013, 5,383 SMEs had benefted from this program. Over
the planning period, BDC will continue to manage the F-PIL and expects to
modify its parameters to provide funding to even smaller companies than
are currently accessing the program. By leveraging the private sector, BDC‘s
involvement in the securitization market helps ensure that SMEs have the
liquidity they need to purchase vehicles and equipment, thereby helping to
boost Canadian productivity.
Financing ICT investments for productivity
As part of its ICT products and services (see page 27), BDC offers affordable
fnancing to help entrepreneurs invest in the ICT needed to increase their
productivity.
BDC’s ICT fnancing helps with the purchase of:
> hardware (servers, network, telephony, computers and accessories);
> software (enterprise resource planning, client relationship management,
human resources, supply chain, fnance and accounting); and,
> advisory services (information technology planning, strategy, security,
online sales, Internet marketing and social media).
To make BDC’s ICT fnancing as accessible as possible, loans for less than
$50,000 can be applied for online. Existing BDC clients can save time and
money with pre-qualifed loans that do not require a personal guarantee.
BDC data show that the majority of BDC’s ICT fnancing is going to frms in
the business services and manufacturing sectors, with a signifcant increase in
uptake in the retail sector. While SMEs in Ontario and Quebec have shown
the quickest uptake of ICT fnancing, it is also catching on in Atlantic Canada.
During a recessionary period with reduced revenues and a shortage of working capital,
our regular lender would not provide additional assistance. BDC came to the table and
brought the North Fraser Community Futures with a further supplement of funds.
”
— a marine transportation company in British Columbia
“
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
38 | bdc.ca
Over the frst three quarters of fscal 2014, BDC clients accepted 1,037
ICT loans for $55.2 million, which will help them incorporate ICT into their
daily operations, boost productivity and improve their ability to innovate and
remain competitive. From the launch of BDC’s ICT products and services
in November 2011 to September 2013, BDC clients have accepted 2,748
loans for a total of $289.5 million. BDC Financing and Subordinate Financing
also support frms in the ICT sector, as does BDC VC through its direct and
indirect investments.
Working capital to support productive operations
Without working capital, SMEs cannot take the measures needed for im-
proved productivity: purchasing equipment, training staff, pursuing product
or market development, boosting inventory for increased sales, or attaining
quality management standards such as ISO.
BDC provides medium-term working capital to complement an SME’s exist-
ing line of credit with another fnancial institution. BDC offers amortization
periods tailored to the needs of the project, seasonal or progressive repay-
ment schedules, and deferred initial principal payments to help entrepre-
neurs get their projects off the ground.
BDC is exploring how it can more effectively provide working capital
loans to address the needs specifc to certain sectors or types of SME. For
example, aerospace and other manufacturers typically must wait a long
time before realizing any revenues from a project or contract. However,
they often must invest upfront in the machinery and equipment needed
to participate in the contract. To address such situations, BDC is exploring
various products to help ensure that each client has the cash fow needed to
effectively run the business.
I have a small home-based business and needed funds to manufacture enough product
for a Canadian mass retailer. I used to make the products off our kitchen table, but
even with all our sales there was no way I had enough funds to pay upfront for the
manufacturing costs. BDC stepped in and gave me the help I needed.
”
— a manufacturer in British Columbia
“
bdc.ca | 39
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
BDC gave my company more breathing room with working capital that is not easily
available for a young company such as mine.
“
”
— a professional services company in Quebec
Advisory services for operational effciency
Advisory services are equally important in helping SMEs improve their com-
petitiveness through productivity improvements. As one of its main areas of
focus, BDC Consulting helps SMEs improve their productivity by:
> isolating the main causes of waste in the business;
> implementing best practices to improve performance;
> training and motivating employees around lean concepts;
> mapping and re-engineering processes;
> reconfguring plant and offce layouts for maximum effciency;
> identifying strategies to free up cash by reducing inventory; and,
> probing opportunities to reduce purchasing costs.
The result is that businesses can increase proftability by taking advantage of
freed-up capacity and can more easily grow and remain competitive.
Through a variety of fnancing and advisory service solutions, BDC helps
SMEs invest in the fxed assets and technology needed for operational ef-
fciency, whether it be state-of-the-art equipment, new facilities to increase
production capacity, or employee training. The goal is to help SMEs boost
productivity at the frm level. Collectively, these improvements can have
a signifcant impact on the competitiveness of Canadian SMEs and on the
domestic economy.
Over the planning period
BDC will ...
> Refne the F-PIL program.
> Tailor working capital loans to SME needs.
> Make BDC solutions more accessible online.
While continuing to ...
> Offer targeted solutions such as the Equipment Line
and ICT loans to help SMEs improve productivity.
> Work alongside the private sector in the
securitization market.
> Offer and build capabilities in advisory services.
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SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
40 | bdc.ca
growth
To create jobs and prosperity, Canada needs entrepreneurs with
the desire and ability to take their business to the next level. This means
exploring new markets, including global opportunities such as exporting or
becoming part of a global value chain. But for many SMEs, growth brings
challenges that require tailored fnancing and advisory services. A recent Sta-
tistics Canada study suggests that larger frms tend to be less proftable than
smaller frms, but that their proftability is also less volatile than for smaller
frms. BDC is exploring the issue of SME growth, including globalization, and
ensuring it has the products and services required. It is focusing on critical
sectors of the domestic economy and working to ensure that successful
Canadian frms remain in Canadian hands.
Pursuing growth through market expansion
Canadian companies must look to international markets for growth op-
portunities, particularly as demand for consumer goods increases in various
foreign markets and as Canada diversifes its trading relationships with coun-
tries around the world. BDC Consulting helps SMEs explore new markets,
at home and abroad, and take advantage of global supply chains.
Research shows that SMEs need to understand the culture and business
practices of a country and to have a local partner when expanding globally.
BDC helps entrepreneurs fnd opportunities in a variety of markets and
has developed a three-phase approach to helping SMEs through advisory
services and fnancing.
BDC Consulting
Assessment
Phase I
Strategy
Phase II
Implementation
Phase III
> Global
Readiness
Assessment
> Market
selection
> Market
research:
primary and
secondary
> International
market entry
strategy
> Partner
identifcation
> Partner evaluation and
selection
> Accompanied country visits
> Post-implementation support
> Coaching
BDC Financing
Market
Xpansion
Leveraged
Financing
Market Xpansion
Plus
> Working
capital
Flexible loan
for market
expansion
> Can also fund
attendance at
trade shows,
open an
offce, etc.
> Working
capital
Proceeds
for market
