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The Huron Expositor, 1994-01-26, Page 3Business Beat 7 Centre supports small businesses In the third of a three-part series on the new Huron Business Centre in Seaforth, we look at the Business Development Corporation. BY DAVID SCOTT Expositor Staff Several years ago, the federal government made the discovery that small business was the biggest employer in the country but new small businesses had an 82 per cent failure rate within their first five years. The two major reasons for this were financial problems and lack of management skills, said Jim Niesen, General Manager of the Huron Business Development Cor- poration (BDC) in Seaforth. In simple terms the BDC is a lending institution charged with providing loans (or equity financing in exceptional circumstances) to small business. It is important to note that a BDC does not provide financing to 'bankable clients.' The BDC operates as a high-risk or last - resort lender, interested in only those clients whodonot qualify for loans from conventional lending sources (chartered banks, credit unions, etc.). "We don't want to compete with anybody. We complement what the banks do," said Niesen. The Business Development Cor- poration can also act as a referral service because they're knowledge- able of other government programs like New Ventures and the Small Business Loans Act. The BDC begins with a $1.55 million portfolio of available funds for loans. The maximum for a single business loan is $75,000 - subject to approval by the eight - member board of directors. The BDC receives its $1.5 million in yearly installments. They receive $250,000 for each the first and ! second years in operation. The third year, the BDC receives $500,000. And in the fourth year, the final $550,000 is received. Loans are provided at an interest rate of prime 1- = plus three per cent and payments can be structured over one to ten years. To ensure repayment, a collateral position is registered in favour of . the BDC on all available assets, both personal and business, in addi- tion to the personal guarantees of the applicant and the applicant's spouse. Banks are governed under the Bank Act but the BDC is not. They can go over 75 per cent of the value of a house for collateral whereas a bank cannot, said Niesen. Submitting a Plan The BDC meets with an applicant and reviews their application or business plan. The BDC will do an analysis of the plan and look at similar existing businesses. "We review the whole thing to make sure they're on the right track. I make a presentation to the Board of Directors. They make the final decision on any loan," said Niesen. "The interesting thing about the BDC is once the loan is approved it (the business relation- ship) doesn't stop." Businesses who receive loans through the BDC have to report on a monthly basis - profit/loss state- ments and balance sheets. "We don't manage businesses for the client." Kelly Metzger, Administrative Assistant, also helps Niesen full- time with the Business Develop- ment Corporation doing research, newsletters, reception and book- keeping. The BDC acts as an advisor. They also have the resources of their board of directors. If a member of the board has experience in the area of business a loan applicant is entering, they can help provide background and information, said Niesen. Unlike a conventional bank, the BDC has a lot of contact with the client. "Banking doesn't have that luxury...The BDC has a more proactive approach. We event problems before they become prob- lems." The BDC is allowed to make a flexible payment schedule for the client. "They (clients) can make some payments on interest only for a few months and then switch to regular payments (on -the- sum)." thesum)." All loans are term loans in gen- eral try to keep them five years or less. "Banks might take over the loans after two or three years once the business has established a track record." Clients can make lump sum payments and there is no pen- alty if the total is paid off before the end of the agreed loan term. There is a little overlap with each of the three departments that com- prise the Huron Business Centre. Although a person with a small business idea would visit Carol Leeming, the Small Business Advisor, initially, either Leeming or Niesen can assist people with their business plans. DAVID SCOTr PHOTO DEVELOPMENT IN HURON - Jim Niesen, General Manager of the Huron Business Development Corporation, stands in front the new Huron Business Centre in Seaforth that houses three business related departments to assist new and existing business in