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Feds, financial firms announce fund for small and medium businessesFeds, financial firms announce fund for small and medium businesses

first_img Canada’s biggest banks and other financial services institutions have launched a fund of up to $1 billion over 10 years to help small and medium-sized companies access capital to grow their businesses. The fund, which will be financed by the private sector and aims to fill the gap between angel investors and the public markets, will initially start at $500 million for the first year. Alexandra Posadzki Share this article and your comments with peers on social media The fund could be increased to a total of $1 billion over the next nine years if demand from the businesses is strong and the fund’s performance is good. Royal Bank of Canada (RBC) CEO David McKay said small businesses face challenges accessing the cash they need to expand their operations — for example to hire new staff, purchase new equipment or facilities, or acquire another company. “We do have a very strong and vibrant investment community … but it’s subscale and it’s fragmented,” McKay said. “So we do have a challenge raising capital for growth in our economy.” The financial services sector has been meeting for about a year to try to solve this problem, he said, and the investment fund is the solution they devised. The fund will be set up as a for-profit, independent entity governed by a board of directors that will determine which companies to invest in. It will only be acquiring a minority stake in the businesses it invests in, allowing the firms to retain control of their operations. In addition to providing cash, the business growth fund will also help companies seek mentorship and advice to help them flourish. Initial contributors include the country’s six biggest banks: Bank of Montreal, RBC, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and National Bank of Canada. Insurance companies including Manulife Financial Corp., Sun Life Financial Inc. and Great-West Life Assurance Co. are also contributing to the fund, as are several other financial services institutions including HSBC Bank Canada, ATB Financial, Laurentian Bank of Canada and Canadian Western Bank. Several other companies are considering coming onboard. The announcement follows a recommendation issued last month by a federal panel advising Finance Minister Bill Morneau on economic growth. A report by the federal Advisory Council on Economic Growth recommended the government encourage the financial sector to create a business growth fund of $1 billion to provide so-called “patient capital” to high-growth companies that want to expand. The council noted that it was particularly enthusiastic about the initiative because it doesn’t place any additional burden on taxpayers. Morneau said the initiative highlights the critically important role that the private sector plays in stimulating innovation and economic growth. “This effort of the banks and other institutions to come together is one that we’ve been pleased to be involved with, of course, but it’s really been a bank-, insurance company- and fund-led initiative, to seek a way to provide capital, patient capital, that will make an important, long-term difference for our company,” Morneau said during a news conference in Toronto on Thursday. Facebook LinkedIn Twitterlast_img read more