expansion,
attendance at
trade shows,
opening an
offce, etc.
> Foreign tangible assets
Proceeds for acquisition
of a plant or company
and purchase of building
and/or equipment
> Up to $500,000 can
be added to support
operations of foreign
projects
Figure 9: BDC products and services for market expansion
bdc.ca | 41
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Over the planning period, BDC will continue to refne its approach and
build corporate knowledge and capacity; expand its network of partners
and consultants; and develop and test new solutions relevant to the market
expansion needs of SMEs.
BDC will continue to work closely with Export Development Canada (EDC)
in supporting Canadian frms that wish to expand abroad.
?
= 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
? ? ? ? ? ?
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 investement 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)
? ? ? ?
1
? ?
1
For existing EDC customers only
Figure 10: BDC/EDC products and services
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
42 | bdc.ca
Helping Canadian manufacturers grow and compete
Manufacturing is a critical contributor to the Canadian economy. BDC has
traditionally had a strong presence in the sector; over the past 15 years, its
fnancial support to manufacturers has nearly quadrupled, its penetration
rate has doubled, and it has established a diverse portfolio across sub-sec-
tors.
However, as in other developed countries, the number of Canadian manu-
facturers has dropped in recent years and the sector’s contribution to
gross domestic product has decreased. In Canada, this is in part due to the
appreciation of the currency and increased competition from emerging
economies.
To help Canadian manufacturers remain competitive and contribute to the
domestic economy, BDC is developing a strategy to increase its impact on
the sector. Preliminary analysis of global manufacturing trends indicates that
there are challenges, but also opportunities.
BDC’s analysis shows that, despite close to 500 fnancing and other sup-
port programs available from both the public and private sectors, Canadian
manufacturers feel that having their fnancing and advisory needs met is a
challenge.
For example, small manufacturers require fnancing for equipment, while
start-ups with few assets to pledge also face credit gaps. Manufacturing frms
that do not have adequate ratios for traditional fnancing require help with
acquisitions, commercialization of new products, and process and product
improvements. Many manufacturers need working capital to help with tight
cash fows.
In the short term, BDC will address these gaps with current fnancing
products or by making slight modifcations to existing products to meet the
specifc needs of manufacturers. For example, BDC Financing will increase
amounts available under ICT and Market Xpansion loans and look into more
options for pre-qualifying clients. BDC Subordinate Financing will continue
offering a “war chest” for acquisitions and explore other ways to help
fnance the growth plans of manufacturers.
Over the planning period, BDC will conduct further analysis of the sector
and develop new products to address unmet needs. It will consider paying
particular attention to manufacturers with signifcant potential to grow and
BDC offered me fnancing solutions that let me take over an already successful business
and expand it into a new revenue stream.
”
“
— a construction company in British Columbia
partnerships
BDC‘s activities in support of
Canadian SMEs are enhanced by
its relationships with other Crown
corporations. BDC and Export
Development Canada (EDC)
share a particularly important
relationship, including a two-
way referral system that ensures
Canadian companies can access
the services of the organization
whose competencies best meet
their needs. An MOU between
BDC and EDC was fnalized in
late 2011.
bdc.ca | 43
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
contribute to the economy by tailoring fnancing and advisory services to
their requirements. Given its traditional strong involvement with the sector,
BDC feels it can increase its support to help manufacturers become more
competitive through existing and potentially new products and services.
Ensuring SMEs in the aerospace sector are competitive
Aerospace is one sub-sector of the manufacturing industry where BDC
believes it can have a signifcant impact. The domestic aerospace industry
has strong foundations, but Canadian frms involved in the industry, including
SMEs that supply larger players, need to adjust to survive in a highly com-
petitive global aerospace sector.
While demand for aerospace products is forecast to increase signifcantly,
commercial airlines’ proftability has been weak, putting price pressures on
aircraft producers. As a consequence, supply chains are transforming, with
original equipment manufacturers transferring market risks and develop-
ment costs to their global suppliers, many of which are SMEs.
To explore how it can best support SMEs that participate in the aerospace
industry, BDC conducted research into market dynamics and gaps for fnan-
cing and advisory services. Many of the fnancing challenges stem from the
fact that, in the aerospace industry, the product lifecycle can last up to 50
years. It is a cash fow issue: frms need a lot of funds to secure their place
on an aircraft program and survive throughout the production period. Pa-
tient and fexible capital is critical for aerospace manufacturing frms as large
upfront investments for long-term cash fows are needed.
BDC found that, while fnancing options exist, access varies along the
product lifecycle. Patient and fexible capital is crucial, but diffcult to fnd,
and there appears to be a gap in smaller private equity deals – although this
is not specifc to the aerospace sector. Not surprisingly, with the challenges
facing the industry, aerospace frms require management advisory services
tailored to their needs.
In response, BDC has increased its expertise in the sector and is taking a
new approach to SMEs that supply the industry. These SMEs include clients
already in the BDC portfolio and potential clients that BDC is identifying
by working with large Canadian aerospace frms such as Bombardier. BDC
is supporting these SMEs with increased patient capital, including project
Had I not been able to fnance the share purchase and subsequent buyout of my previous
partner, the company would have been liquidated and ceased operations.
”
— an agriculture, forestry, fshing and hunting company in Ontario
“
partnerships
BDC gains a greater
understanding of SMEs by
working with non-government
organizations, including sector-
specifc associations such as the
Canadian Manufacturers and
Exporters (CME). BDC and CME
are building on a pilot project that
took place in Quebec in 2009
called Export Experts, a series of
on-site workshops that highlight
best practices in international
trade. The program currently
holds about six workshops
annually, targeting BDC clients
who are interested in expanding
abroad. Based on positive results
in Quebec, BDC and CME in
British Columbia are collaborating
on additional sessions focussing on
various target trade markets.
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
44 | bdc.ca
fnancing that is particularly helpful for frms in sectors such as aerospace.
BDC is also working with industry associations and is fnancing the supplier
development program study being conducted by the Aerospace Industries
Association of Canada, as proposed in the Emerson review.
Recognizing that the sector is a government priority, BDC will continue to
build on its new approach over the planning period.
Finding solutions for high-growth frms
Canadian frms with the desire and potential to grow rapidly are also im-
portant in today’s economy. Recognizing this, BDC is developing various
ways to better support high-growth frms (HGFs).
Part of the challenge is to defne HGFs. The most common defnition is
from the OECD: annualized growth greater than 20% per annum (sales or