the county, as well as agriculture and arts. "We don't want to compete with anybody. We complement what the banks do." "Carol is the first step...Hopefully when they come to me they've done a lot of research. Clients I see will be able to put a business plan together," said Niesen. The names and business ideas remain confidential information. The numbers of loans granted by the BDC, however, are public infor- mation. November 1, 1993 was the effective start up date for the Huron Business Development Corporation. December was the fust month in which loans were considered. As of January 19, 1994, the Huron BDC has approved four business loans that total $115,000. The Huron BDC has spoken to economic development groups, chambers of commerce and small business seminars. They also receive a lot of direct referrals from lawyers, chartered accountants and banks. "It makes a difference that they know we're not here as a competi- tor," said Niesen. E. t volunteer board members DAVID SCOT PHOTO TAKING CARE OF BUSINESS - Kelly Metzger, Administrative Assistant at the Huron Business Centre in Seaforth. represent the four different econ- omic development areas of Huron County: north, south, central and west. Two of the board members are also on the Huron Futures Board. "We try to keep a wide variety of industry backgrounds - We have people representing agriculture, we have a lawyer on the board." Cooperation and Referrals It's also not uncommon for the BDC to cooperate with a bank for a large business loan (for example a bank might loan the first $100,000 and the applicant needs another $50,000. They would be referred to the BDC for that amount). The BDC also does referrals to the Federal Business Development Bank (FBDB) which also provides financing to business but for larger projects. The BDC is not allowed to compete with the Federal Business Development Bank. They will refer clients to the FBDB. The BDC also make clients aware of the Small Business Loans Act that includes Business Improvement Loans which can be as much as $250,000. Chartered banks adminis- ter the loans for the federal govern- ment. The government in turn guar- antees 90 per cent of the loan in case of default by the applicant. The Business Improvement Loans are offered at prime plus one and three-quarters per cent interest. New Ventures loans are also offered through chartered banks by the provincial government. The way it works is the client can borrow any amount from one dollar to $15,000 but must already have raised an equal amount of money. For example, if a company needs an extra $10,000 for improvements, they must already have $10,000 of their own. Other government financial assist- ance programs include: Small Busi- ness Improvment Loan, of up to $100,000 for the purchase of fixed assets; Youth Venture Capital Loan, of up to $7,500; and Student Ven - ture Capital Loan, of up to $3,000. Jim Niesen meets with other BDC general managers from across Ontario once a year, and meets twice a year with the Southwest Association, to which Huron belongs, to exchange information on types of clients each BDC handles. The BDC receives funding from the Job Strategy division of Unem- ployment Insurance. BDCs have been functioning since the mid- 1980s. There are 300 BDCs in Canada and 50 in Ontario. The reason for their success, says Niesen, is <the localized decision making. "We don't have someone in Toronto or Ottawa making deci- sions on local loans." What is business centre? • A Business Development Centre (BDC) is a non-profit organization affiliated with Com- munity Futures, a federally -spon- sored initiative operated through Employment and Immigration Canada. BDC's are normally located within rural or northern communities that are usually dependent upon one particular industry which may be currently in the process of down -sizing. • Within Huron County, the BDC is called Huron Business Development Corporation (HBDC) and may provide financing only to those busi- nesses that operate, or intend to establish themselves within the borders of Huron County. THE HURON EXPOSITOR, January 20, 1094-3 THE TOWN OF SEAFORTH NEEDS YOUR HELP! The Town of Seaforth requires a resident of Seaforth to fulfil the position as public repre- sentative on the Maitland Valley Conservation Authority for a term of one year. If you are interested in becoming involved in the management of the Maitland Valley Conservation Authority, please contact the Seaforth Municipal Office at 72 Main Street South, Box 610, Seaforth, Ontario NOK 1WO, by February 4th, 1994. For more information, call 527-0160. SENIOR CITIZEN'S DAY ON TUESDAY, FEB.1 receive DOUBLE COUPONS Canadian Tire cares about Senior Citizens and to show their appreciation offers double coupons with all purchases the first Tuesday of each month. (Cash or cheque, excludes Auto Centre labor) Open: Mon. to Thurs. 