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'It’s incredibly frustrating,' says Michael Wood, managing partner of Ottawa Special Events, seen here on March 25, 2020.Justin Tang/The Globe and Mail

As Ottawa announces new measures to help workers and employers hit hardest by the coronavirus pandemic, entrepreneurs are warning that already promised funding is difficult to access and won’t prepare the work force to rebound when the crisis ends.

The Business Development Bank of Canada (BDC) was one of two federal agencies the Liberal government last week delegated to administer $10-billion in support to business communities hurt by the crisis, alongside Export Development Canada (EDC). It was a centrepiece of stimulus measures so far totaling $82-billion, which also included a 10-per-cent wage subsidy and increased GST-credit payments.

Some entrepreneurs and business leaders say the BDC program is out of step with the business community’s needs at a time when many companies are actually shut down and nearly a million laid-off Canadians have applied for employment insurance benefits over the past week.

The need to access cash grows more urgent with each day businesses are shuttered. The EDC took nearly a week to clarify how to access its portion of the $10-billion program. Such problems highlight the differences between Canada’s program and those of countries focusing on wage relief – which include Ireland, the United Kingdom, Denmark and others.

The government began announcing further measures Wednesday, including that it will provide $2,000 monthly to Canadians who lost work because of the crisis – and potentially some who have not been formally laid off, but are not being paid.

The BDC is granting payment postponements to current loan clients and offering relief that includes floating-rate loans of up to $2-million based on a company’s expected financial performance in the coming months. However, the program is focused on existing clients already deemed creditworthy and some loans will require personal guarantees that could make owners liable if the company cannot repay them.

As well, applicants to the new program may be required to pay application and legal-document fees. Some entrepreneurs also say the floating interest rate, currently set at 3.3 per cent, is higher than what commercial banks offer.

“It’s incredibly frustrating,” says Michael Wood, managing partner of Ottawa Special Events. “I don’t think it’s fair, and I don’t think it is paying attention to what the actual state of the small- and medium-enterprise industry is, and that is working-class people trying to make a living.”

Many business owners and executives said they are reluctant to criticize BDC publicly – some because they appreciate how hard the bank is working, others because they don’t want to diminish their chances to get funding.

One Western-Canadian software entrepreneur who is a long-time BDC client, and who The Globe and Mail is not identifying because they feared damaging their relationship with the bank, said its criteria for creditworthiness already disadvantaged software startups that depend on deferred or subscription revenue. Now, the entrepreneur says they may be forced to make the “gut-wrenching” decision to lay workers off because the relief program for the sector seemed designed without understanding the sector itself.

Two sources close to BDC, who The Globe is not identifying because they fear professional reprisals, said the Liberals’ bailout package came as a surprise to the agency, which had to rush to retool programs that might not be best to deal with a massive economic crisis and left many front-line staff without answers for clients.

BDC said this week that it hoped to expand its eligibility criteria soon. In an e-mail on Wednesday, communications vice-president Shawn Salewski said BDC’s systems weren’t designed to handle such an enormous volume of financing requests – as many in the past two weeks as it typically receives in a year.

Mr. Salewski said many of BDC’s loan terms were designed to complement, not compete with, those of private lenders, noting that the agency reduced its interest rates on March 18. While some BDC loans do not have application fees, he said some do because of increased need for due diligence. “We are constantly adjusting our approach,” he said.

Finance Minister Bill Morneau said on Wednesday that it has become clear the government needs to act rapidly.

“We know that getting the opportunity for credit to businesses – small, medium and large – is critically important," he told reporters, adding that the government is working with BDC, EDC and commercial banks to get capital flowing quickly.

Business owners and employees also want wage subsidies expanded like other countries that say they will subsidize as much as 80 per cent to keep people working and ready to bounce back when ordinary life resumes. “We need to do everything to keep people attached to their jobs,” said Andrew Graham, chief executive officer of financial-technology firm Borrowell.

The Council of Canadian Innovators (CCI), a technology business association, says many members are worried about making payroll and frustrated about BDC’s interest rates and personal-guarantee requirements.

Since BDC’s measures were announced, the group has pressed Ottawa for measures including reduced or zero-interest loans, eliminating personal guarantees and automatic loan top-ups for BDC’s existing clients. “We need the government to take bold and decisive action to support small businesses in weathering this storm so they can rebound and refuel the economy when this pandemic is over,” executive director Ben Bergen said in an e-mail.

The possibility that they will have to provide personal guarantees only makes things more stressful for entrepreneurs already dealing with an unprecedented crisis. “Is it improper? No. But it can be a hard pill to swallow in these times,” says Bryan Watson, a partner at Flow Ventures in Toronto.

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