employees) over a three-year period, with 10 or more employees at the
beginning of the period.
BDC’s analysis has shown that there is a range of fnancing options avail-
able for HGFs, which require solutions suited to their cycle of fast growth
followed by relatively slow or no growth. In private equity, there is relatively
little activity in transactions less than $10 million, and neither small nor large
funds are well suited to assist HGFs. This is especially true for non-high-tech
SMEs, which often require multiple rounds of fnancing over a short time-
frame to execute on an unpredictable, fast growth business plan.
BDC Subordinate Financing has identifed about 25% of its clients as high
growth. BDC believes it can better assist HGFs by focusing its existing prod-
ucts and services on the needs of these frms. It is currently conducting pilot
projects, led primarily by BDC Subordinate Financing, which is best placed
to help HGFs with their specifc needs through its fexible fnancing comple-
mented by strategic advice. BDC Subordinate Financing has developed
specifc expertise in supporting HGFs through their various growth cycles
and will build on that knowledge going forward.
Providing the fuel for growth
For frms that wish to grow, subordinate fnancing combines the advantages
of a term loan and of equity and appeals to business owners as a fnancing
solution that does not dilute their stake in the company. BDC Subordinate
Financing works as a partner to SME owners, including conducting proactive
administration to quickly identify red fags.
BDC Subordinate Financing takes a forward-looking investment view,
accepts less security and fnances intangibles, which is important as the
economy becomes more knowledge-based. Since private-sector banks tend
partnerships
Recognizing the value of mentorship,
BDC is a founding member of
QG100, a private group of chief
executive offcers from Quebec that
supports the development of global
leaders; promotes the sustainability
of their positions in the context
of international competition; and
benefts from the global business
expansion of its members.
BDC works with the Department
of Foreign Affairs, Trade and
Development (DFATD) to help
provide Canadian entrepreneurs
with access to foreign networks.
In 2011, BDC signed an MOU
with DFATD to share business
intelligence about global
markets and encourage closer
collaboration on joint marketing
initiatives. The MOU increases
cooperation in felds such as
training and staff development, as
well as co-location opportunities.
partnerships
bdc.ca | 45
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Over the planning period
BDC will ...
> Increase support to the manufacturing and aerospace
sectors.
> Provide improved support to high-growth frms.
> Increase its equity offering.
While continuing to ...
> Offer and build advisory services that help SMEs
explore new markets, at home and abroad.
> Offer fexible subordinate fnancing solutions tailored
for companies in growth mode.
> Help ensure that Canadian frms remain in Canadian
hands.
G
R
O
W
T
H
to consider BDC Subordinate Financing as equity, it helps SMEs stay within
prescribed covenants, including debt-to-equity ratios.
BDC Subordinate Financing has identifed niche opportunities where it can
play a complementary role in the market. For example, growth frms, par-
ticularly in rural areas, often need the strategic partnerships that accompany
subordinate fnancing. There is also demand for subordinate fnancing from
SMEs that wait long periods between when they incur expenses and when
they receive payments related to a contract or project.
As many of Canada’s entrepreneurs approach retirement, BDC Subordin-
ate Financing is helping frms transition from one owner to the next through
succession fnancing, which comprises about 40% of the portfolio. BDC is
also helping Canadian entrepreneurs acquire companies that might other-
wise cease operations or be bought by foreign interests. In these ways, BDC
is working to ensure that Canadian frms remain in Canadian hands.
BDC also sees a need in the market for small amounts of private equity
among SMEs that wish to grow, improve cash fow or transition to new
owners.
By assisting frms to scale up, expand abroad, compete and transition to new
domestic owners, BDC helps to ensure signifcant economic benefts for
Canada.
BDC partners with groups and
associations around the world to
gain insight into foreign markets
and assist Canadian businesses
with their global expansion plans.
BDC is a member of the Board of
the Association of Development
Financing Institutions in Asia and
the Pacifc, the focal point for
development banks and other
fnancial institutions engaged in
fnancing development in the
Asia-Pacifc region. BDC is also
a member of the Latin American
Association of Development
Financing Institutions, which
represents Latin American and
Caribbean development banking.
partnerships
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
46 | bdc.ca
Within the context of its incorporating and governing legislation, its ap-
proved 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, a task that includes
approving appointments to the senior management team and evaluating
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,
> review the complementarity of BDC’s market approach and activities.
BDC‘s internal structure includes the Senior Management Committee,
which comprises the president and CEO, the executive fnancial and operat-
ing offcers, and designated senior vice presidents. Its responsibilities include:
> setting 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 | 47
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
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
Leader’s
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 Venture Capital &
Subordinate Financing
EVP & Chief Financial 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
Figure 11: BDC governance structure
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
48 | bdc.ca
audit
This committee promotes an overall
corporate culture of quality 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
of the chief audit executive,
who reports directly to the
committee and administratively
to the president and CEO;
> review the annual internal audit
plan and the results of internal
audit activities carried out by the
chief audit executive; 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 businesses, 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 over-
sight 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 | 49
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
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 2014-15 TO 2018-19
50 | 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 developing risk policies and setting
delegated authorities and limits.
The Internal Audit Department promotes sound risk manage-
ment practices. Through its annual audit plan, the depart-
ment 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 enterprise risk
management (ERM), credit risk management (CRM) and
portfolio risk management (PRM), including treasury risk
management. These three functions:
> ensure that BDC applies appropriate risk management
principles, policies and corporate directives to manage
signifcant and emerging risks, according to risk
thresholds;
> 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.
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 by
identifying and assessing signifcant risks, and managing them
on an enterprise-wide basis.
Appendix B to the Corporate Plan: Risk Management
bdc.ca | 51
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
IDENTIFY
Every quarter, risks at the corporate and functional levels are identifed, assessed,
documented and classifed. They are then presented to the Risk Management
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 objectives and strat-
egies. 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; and,
> audits to ensure that BDC is using appropriate and sound risk
management practices (every quarter, the Internal Audit Department
