More than any other barrier to starting and maintaining a business, immigrant entrepreneurs identify access to capital as a challenge. Small business bank loans are difficult to obtain at the best of times, even for well-established businesses owned by Canadians with a credit history. For newcomers, the possibility of securing a bank loan may seem quite remote.
From the bank’s perspective, business loans are risky as many new businesses do fail. Yet most future business growth in Canada is expected to come from small and medium size enterprises. And immigrants are more likely than Canadians to be self-employed or to own a business.
It is in this context that the Business Development Bank of Canada (BDC) has launched a business loan program for newcomers. The bank caters to new Canadians by allowing them to bypass the credit history roadblock while applying for loans. Loans are available to a maximum of $50,000. This is an excellent fit for BDC which already specializes in smaller loans, defined as $250,000 and under.
In his role as BDC’s Vice President for Toronto Central and East, Randy Blackwood works with a wide range of business centres and businesses. BDC works closely with start-up businesses that are often in need of working capital. In Toronto, this market includes a lot of new Canadians. According to Randy,
“They are well-educated, often have business aspirations, maybe a business background.”
BDC views support of immigrant entrepreneurs as an exciting addition to its suite of loans and supports. In Blackwood’s words,
“We are looking to support entrepreneurs and these are coming here to begin a new life and have an entrepreneurial mindset. We know there might be some unique challenges facing someone from another country, but we are trying to nurture their entrepreneurial spirit.”
Banks often rely on Beacon scores, a mathematical formula used to calculate credit risk level. It considers a loan applicant’s credit rating, level of indebtedness, existing credit instruments, and repayment history in order to determine one’s likelihood of repayment. The BDC program is for individuals who have no established credit and thus bypasses the Beacon score system. According to Randy,
“many newcomer business owners actually do have a credit history in Canada, often through investments as well as credit cards they have obtained since arrival.”
Immigrant entrepreneurs are replicating businesses from their home countries
New businesses supported by BDC represent a wide range of sectors and interests. Many of the immigrant entrepreneurs are replicating businesses from their home countries, particularly around food. Some have also focused on support services and supplies from home country that can support agri-food businesses in Canada.
As part of the loan program, clients are required to undergo a certain amount of training to improve their business acumen and learn about the Canadian business landscape.
BDC is a crown corporation of the federal government. It is a for-profit enterprise that reinvests its profit to continually support entrepreneurs. BDC focuses on term lending, financing fixed amounts of money over a specific term. It offers lower lending rates than many banks and is willing to accept higher risk than traditional lenders. According to Blackwood,
“We do a lot of lending and have been fortunate to support strong entrepreneurs. We also provide advisory services to customers as part of our offer, including sales and marketing, business coaching.”
For entrepreneurs needing other financing solutions such as credit cards or lines of credit, BDC works with the charter banks.
You can view a short video about the loan program on the NEW CANADIANS TV website. (NEW CANADIANS is produced by internationally trained journalists and portrays stories of recent immigrants making Canada their home.) The video was filmed at the Immigrant Business Expo that took place in Toronto a few months ago. It features an interview with Ms. Leteinturier-Guisse, BDC’s Toronto Business Centre Manager.
Sarah Wayland, Principal Investigator