8:30-6; Frl. 8:30-9:00; Sat. 8:30-5:30 THIS TUESDAY I5 DOUBLE COUPON DAY FOR SENIOR CITIZEN'S ONLY AT SEAFORTH CANADIAN TIRE 527-1350 January Blues CHASER 2 Medium Pizzas $ with 3 items Just 9.99 Plus 2 litre Pepsi ONLY 99' with Special Offer valid Monday, Tuesday & Wednesday Only GODFATHER PIZZA 100 Main St. S. (rear) Seaforth 527-0222 /- =CLEARANCE LAST OF THE 94'S 11164.., Bulk 011 For Your Snowmobile' 3 .95 litre (Bring in your jug) rCLEARANCE Kids Suits and Adult SUITS AND HELMETS 7 OPERATING AS (),II.VIL'S PLANING MILL LTO SERRINGVILLF. ONTARIO 519 393 5101 FAX 19 393 9Io9 FELDMANN WINDOWS Aluminum Clad WOOD WINDOWS & PATIO DOORS Winter Booking Sale % AFF A i,% AFF LIST PRICE LIST PRICE TO FEB. 28 TO MAR. 31 1994 1994 Classic Styling that lasts and lasts QUALITY AND SERVICE SINCE 1906 SEAFORTH SEBRINGVILLE 5274:0910 393-5101 AIC HIGH QUALITY, HIGH SPEED COMPUTERS! / SYSTEMS / GO VESA LOCAL BUS! GO AICI PREMIUM SERIES 486DX33/128K CACHE (LOCAL BUS, VERY FAST) 4 MB RAM UPGRADABLE TO 64 MB PANASONIC 1.2 & 1.44 FLOPPY DRIVES VESA LOCAL BUS 1/0 CARD MEDIUM TOWER CASE 200W/PS QUANTUM 270 MB HARD DRIVE CIRRUS LOGIC VL/BUS SVGA 2M W/1 M CTX 5468NI SVGA MONITOR (.28DP, 1024) MOUSE, DOS, WIN. 3.1 101 KEYBOARD WITH.... PANASONIC CDROM DOUBLE SPEED -320MSEC ACCESS -306KBYTES TRANSFER -XA SUPPORTED -PHOTO CD SUPPORTED -MULTISESSION , _, , -POWER TRAY ' ' -NO CADDY ___ � , -4 CD TITLES ONLY 249500 .+ TAXES Other systems starting at 51750."' *Price subject to change & based on COD R.N. HOPPER COMPUTERS RR#2 SEAFORTH 522-0544 ture Capital Loan, of up to $3,000. Jim Niesen meets with other BDC general managers from across Ontario once a year, and meets twice a year with the Southwest Association, to which Huron belongs, to exchange information on types of clients each BDC handles. The BDC receives funding from the Job Strategy division of Unem- ployment Insurance. BDCs have been functioning since the mid- 1980s. There are 300 BDCs in Canada and 50 in Ontario. The reason for their success, says Niesen, is <the localized decision making. "We don't have someone in Toronto or Ottawa making deci- sions on local loans." What is business centre? • A Business Development Centre (BDC) is a non-profit organization affiliated with Com- munity Futures, a federally -spon- sored initiative operated through Employment and Immigration Canada. BDC's are normally located within rural or northern communities that are usually dependent upon one particular industry which may be currently in the process of down -sizing. • Within Huron County, the BDC is called Huron Business Development Corporation (HBDC) and may provide financing only to those busi- nesses that operate, or intend to establish themselves within the borders of Huron County. THE HURON EXPOSITOR, January 20, 1094-3 THE TOWN OF SEAFORTH NEEDS YOUR HELP! The Town of Seaforth requires a resident of Seaforth to fulfil the position as public repre- sentative on the Maitland Valley Conservation Authority for a term of one year. If you are interested in becoming involved in the management of the Maitland Valley Conservation Authority, please contact the Seaforth Municipal Office at 72 Main Street South, Box 610, Seaforth, Ontario NOK 1WO, by February 4th, 1994. For more information, call 527-0160. SENIOR CITIZEN'S DAY ON TUESDAY, FEB.1 receive DOUBLE COUPONS Canadian Tire cares about Senior Citizens and to show their appreciation offers double coupons with all purchases the first Tuesday of each month. (Cash or cheque, excludes Auto Centre labor) Open: Mon. to Thurs. 8:30-6; Frl. 8:30-9:00; Sat. 8:30-5:30 THIS TUESDAY I5 DOUBLE COUPON DAY FOR SENIOR CITIZEN'S ONLY AT SEAFORTH CANADIAN TIRE 527-1350 January Blues CHASER 2 Medium Pizzas $ with 3 items Just 9.99 Plus 2 litre Pepsi ONLY 99' with Special Offer valid Monday, Tuesday & Wednesday Only GODFATHER PIZZA 100 Main St. S. (rear) Seaforth 527-0222 /- =CLEARANCE LAST OF THE 94'S 11164.., Bulk 011 For Your Snowmobile' 3 .95 litre (Bring in your jug) rCLEARANCE Kids Suits and Adult SUITS AND HELMETS 7 OPERATING AS (),II.VIL'S PLANING MILL LTO SERRINGVILLF. ONTARIO 519 393 5101 FAX 19 393 9Io9 FELDMANN WINDOWS Aluminum Clad WOOD WINDOWS & PATIO DOORS Winter Booking Sale % AFF A i,% AFF LIST PRICE LIST PRICE TO FEB. 28 TO MAR. 31 1994 1994 Classic Styling that lasts and lasts QUALITY AND SERVICE SINCE 1906 SEAFORTH SEBRINGVILLE 5274:0910 393-5101