presents the results of these 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 signifcant risks, and they meet through
risk management 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 2014-15 TO 2018-19
52 | bdc.ca
bdc.ca | 53
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
fnancial plan
The Financial Plan is based on the following assumptions
regarding economic conditions:
Accounting Policies and Changes
The accounting policies used in the preparation of this Financial Plan are in accordance with International Financial Reporting
Standards (IFRS).
The International Accounting Standards Board (IASB) issued an amended version of International Accounting Standard 19, Employee
Benefts, which became effective April 1, 2013. This Financial Plan presents BDC fnancial results based on the amended standard.
As this amendment requires that comparative fnancial results be reported, all fscal 2013 results have been restated based on the
amended standard.
> Canada will continue to beneft from solid economic fundamentals,
including a low net level of government debt as a percentage of GDP;
> Canadian economic growth will start to pick up in 2014, particularly as
the U.S. economy gains momentum;
> Exports should improve, along with business fxed investment;
> Corporate balance sheets and credit conditions will be conducive to
investing;
> SMEs will be increasingly interested in investing, but may still proceed
with caution;
> Credit availability will be good, but market gaps for SMEs will remain;
> Lingering uncertainty and structural issues will result in modest global
economic growth; and,
> Emerging markets will continue to present growth opportunities for
business.
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
54 | bdc.ca
Over the planning period, BDC Financing will continue to
play an important role in catalyzing the entrepreneurial eco-
system and in supporting the competitiveness of Canadian
SMEs. To achieve this, BDC will proactively identify and ad-
dress market gaps for fnancing, including providing support
to medium-size frms and participating in larger transactions
through syndication. BDC is also maintaining its focus on
small loans, often for less than $250,000, which are used by
entrepreneurs to buy equipment to increase productivity,
apply innovation to their business through ICT, and to grow
and explore new markets.
BDC’s commitment to small loans is paying off, with 6,390
small loans authorized in fscal 2013, well above the Corpor-
ate Plan target of 5,400. BDC expects to again surpass cor-
porate performance targets for small loans in fscal 2014. By
offering increased numbers of small loans, BDC is expanding
its reach and impact among Canadian entrepreneurs; in the
frst nine months of fscal 2014, the number of BDC Finan-
cing clients grew by 1,479 to reach 29,535.
In light of these results, BDC Financing has increased its fore-
cast over the planning period for the number of small loan
acceptances, as compared to last year’s Corporate Plan.
In dollars, net acceptances for BDC Financing are expected
to reach $4.15 billion in fscal 2014, in line with last year’s
Corporate Plan. The forecast growth rate of about 3% in the
dollar amount of acceptances for BDC Financing balances the
need to improve the competitiveness of Canadian SMEs with
current expectations for the Canadian economy and improv-
ing liquidity in the market. BDC stands ready to increase its
support to Canada’s SMEs if required, in keeping with its
complementary role.
The BDC Financing portfolio is expected to grow by 8.1% in
fscal 2014, more than the 6.2% presented in last year’s Cor-
porate Plan due to faster disbursement periods associated
with small loans and lower payments and prepayments. This
suggests that entrepreneurs are taking advantage of BDC’s
fexible terms, including payment postponements, to improve
their liquidity and apply the cash to their operations.
The BDC Financing portfolio is forecast to grow from
$17.8 billion in fscal 2014 to $18.9 billion in fscal 2015.
Net income for BDC Financing in fscal 2014 is forecast at
$395 million, $53 million more than last year’s Corporate
Plan due primarily to lower impairment losses and operating
expenses and refecting the relatively stable fnancial health of
BDC clients.
As a result of BDC’s efforts to reduce costs and fnd effcien-
cies, including through its Agility & Effciency (A&E) program,
BDC Financing’s operating expenses as a percentage of the
average portfolio outstanding are expected to decrease even
though small loans tend to be more costly to manage.
BDC is also forecasting higher impairment losses, which are
nonetheless in line with estimates in last year’s Corporate
Plan and with historical levels of close to 1%.
Financing
Table 1: Net Planned Acceptances ($M)
Actual
2013
Estimate
2014
Proposed
2015
4,111 4,150 4,250
Table 2: Net Planned Acceptances (Numbers)
Actual
2013
Estimate
2014
Proposed
2015
9,195 11,000 11,200
Table 3: Financing Portfolio Outstanding
Actual
2013
Estimate
2014
Proposed
2015
16,464 17,803 18,922
bdc.ca | 55
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 4: Financing - Financial Forecasts ($M)
Actual
2013
Estimate
2014
Proposed
2015
Net interest income 784 818 865
Fee and other income 13 15 15
Net realized gains (losses) on other fnancial instruments 1 1 1
Net revenue 798 834 881
Impairment reversals (losses) on loans (19) (95) (156)
Net unrealized gains (losses) on other fnancial instruments 1 (1) (1)
Income before operating and administrative expenses 780 738 724
Operating and administrative expenses 347 343 350
Net income 433 395 374
As a % of average outstanding
Net interest income 4.9 4.7 4.7
Fee and other income 0.1 0.1 0.1
Net realized gains (losses) on other fnancial instruments 0.0 0.0 0.0
Net revenue 5.0 4.8 4.8
Impairment reversals (losses) on loans (0.1) (0.6) (0.9)
Net unrealized gains (losses) on other fnancial instruments 0.0 0.0 0.0
Income before operating and administrative expenses 4.9 4.2 3.9
Operating and administrative expenses 2.2 2.0 1.9
Net income 2.7 2.2 2.0
Average portfolio outstanding 15,892 17,226 18,288
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
56 | bdc.ca
BDC Subordinate Financing is playing an increasingly import-
ant role in supporting the growth plans of SMEs through
fexible fnancing solutions and a diverse product offering.
The forecast for acceptances, both in numbers and dollars, is
in line with last year’s Corporate Plan and demonstrates that
BDC will continue to leverage this product offering to im-
prove the competitiveness of Canadian SMEs, to the beneft
of the economy.
The volume of acceptances is expected to reach $220 million
in fscal 2015, bringing the portfolio at fair value to $622 mil-
lion.
Operating expenses as a percentage of the average portfolio
outstanding will increase from 4.3% in fscal 2014 to 4.5% in
fscal 2015, but are expected to decrease thereafter as BDC
continues to fnd operational effciencies, resulting in part
from A&E.
After two years of exceptionally low losses on investments
in fscal 2012 and fscal 2013, losses are expected to be at
more representative levels for the risk being taken in BDC’s
Subordinate Financing portfolio during the planning period.
Net interest income as a percentage of the average portfolio
outstanding is forecast to decrease, refecting the fact that, as
BDC increases its equity-type offerings, returns will be more
long-term.
BDC Subordinate Financing net income is forecast at $18 mil-
lion in fscal 2014, $22 million less than anticipated in last
year’s Corporate Plan, due mainly to an increase in the net
fair value loss.
As shown by the declining non-controlling interest, the
portfolio owned by BDC’s partner, the Caisse de dépôt et
placement du Québec, will be fully repaid by the end of the
planning period.
Subordinate Financing
bdc.ca | 57
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 5: Subordinate Financing - Activity and Financial Forecasts ($M)
Actual
2013
Estimate
2014
Proposed
2015
Acceptances (#) 113 128 140
Acceptances ($) 190 195 220
