Help small businesses instead of Bombardier
By Richard Koss
According to recent reports, there are expectations from the Quebec government and from Bombardier that the federal government will match Quebec’s contribution to Bombardier of $1 billion. That’s $2 billion of taxpayers’ money going to a company that has just announced a 7,000-person layoff, but strangely not in the sector that is trying to market an aircraft that itself is already $2 billion over budget.
If this were a one-time event one could be persuaded that there might be value in it. The reality is that Bombardier is constantly being fed public money and its appetite is insatiable. Between 1966 and 2009 they have received $1.14 billion already via 48 separate transactions from Industry Canada alone. De Havilland, which was acquired by Bombardier in 1992, has received an additional $1.1 billion, and Pratt and Whitney, which makes the engines for Bombardier’s not-yet jet, has received $3.3 billion.
My intent is not to beat up on Bombardier, but to highlight the relative unfairness of these kinds of supports when there are so many viable and productive small businesses needing help far more than the Bombardiers of the world.
December 2012 Statistics Canada estimates placed the number of employer-owned businesses in Canada at 1.1 million, 98% of them classified as small or less than 100 employees. Other StatsCan reports state that these businesses employ over 7.7 million people, or 40% of Canada’s total workforce. They contribute 28%, or over $500 billion, of the country’s total GDP and account for 25% of its total exports.
According to Bloomberg Business, Bombardier employs 24,000 people in Canada and contributes $12.4 billion towards our GDP. That’s impressive, but should we be paying them to do that?
Not all large corporations are receiving taxpayer-funded handouts and not all small businesses are in need of financial assistance, but many are or will be in the next short time span.
I have a personal perspective to this. In September 2014, my company, Hunter Wire Products, borrowed $350,000 from BDC to purchase an automated powder painting line. We encountered numerous difficulties with the paint contractor and finally locked them out of the building in May 2015. From that point on, we were in almost constant negotiations with BDC attempting to obtain the release of the balance of the loan proceeds, approximately $50,000, so we could hire another firm to complete the work. We were unsuccessful.
Eventually, due to other serious financial pressures added to the burden of the non-operational paint line and its loss of revenue, the company declared bankruptcy in October 2015. This resulted in the closure of a well-known, 70-year-old Winnipeg manufacturing business. For the lack of $50,000 we lost a company producing over $7 million in revenue, almost $1 million of that in exports, and 50 people lost their jobs.
Saving my 50 employees would have cost $1,000 per employee. In comparison, assuming Bombardier gets their requested financing, the cost is $83,333 per employee.
A survey released on Wednesday by the Winnipeg Chamber of Commerce cites 40% of its respondents as stating that access to financing is either somewhat or very difficult. Some of these companies are certain to go out of business due to lack of funding. You can do something about that in the upcoming budget. Make a point of creating or enhancing programs that fund small business start-ups. Small businesses create three and a half times as many new jobs every year as medium and large businesses combined. That’s 77% of all private sector jobs created since 2003.
Ensure that there is adequate financing available to establish small businesses for their needs. This applies just as much to old wire manufacturing companies as to new 3-D additive manufacturing start-ups, and sometimes even more so.
Mandate that a certain percentage of federal government purchases must come from small business. This doesn’t mean a small business front that is owned by a large corporation.
Offer more loan guarantees at reasonable interest rates to allow small businesses to invest in needed technology for the sake of productivity improvement. Report after report states how under-invested Canadian companies are in R and D and technology. It’s because technology is expensive, and we need help.
Put a moratorium on grants and subsidies and loans to large corporations, especially publicly traded ones. They are able to go to the marketplace for capital, small businesses cannot.
Honourable members, you cannot solve all our problems. You cannot remove the risk of running a small business and we don’t want you to. We’re not asking for a handout, but sometimes we need a hand-up and this is one of those sometimes. Small business is a key driver of the Canadian economy, producing the wealth that many of the other presenters here are asking you to redistribute in their direction. Help us to do that. At the very least, don’t forget or take for granted where it comes from.
[Excerpts of testimony given to House of Commons Finance committee]