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18 The Canadian Statesman, Bowmanville, Wednesday, May 25,1994 Section Two BUSINESS and FINANCE, Switzerland Model Can Work Here FBDB Capital Loan Program Available for Small Business During an address to Canada's Technology Triangle in Waterloo May 11, the Honourable John Man- ley, Minister of Industry, announced a new $50 million small business financing financing program to be provided by the Federal Business Development Bank (FBDB). The new program, called Working Capital for Growth, will provide working capital loans to small and medium-sized businesses that have identified new opportunities for growth and expansion. This program will provide working. capital loans when conventional sources of shortterm shortterm financing are unable to offer sufficient levels of funding to support support growth. FBDB's loan will "top up" financing from conventional lenders. "FBDB's Working Capital for Growth program will be a positive measure for addressing the immediate immediate working capital needs of small businesses," said Minister Manley. "The program will be welcomed by the Government's Small Business Working Committees which are developing developing longer term solutions to improve improve small businesses' access to capital," he added. The $50 million for the program will be borrowed by FBDB on capital markets and repaid in the same way the Bank finances its regular lending operations. "Economic conditions have made it increasingly difficult for small businesses to obtain working capital," capital," says Francois Beaudoin, President President and Chief Executive Officer of the Federal Business Development Bank. "As the economy starts to gain The Statesman Proofreader's Words of the Week... A carat - A unit of weight for gems, one metric carat being 200 milligrams. karat - The twenty-fourth part by weight of gold in an article: 18- karat gold has 18/24 or 3/4 gold by weight. momentum, fewer businesses have sufficient cash available to finance growth. FBDB's Working Capital for Growth program has been developed to help small businesses capitalize on opportunities to grow and create jobs." FBDB will work closely with a client's financial institution in providing providing financing. FBDB's working capital term loan plus existing financing financing from the client's financial institution institution will raise eligible businesses' working capital to levels that enable, them to expand. The program is aimed at existing Canadian-owned small businesses which have new or expanded markets for their products but need working capital. Businesses must be able to demonstrate support from current lenders, growth potential and a past earnings record with good future prospects. Ptoven management capability is a must. Companies must have a solid business plan which outlines what steps are being taken to expand operations operations or improve the company's viability. viability. FBDB business counselling is also a part of this program and helps business owners manage expansion effectively. The maximum loan amount is $100,000. The repayment schedule is flexible and tailored to the needs of the business. Principal payments may not be required in the first year and subsequent payments will be adjusted to projected cash flow. The maximum maximum amortization is seven years. For more details on FBDB's Working Capital for Growth program, program, entrepreneurs may call any of the Bank's 78 branches across the country, or call toll-free, 1-800-361- 2126. The Federal Business Development Development Bank promotes the creation and development of small and mediumsized mediumsized business in Canada. A Crown corporation, FBDB provides specialized specialized financing for cdmmercially- viable businesses including term loans, venture loans and venture capital capital as well as a wide range of planning, planning, counselling and training services. services. This year marks FBDB's 50th anniversary of helping entrepreneurs to build successful businesses. ARE YOU TIRED OF PAYING TAXES? Call Me about the C.l. SECTOR FUND You don't need to win the Lottery, you need to keep more of what you make. The C.l. SECTOR FUND allows you to invest in Canadian and Global Mutual Funds while DEFERRING TAX on Capital Gains. REGAL CAPITAL PLANNERS LTD. Call Steve Scatterty Financial Advisor, Bowmanville 623-1936 THE AVERAGE TAX RETURN FOR 1993 WAS *900.00 © By Paul Pagnuelo It's considered one of the most credit-worthy countries in the world. Its unemployment rate is almost.non- existent - somewhere between 2% and 3%. It boasts low tax rates, low inflation, and streets that arc twice as safe as Canada's. It has the second highest standard of living in the world, and because of its bright future, the Economist magazine magazine just called it the best place in the world to live. Sounds like taxpayers' Utopia - Who runs this country, anyway? What kind of politicians live here, and what kind of salary and pension benefits are needed to attract such qualified leaders? Last year the people people actually agreed to an increase in the gas tax! The country is Switzerland and everyday people run the place. The Swiss people have used referendums to control their politicians since 1848, This industrialized country has achieved a political and economic climate climate that is envied by other nations. The relative harmony in Switzerland provides a model for Canadians, especially especially when one considers that Switzerland has four national languages. languages. Switzerland is a citizen state. Non-partisan, everyday people, through direct democracy, are allowed allowed to make the decisions that affect affect their lives. In fact, the Swiss parliament parliament cannot pass any law until the people have had the opportunity to decide whether they will vote. If a petition containing 50,000 signatures of eligible voters is gathered, the issue issue must be put to a vote. The results of the vote are binding on the government. government. If the law is not challenged it comes into effect. Anyone who wishes to institute a new law can initiate a nationwide binding vote on any issue by collecting collecting 100,000 signatures. When these nation-wide votes do take place, the government has the right to put forward forward a counter proposal. Essentially, the people can choose either the citizen-initiated citizen-initiated proposal or the government's government's revised version - or reject both. This binding provision makes all the difference - witness the non- biding 1991 balanced budget vote in Saskatchewan, where 80% of voters Sharp Increase in Banks Loans for Small Businesses Industry Minister John Manley announced announced today that loans to small businesses in Canada under the Small Business Loans Act (SBLA) sharply increased in January, February and March 1994. The total of these loans, $561 million, exceeds the value of all loans for fiscal year 1992-93. "Over the past 12 months ended March 31, 1994, the amount of loans has increased more than four-fold to $2.3 billion from the previous year," said Mr. Manley. "This points to a promising increase