Growth (%) 15.9% 2.6% 12.8%
Portfolio at fair value 558 570 622
Net interest income 47 51 54
Net realized gains (losses) on investments and write-offs (12) (8) (17)
Fee and other income 20 19 21
Net revenue 55 62 58
Net fair value change (3) (27) (28)
Fair value adjustment due to realized gains (losses) and write-offs 6 8 20
Income before operating and administrative expenses 58 43 50
Operating and administrative expenses 23 25 28
Net income 35 18 22
Net income attributable to:
BDC’s shareholder 29 10 19
Non-controlling interests* 6 8 3
Net income 35 18 22
As a % of average outstanding
Net interest income 9.1 8.8 8.6
Net realized gains (losses) on investments and write-offs (2.3) (1.4) (2.7)
Fee and other income 3.9 3.3 3.4
Net revenue 10.7 10.7 9.3
Net fair value change (0.6) (4.7) (4.5)
Fair value adjustments due to realized gains (losses) and write-offs 1.2 1.4 3.2
Income before operating and administrative expenses 11.3 7.4 8.0
Operating and administrative expenses 4.5 4.3 4.5
Net income 6.8 3.1 3.5
*Non-controlling interests are in AlterInvest Inc., AlterInvest L.P. and AlterInvest II L.P.
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
58 | bdc.ca
Table 6: Consulting - Financial Forecasts ($M)
Actual
2013
Estimate
2014
Proposed
2015
Revenue from activities 24 21 21
Delivery costs 10 9 12
Margin 14 12 9
Operating and administrative expenses 26 26 29
Net income (loss) before transition costs (12) (14) (20)
Transition costs – 2 5
Net income (loss) (12) (16) (25)
In fscal 2013, BDC undertook a review of its Consulting
group to refne its approach to providing value-added advis-
ory services to entrepreneurs.
As a result, BDC Consulting is organizing its internal resour-
ces under three pillars that comprise solutions designed to
help SMEs improve competitiveness by:
> accelerating growth;
> improving productivity; and,
> building organizational capabilities.
Experienced internal teams in each of the three pillars will
develop new strategies and tools specifc to their area of
expertise, with ICT offerings being incorporated into each
pillar. At the same time, BDC will strengthen its network of
external consultants by working in partnership with select
frms. It will monitor the impact of its services on clients by
developing performance indicators.
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 recognizes
that entrepreneurs often cannot fnd quality, affordable servi-
ces tailored to their needs. To address this market gap, BDC
is investing in advisory services that will maximize the impact
on the competitiveness of Canadian entrepreneurs.
In its role as a development bank, BDC will assume the ma-
jority of costs associated with the provision of such services,
ensuring they are affordable and accessible to a variety of
SMEs.
As a result of the transition to the new approach, revenue for
BDC Consulting is expected to be $21 million in each of fs-
cal 2014 and fscal 2015, before increasing over the planning
period as new solutions improve reach and impact.
BDC Consulting expects that effciencies created by stan-
dardization of processes and reductions in administrative sup-
port will result in operating expenses remaining stable even
as revenues increase.
Consulting
bdc.ca | 59
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
In 2010, BDC VC completed a review of the industry and its
own operations and, based on the fndings, embarked on a
new approach designed to:
> help build leading Canadian technology companies in digit-
al technologies and ICT, health care, energy and clean/en-
vironmental technologies, and other high-growth sectors;
> maximize the exit value of BDC VC‘s existing portfolio
and remain responsive to specifc government requests;
> build and sustain world-class Canadian venture capitalists
by investing in high-performing fund managers;
> develop strategic initiatives to reinforce key areas in the
VC and innovation ecosystem; and,
> help demonstrate the viability of the Canadian VC
industry.
Over the past three years, BDC’s strategy of direct and
indirect investing, complemented by innovative work in the
VC ecosystem, has resulted in signifcant progress on each of
these goals. More recently, BDC VC has also demonstrated
its ability to react quickly and effectively to specifc govern-
ment requests, namely VCAP and VCSIP.
BDC VC’s three internal direct investment funds emulate the
best practices of the private sector and are focused on build-
ing leading Canadian technology businesses in the IT, health-
care, and energy/cleantech sectors. Each fund was “seeded”
with promising companies from BDC’s legacy portfolio that
meet the objectives of the respective fund strategies.
The remaining direct legacy investments are being managed
within BDC VC’s Diversifed Portfolio, which strives to maxi-
mize growth and exit value through follow-on investments.
BDC VC expects to have exited the majority of the Diversi-
fed Portfolio investments within the planning period.
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 in their feld. BDC VC is also invested in
GO Capital, a fund designed to support the creation of com-
panies 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 and re-energize the VC ecosystem, BDC VC
created the Strategic Initiatives and Investments (SII) team. It
is developing innovative initiatives to reinforce key areas of
the ecosystem and is making investments in specialized funds
that fll fnancing gaps, focusing on early stage investments,
angels and accelerators. Since the SII team’s inception, de-
mand for its support – both fnancial and non-fnancial – has
been strong.
As one of the most active investors in the market, BDC VC
is helping to demonstrate the viability of the Canadian VC
industry, particularly with its direct investments and by creat-
ing the conditions for success through its SII team. BDC VC
believes that VCAP and VCSIP, as announced by the govern-
ment in Economic Action Plan 2013, will play a large part in
helping to restore the VC market to health and proftability.
Venture Capital
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
60 | bdc.ca
Table 8: Venture Capital - Disbursements and Proceeds ($M)
Actual
2013
Estimate
2014
Proposed
2015
Proceeds 27 84 30
Disbursements* (116) (122) (124)
(89) (38) (94)
*Excludes operating and administrative expenses
Portfolio at cost 531 559 624
Portfolio at fair value 457 485 559
Fair value / cost 86% 87% 90%
Authorizations
In fscal 2015, BDC VC expects to authorize $160 million:
$60 million in direct investments, $65 million in indirect
investments, and $35 million in SII and VCSIP. The investment
in VCSIP draws on BDC’s own capital and is incremental to
the work of the SII team in support of the VC ecosystem.
Disbursements and proceeds
In fscal 2015, disbursements should total $124 million, while
proceeds of $30 million should be generated, mostly by BDC
VC’s direct investments. BDC VC reinvests its proceeds in
support of its overall investment strategy.
It should be noted that the risk associated with estimating
proceeds is signifcant as the value and timing of exits are dif-
fcult to predict. Since fnancial results depend on the level of
proceeds, actual results may differ signifcantly from forecast
and additional capital could be required to sustain BDC VC’s
level of activity.
Net income
Overall, BDC VC is forecasting a net loss in fscal 2014 of
$30 million. Forecast losses over the planning period are
expected to be higher than last year’s Corporate Plan due to
diffculties in estimating proceeds, which has caused BDC VC
to take a more conservative approach to forecasting. Note
that in fscal 2015, the net realized gain is affected by lower-
than-expected proceeds and realized losses from exits in the
Diversifed Portfolio.
It is important to point out that the sustained poor perform-
ance of the Canadian VC industry for more than a decade has
had a signifcant impact on BDC VC results. Factors leading
to these results – diffcult market conditions, longer invest-
ment periods and a shortage of capital in investee companies
– persist. As mentioned, it is diffcult to forecast the timing
