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Information Regarding BDC Loans

Fasken
Reading Time 2 minute read
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There have been many questions around the Business Development Bank of Canada (BDC) loan program announced by the Federal Government. BDC has shared important and helpful information with our lawyers in connection with applications that we have assembled below:

Loans are currently structured as 12 months of interest-only payments, followed by 24 months of principal payments representing 40% of the principal amount, followed by a balloon payment of the remaining 60%. The rate is at 3.3% as of today.

BDC Requires:

  • A GSA and/or mortgage
  • No Subordination of BDC's Rights
  • Personal Guarantee

4 Questions for all Relief Loans:

What activity level do you anticipate to operate at over the next six months (i.e. full shut down or reduced capacity)?

Examples:

  • What are the main impacts on your activities?
  • Complete or partial closure of your premises?
  • Specialized staff / employees required?
  • Access to premises: common workspace (number of employees) or remote work possible?

Quantify the key carrying costs for the next 6 months?

Examples : rent, insurance, electricity, salaries, financial fees, etc.


With a working capital loan and/or postponement (and support from other lenders) does this cover your cash needs for the next six months?

Examples :

  • Cash and availability on your current bank line of credit?
  • Do you have other sources of funding available?
  • Personal ability to inject funds in addition to BDC loan?

What are your agreements with key suppliers (and customers) on payment terms / support for the next six months?

Examples :

  •  Have you undertaken discussions / negotiations with third parties?

Details to also include:

  • A comment to ensure that proceeds are to be used to:
    • Ensure ongoing operations (understanding they may be reduced), or
    •  To safeguard existing assets (i.e. not to payout existing lenders or consolidate debt).
  • Comment on the discussion held with your existing operating lender: lender to provide appropriate support as required (i.e. waiver of covenants, extension of the facility, over-margining etc.).
  • Comments on your financial needs for the next 6 months and how these needs will be covered (i.e. with BDC support, other financial partners, shareholder injection, revenue stream etc.).

Supporting Documents:

  • BDC Application form 4025
  • Statement of Personal Affairs 4037 of all shareholders 25% and over
  • Photo ID of all shareholders 25% and over
  • Operating Lender Credit Facilities Agreements
  • Org. Chart Showing Beneficial Ownership
  •  Org. Chart Showing Management
  • Most-recent three years of year-end financial statements
  • Most-recent interim Y-o-Y comparable financial statements (if Year-end accountant-prepared statements are more than 3 months old)
  • Aged receivables and payables listings at year-end and interim period (if applicable)
  • Projections and forecasts:
    • 6-month detailed cash flow
    • 6 to 18 months additional forecasts.

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