in small business activity as well as a follow-through by major banks in their commitment to boost support to small businesses." Mr. Manley noted that all the provinces share in this increased capital capital to small business delivered by all participating financial institutions in Canada. The small business borrowers are using the funds to start new businesses businesses and to expand existing ones. Over one-third of the 9,900 loans made were to businesses starting out and over half to businesses in their first three years of operation. "These new small businesses need workers," Mr. Manley said. "In the past year, small businesses participating in this program program have created over 70,000 new jobs." Background to the program is contained in the SBLA Annual Report Report tabled in the House of Commons on April 29, 1994, by Mr. Manley on behalf of Paul Martin, Minister responsible responsible for the Federal Office of Regional Development - Quebec, Lloyd Axworthy, Minister of Western Western Economic Diversification, and David Dingwall, Minister responsible for the Atlantic Canada Opportunities Agency. asked for such legislation and the government has been able to ignore the voice of the people. So how will our politicians oppose oppose these kinds of proven reforms? They will argue that average citizens citizens aren't qualified to make 'complex 'complex and important' decisions. Do you really buy that? A hundred years ago, representative democracy may have made more sense. It took weeks to communicate from one end of the land to the other, people were generally generally less educated, and had less knowledge of government. Canadians now have enough experience experience with government to be very sophisticated in the opinions they hold and the decisions they make. Governments have increasingly got in their way, on their backs and into their wallets at every chance, and taxpayers have learned more about 'governing' every step of the way. Governments have also provided some services that people have come to value and are willing to pay for. Technological advances have given us tremendous power to leam about and discuss public issues instantly. Politicians, in an about-face from -their usual antics, will also argue that direct democracy is costly. The truth is that referendums don't pose an added cost - simply a transfer of priorities. priorities. There's really only one simple reason why politicians don't want to extend democratic power to the people. people. They don't want to give up their political power. "Let's Talk Taxes" is a feature service of the Ontario Taxpayers Federation. by Brian Costello RATES WILL FALL IN SUMMER Do you have a tendency to jump on the sport's bandwagon only at playoff time? Does baseball mean nothing all year long but a great deal in October when the Blue Jays are in the World Series? Or, what about now when your favourite team is battling for Lord Stanley's silver? I think we all have a tendency to do this about a lot of things. One of them is interest rates. Another is stock markets and mutual funds. I am convinced the Federal Reserve in the United States, The Bank of Canada and the banking institutions all of a sudden woke up, realized we were in the final playdowns and all tried to get tickets at the same time. This interest rate thing is more than overdone. This summer anybody, everybody, who owns interest sensitive investments is going to earn a well above average rate of return when the financial world realizes it has made a mistake continually pushing interest rates higher this year. This is not a promise that we've seen the last of the rate increases as the "Fed" usually starts late and quits too late. But, I can say with confidence that come this summer the documentation will be evident to show the Fed that things have been overdone. The Fed has increased interest rates for two reasons. The most important is to discourage speculation in the American economy that might cause a return to high inflation. There's merit to this cause as we learned in the 1970's and early 80's. The other reason, of course, is to attract money into the U.S. to support its dollar. But, I believe we will learn that there really is no need to fear rapidly rising inflation. For example, look at recent economic reports. 267,000 new jobs were reported in the United States. Sounds like their economy is surging. But, many, if not most of those jobs were part-time. American inventories are at close to all-time highs. At the same time retail sales actually fell .8% last month. Industry has been running at a hot pace producing goods it hoped would sell. But, they aren't selling. One of two things has to happen, or maybe even both. We're going to see some big sales this summer wiping out inflation fears. And, we aren't going to see a whole lot of jobs created. In fact, now you can probably see why a high percentage of new jobs right now are part-time. You can usually, see future inflation in the wholesale markets before retail. Well, last month wholesale prices fell .1%. That means merchants are buying at slightly lower prices already. In fact, over the last twelve months wholesale prices have fallen .4%. These aren't big declines but they definitely aren't increases either. What about the fears at the retail level? Well, we know we have no inflation in Canada. Our interest rates are only rising because we have to move with the Americans. Well, last month their consumer prices rose by only .1%. On the year they are up by only 2.4%. With negative wholesale prices and declining retail sales we're hardly seeing indications of runaway inflation. Actually, if we removed auto sales from these numbers they would look worse. Auto sales have been in high gear. But, part of the reason is the low cost of financing. And the growth has been in trucks more than cars. Then we have real estate. When rates started to move higher many buyers who had been looking got off the fences and bought to beat the rate increases. Many arranged pre-approvèd financing to lock in their rates. But, now that rates are higher watch the business dry up. New housing starts are up 5. 9% but they are still well below where they used to be. If we include other countries I think the picture is even more obvious. Germany just cut its rates. Most of Europe will be. Sooner or later that will take the pressure off North American currencies. Then our rates can fall. Don't expect them to fall all the way back to their winter lows. But, I'm comfortable that you can count on them falling a chunk of the way. Those who take advantage of it by buying interest sensitive investments like bond mutual funds, preferred shares, high yielding equity stocks and mutual funds, mortgage backed securities and especially international interest sensitive investments should reap a substantial windfall this summer and fall. When rates fall Canadian equities should also do well as they have two to three years of tremendous earnings growth ahead of them. Those who have been able to resist the urge and stick with short term, open and variable rate loans will get a chance to lock in at lower levels.