and value of exits and the amount and timing of fair value
changes. While BDC is optimistic about the direction of its
strategy over the planning period, these factors may cause
signifcant variation from plan.
Table 7: Venture Capital - Authorizations Forecasts ($M)
Actual
2013
Estimate
2014
Proposed
2015
Direct investments 75 45 60
Indirect investments
Private-sector funds 40 50 65
GO Capital L.P. 2 2 –
Total indirect investments 42 52 65
SII (includes direct convertible notes) 28 5 15
VCSIP – 20 20
Total authorizations 145 122 160
bdc.ca | 61
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 9: Venture Capital - Financial Forecasts ($M)
Actual
2013
Estimate
2014
Proposed
2015
Net realized gains (losses) on investments 23 42 6
Write-offs (58) (52) (35)
Net realized gains (losses) on investments and write-offs (35) (10) (29)
Fee and other income 6 3 3
Net realized gains on other fnancial instruments 3 – –
Net revenue (loss) (26) (7) (26)
Net fair value change (3) (10) (18)
Fair value adjustment due to realized gains (losses) and write-offs 42 7 27
Net unrealized foreign exchange gains (losses) on investments 2 (2) –
Net unrealized (losses) gains on fnancial instruments (4) 3 –
Income before operating and administrative expenses 11 (9) (17)
Operating and administrative expenses 20 21 23
Net income (loss) (9) (30) (40)
Net income (loss) attributable to:
BDC’s shareholder (7) (29) (39)
Non-controlling interests* (2) (1) (1)
Net income (loss) (9) (30) (40)
*Non-controlling interests represent 80% of GO Capital net income
Table 10: Venture Capital - Financial Forecasts : Net Income by Funds* ($M)
Actual
2013
Estimate
2014
Proposed
2015
Health 14 (18) (3)
IT 15 21 (9)
Energy / Cleantech (16) (5) –
New BDC fund – – –
Direct internal investments 13 (2) (12)
Diversifed (9) (12) (9)
GO Capital (3) (1) (2)
Direct legacy investments (12) (13) (11)
Total direct investments 1 (15) (23)
Funds - legacy (3) (6) (4)
Funds - new strategy (1) (3) (4)
GO Capital L.P. (3) (1) (2)
Indirect investments (7) (10) (10)
SII (3) (4) (4)
VCSIP – (1) (3)
Net income (loss) (9) (30) (40)
*Includes operating and administrative expenses
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
62 | bdc.ca
Table 11: Securitization - Financial Forecasts ($M)
Actual
2013
Estimate
2014
Proposed
2015
Acceptances 265 75 205
Disbursements 193 231 264
Portfolio at cost 435 366 495
Fair value allowance 2 2 3
Portfolio at fair value 437 368 498
Net revenue 13 8 8
Operating and administrative expenses 2 2 2
Net income 11 6 6
In Economic Action Plan 2009, the government mandated
BDC to develop and offer the Canadian Secured Credit
Facility (CSCF), in concert with the private sector, with the
goal of increasing liquidity in the market. Under the CSCF,
BDC purchased $3.654 billion of asset-backed securities,
representing fve transactions. The CSCF is now over and the
portfolio has been fully repaid.
While the CSCF helped to resolve some of the challenges
experienced by the market, other defciencies remained,
especially for smaller players. To address this, BDC partnered
with the private sector to create the Multi-Seller Platform
for Small Originators (MSPSO), now known as the Funding
Platform for Independent Lenders (F-PIL).
The objective of F-PIL is to ensure that fnancing for vehicles,
machinery and equipment is accessible to smaller companies,
which tend to under-invest in these areas, leading to poor
productivity. F-PIL leverages existing private-sector fnancing
and complements BDC’s direct fnancing of these assets.
In fscal 2014, BDC anticipates $75 million of acceptances,
a relatively low amount as some deals have not material-
ized as expected; since F-PIL involves fewer deals for larger
amounts, it can be diffcult to forecast activity levels. BDC
has noted that while deals are being accepted, the utiliza-
tion or disbursement rate has been low, perhaps refecting
depressed levels of business fxed investment in the Canadian
economy.
BDC Securitization believes that demand remains in the
market and is reviewing the parameters of F-PIL to ensure
that it continues to serve Canadian SMEs, including very small
players.
BDC expects F-PIL acceptances to return to more typical lev-
els in fscal 2015. Variation in acceptances over the planning
period is due to the revolving nature of authorizations and
assumes renewals of authorizations with fnancing companies.
Net revenue is forecast to increase in the later years of the
planning period as the portfolio grows, while operating and
administrative expenses remain stable.
Securitization
bdc.ca | 63
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
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; and,
> 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 cre-
ated a small team dedicated to implementing this initiative.
In fscal 2014, BDC anticipates that $50 million will be
authorized for four high-performing funds and $175 million
authorized for the funds of funds. The remaining $175 million
will be authorized in fscal 2015.
Disbursements will commence in fscal 2014 with $3 million
for the four high-performing funds. For the funds of funds,
BDC will disburse 90% of the required capital, while the
other limited partners will disburse 10% until their respect-
ive commitments have been met.
BDC expects that the bulk of the proceeds from VCAP will
be created outside of the planning period.
In fscal 2015, BDC forecasts that it will incur a loss of $20
million, attributable to net fair value changes on VCAP invest-
ments. Outside of the planning period, BDC expects VCAP
to generate a net proft.
With the $350 million to be committed in the funds of funds,
BDC expects that $1 billion will be raised from other part-
ners, for a total commitment of $1.35 billion. However, it
should be noted that the fundraising environment remains
diffcult.
Given the nature of the industry and that VCAP is in the early
stages of implementation, it is diffcult to forecast the overall
fnancial performance of the program. BDC continues to
collaborate with offcials from Industry Canada and Finance
Canada on operational details.
BDC supports the overarching goal of VCAP to encourage
private-sector involvement in the VC asset class through a
new source of funds and is committed to working with all
the players involved to ensure the success of the program.
BDC believes that the combined effect of VCAP, VCSIP and
its own VC investing activities will have a signifcant positive
impact on the VC market in Canada.
Table 12: VCAP - Financial Forecasts ($M)
Estimate
2014
Proposed
2015
Authorizations 225 175
Disbursements 3 27
Proceeds – –
Portfolio at cost 3 30
Portfolio at fair value 3 9
Fee and other income – 3
Net revenue – 3
Net fair value changes – (21)
Income (loss) before operating and administrative expenses – (18)
Operating and administrative expenses 1 2
Net income (loss) (1) (20)
Venture Capital Action Plan
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
64 | bdc.ca
Table 13 shows the composition and growth of BDC’s con-
solidated outstanding portfolio in dollars. Growth is forecast
to slow as activity levels stabilize, refecting BDC’s counter-
cyclical role and the ongoing focus on small loans.
BDC consolidated net income is expected to reach $372 mil-
lion in fscal 2014, $365 million attributable to BDC. Consoli-
dated net income will be impacted, particularly in the early
years of the planning period, by results in VC, VCAP, and
Consulting, as BDC makes the investments required to fully
play its role in catalyzing the entrepreneurial ecosystem and
supporting the competitiveness of Canadian SMEs.
In fscal 2014, because of actuarial gains on post-employment
benefts, BDC expects to post a consolidated comprehensive
income of $464 million, $457 million attributable to BDC
and the remainder to the non-controlling interests of Caisse
de dépôt et placement du Québec and GO Capital partners.
The actuarial gain is caused by higher interest rates used to
discount the beneft obligation, as well as better-than-ex-
pected returns on pension assets.
7.4%

7.2%

2%
5%
8%
14,000
20,000
26,000
2013
(actual)
2014 2015 2016
VCAP
Securitization
Venture Capital
Subordinate Financing
Financing
Growth %
Table 13: Consolidated BDC Portfolio - as at March 31
Consolidated Portfolio and Net Income
bdc.ca | 65
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 14: Consolidated Net Income ($M)
Actual
2013
Estimate
2014
Proposed
2015
Financing 433 395 374
Subordinate Financing 35 18 22
Venture Capital (9) (30) (40)
Consulting (12) (16) (25)
Securitization 11 6 6
Venture Capital Action Plan – (1) (20)
Net income 458 372 317
Net income (loss) attributable to:
BDC’s shareholder 454 365 315
Non-controlling interests 4 7 2
Net income 458 372 317
Table 15: Consolidated Comprehensive Income ($M)
Actual
2013
Estimate
2014
Proposed
2015
Net income 458 372 317
Other comprehensive income (loss)
Items that may be reclassifed subsequently to proft or loss
Net change in unrealized gains (losses) on available-for-sale-assets (4) 1 1
Net change in unrealized gains (losses) on cash fow hedges (2) – –
Total items that may be reclassifed subsequently to net income (6) 1 1
Items that will not be reclassifed to OCI
Remeasurements of net post-employment beneft liability (18) 91 –
Other comprehensive income (loss) (24) 92 1
Total comprehensive income 434 464 318
Total comprehensive income (loss) attributable to:
BDC’s shareholder 430 457 316
Non-controlling interests 4 7 2
Total comprehensive income 434 464 318
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
66 | bdc.ca
In Economic Action Plan 2010, the government announced
cost containment measures to improve effciency and reduce
the rate of growth in operating expenditures; in Economic
Action Plan 2011, it initiated a strategic review. Over the
years, BDC has made a concerted effort to achieve effcien-
cies and is continuing this tradition and observing the intent of
the government’s review by:
> carefully managing operating expenses;
> identifying and gaining effciencies; and,
> improving its effciency ratio, where a lower ratio refects
greater effciency.
In fscal 2014, BDC expects to improve upon results achieved
in fscal 2013 for both its reported and adjusted effciency
ratios and to surpass the target set in last year’s Corporate
Plan for fscal 2014, due primarily to lower than expected
hiring and decreased operating expenses. Effciency ratios
for the Financing portfolio will improve over the planning
period as A&E results in streamlined processes and internal
productivity improvements. By fscal 2015, BDC is forecast-
ing a reported effciency ratio of 39.7%, meaning that BDC
will spend 39.7 cents to generate a dollar of revenue. In fscal
2007, BDC spent 50.6 cents to generate a dollar of revenue.
Starting in fscal 2014, BDC expects reduced expenses
related to communication, meals, travel and accommodation
as a result of investments in videophones, instant messaging,
videoconferencing and desktop sharing, as well as a VoIP
(Voice over Internet Protocol) network. These technolo-
gies allow employees to interact without the need for travel,
complementing traditional face-to-face meetings.
Pension expenses are expected to decrease over the planning
period as BDC’s post-employment beneft asset is increasing
more rapidly than the associated liability. This means that the
post-employment beneft asset is forecast to generate net
interest income, causing pension expenses to decrease.
50.6%

41.0%

43.7%

41.4%

40.3%

43.5%

41.1%

39.7%

47.1%

44.7%

39.2%
38.3%

38.0%

36.7%

38.3%

35.7%

35.6%

2007 2008 2009 2010 2011 2012 2013 2014 2015
60%
40%
20%
0%
47.8%
Table 17: Historical Effciency Ratio - as at March 31 ($M)
Financing effciency ratio
Financing effciency ratio
excluding pension
Table 16: Financing Operating Expenses - Financial Forecast ($M)
Actual
2013
Estimate
2014
Proposed
2015
Total operating expenses 347 343 350
Less:
Pension expense 41 45 36
Adjusted operating expenses (excluding pension) 306 298 314
Reported effciency ratio 43.5% 41.1% 39.7%
Adjusted effciency ratio (excluding pension) 38.3% 35.7% 35.6%

Cost Containment and Effciency Measures
bdc.ca | 67
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 18: Capital Budget ($M)
Actual
2013
Estimate
2014
Proposed
2015
Facilities 4 1 6
Information technology 5 9 6
Agility & Effciency (A&E) 14 24 4
Total 23 34 16
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. Table 18 shows these expenditures
through to fscal 2015. Capital expenditures in A&E will cease
after fscal 2015 as the project is deployed.
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 2.1%.
For fscal 2014, BDC expects its 10-year moving average
ROE to be 8.7% due to positive returns in its Financing port-
folio. It is expected that the 10-year moving average ROE will
decrease slightly as BDC makes the investments required to
fully play its role in catalyzing the entrepreneurial ecosystem
and supporting the competitiveness of Canadian SMEs.
Dividend Policy, Statutory Limitations and Capital
Adequacy
Dividend Policy
Common dividends are payable annually and fuctuate based
on BDC performance. In fscal 2014, BDC is forecasting
dividend payments of $60 million. Since 1997, BDC has paid
$363 million in dividends (including a $60-million payment in
June 2013) to the Government of Canada.
Statutory Limitations
The BDC Act requires that the aggregate of borrowings 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 re-
quirement over the planning period.
The debt-to-equity ratio is projected at 3.3:1 in fscal 2014.
The total equity of BDC should increase from $4.494 billion
in fscal 2014 to $4.937 billion by the end of fscal 2015.
BDC’s paid-in capital limit was raised by the Budget 2009
Implementation Act to $3.0 billion from $1.5 billion, as origin-
ally set out in the BDC Act.
BDC’s paid-in capital is currently at $2.116 billion.
Capital
In line with its requirement for fnancial sustainability, BDC
provides for an additional capital safeguard to help Can-
adian entrepreneurs withstand diffcult economic conditions
without requiring further investment by the Government of
Canada. This approach observes Treasury Board guidelines
dated March 28, 1996, which state that, “the Bank maintain
capital and loss provisions suffcient to ensure that BDC can
withstand unfavourable economic circumstances without
requiring additional government funding.”
Table 19: Dividends ($M)
Actual
2013
Estimate
2014
Proposed
2015
Dividends* 69 60 48
*Common dividends are declared, booked, and paid in the following fscal year
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
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In a decision dated May 14, 2009, Treasury Board recon-
frmed BDC’s capital adequacy ratios (percentage of net
portfolio assets) of at least:
> 10% for term loans;
> 25% for quasi-equity loans (defned as “venture loans,
patient capital, working capital support program”);
> 100% for venture capital investments (including VCAP);
> 5% of the fair value of CSCF assets; and,
> 10% of the fair value of F-PIL assets.
BDC’s capital (comprised of its paid-in capital, retained earn-
ings and accumulated other comprehensive income that is
available for sale) is expected to reach $4.496 billion by the
end of fscal 2014. A portion of this amount must be re-
served for loans and investments already committed but not
yet disbursed. These undisbursed amounts will represent
$0.776 billion of capital by the end of fscal 2014.
In addition to the Treasury Board guidelines on capital, BDC
uses an economic capital model to manage risks by ensuring
adequate capital to support its current and future business
and to safeguard its fnancial sustainability. The philosophy
behind this model is to balance the requirement for BDC to
fulfll its public mandate while remaining fnancially self-suf-
fcient. It also provides a benchmark for the Treasury Board
assessment guidelines.
In keeping with best practices and the core tenets of sound
fnancial and risk management, particularly during times of
uncertainty, BDC conducts stress tests on its portfolio to de-
termine an adequate level of capital to withstand a sustained
economic downturn. Macro-economic variables are stressed
and specifc scenarios are selected based on historical and
estimated impact on the current portfolio and by drawing on
industry best practices.
bdc.ca | 69
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 20: Consolidated Statement of Income ($M)
Actual
2013
Estimate
2014
Proposed
2015
Interest income 968 1,014 1,093
Interest expense 124 137 166
Net interest income 844 877 927
Net realized gains (losses) on investments (47) (18) (46)
Consulting revenue 24 21 21
Fee and other income 39 37 42
Net realized gains (losses) on other fnancial instruments 4 1 1
Net revenue 864 918 945
Impairment reversals (losses) on loans (19) (95) (156)
Net change in unrealized appreciation (depreciation) of investments* 42 (22) (20)
Net unrealized foreign exchange gains (losses) on investments 2 (2) –
Net unrealized gains (losses) on other fnancial instruments (3) 2 (1)
Income before operating and administrative expenses 886 801 768
Operating and administrative expenses 428 429 451
Net income 458 372 317
Net income (loss) attributable to:
BDC’s shareholder 454 365 315
Non-controlling interests 4 7 2
Net income 458 372 317
*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 highlights. In fscal 2015, BDC expects total revenues of $945 million and a net
income of $317 million, of which $315 million is attributable to BDC’s Shareholder.
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
70 | bdc.ca
Table 22: Operating Budget - Expenses ($M)
Actual
2013
Estimate
2014
Proposed
2015
Financing 347 343 350
Subordinate Financing 23 25 28
Consulting (includes delivery and transition costs) 36 37 46
Venture Capital 20 21 23
Securitization 2 2 2
Venture Capital Action Plan – 1 2
Total operating budget 428 429 451
Operating expenses as a % of the average total loans and investments portfolio 2.4 2.3 2.3
Table 23: Projected Statement of Cash Flows ($M)
Actual
2013
Estimate
2014
Proposed
2015
Net cash fows provided by operating activities (679) (965) (710)
Net cash fows used in investing activities 101 (53) (351)
Net cash fows provided by fnancing activities 539 1,074 1,125
Net increase in cash & cash equivalents (39) 56 64
Cash & cash equivalents at beginning of year 741 702 758
Cash & cash equivalents at end of year 702 758 822
Table 21: Total Revenues by Business Line ($M)
Actual
2013
Estimate
2014
Proposed
2015
Financing 798 834 881
Subordinate Financing 55 62 58
Consulting 24 21 21
Venture Capital (26) (7) (26)
Securitization 13 8 8
Venture Capital Action Plan – – 3
Net revenues 864 918 945
bdc.ca | 71
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
Table 24: Consolidated Statement of Financial Position (unaudited, in $M)
Actual
2013
Estimate
2014
Proposed
2015
ASSETS
Cash and cash equivalents 702 758 822
Asset-backed securities 437 368 498
Loan Portfolio 16,410 17,790 18,905
Allowance for credit losses (538) (538) (584)
Loan Portfolio (net) 15,872 17,252 18,321
Subordinate fnancing investments 558 570 622
Venture capital investments 457 485 559
Venture Capital Action Plan – 3 9
17,324 18,678 20,009
Post-employment beneft asset – 115 165
Other assets 158 135 140
Total assets 18,184 19,686 21,136
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued liabilities 106 101 103
Short-term notes 12,732 13,990 15,019
Long-term notes 1,136 799 788
Borrowings 13,868 14,789 15,807
Post-employment beneft liability 191 180 185
Other liabilities 64 68 73
Total liabilities 14,229 15,138 16,168
Equity
Share capital 2,088 2,313 2,488
Contributed surplus 28 28 28
Retained earnings at beginning of year 1,380 1,747 2,143
Net income 454 365 315
Remeasurements of net post-employment beneft liability (18) 91 –
Dividends on common shares (69) (60) (48)
Retained earnings 1,747 2,143 2,410
Accumulated other comprehensive income 9 10 11
Equity attributable to BDC’s shareholder 3,872 4,494 4,937
Non-controlling interests 83 54 31
Total equity 3,955 4,548 4,968
Total liabilities and equity 18,184 19,686 21,136
Debt/Equity ratio 3.6 3.3 3.2
SUMMARY OF THE BDC CORPORATE PLAN 2014-15 TO 2018-19
72 | bdc.ca
Future accounting changes
Information on new standards, amendments and interpreta-
tions that are not yet effective but are expected to impact
BDC’s fnancial results is provided below. These pronounce-
ments are being assessed to determine their impact on
BDC’s consolidated fnancial statements. Certain other new
standards, amendments and interpretations have been issued
but are not yet effective and are not expected to have a
signifcant impact on BDC’s fnancial results.
Financial Instruments
Over the past few years, the International Accounting Stan-
dards Board (IASB) has been working on a project to replace
IAS 39, Financial Instruments: Recognition and Measurements:
Recognition and Measurement with IFRS 9, Financial Instru-
ments. The project is divided into three phases:
> Classifcation and measurement;
> Impairment methodology; and
> Hedge accounting
The frst phase of IFRS 9 was released in two parts. The frst
part, published in November 2009, contained the require-
ments for fnancial assets. These requirements used a single
approach to determine whether a fnancial asset is measured
at amortized cost or at fair value, replacing the multiple rules
in IAS 39. This approach is based on how an entity manages
its fnancial instruments and the contractual cash fow char-
acteristics of the fnancial assets. Requirements for fnancial
liabilities were added to IFRS 9 in October 2010. Most of the
requirements in IAS 39 for classifcation and measurement of
fnancial liabilities were carried forward in IFRS 9.
The objective of the impairment phase is to improve the
transparency of provision for losses on loans and for the qual-
ity of fnancial assets. An exposure draft was issued in March
2013 and deliberations are ongoing.
Phase three of IFRS 9 was completed in November 2013
with the publication of IFRS 9, Financial Instruments (2013).
This phase replaced the rule-based hedge accounting require-
ments in IAS 39 to more closely align the accounting with
risk management activities. In the new requirements, there
are fewer restrictions and, therefore, entities may be able to
apply hedge accounting to more transactions.
The IASB recently announced that the mandatory effective
date of January 1, 2015 would not allow suffcient time for
entities to apply the new standard since phase two of the
project is not yet complete. Consequently, the IASB has
removed the mandatory effective date from IFRS 9.
Appendix B to the Financial Plan

doc_936240301.pdf