The federal government unveiled a two-pronged effort Thursday aimed at improving Canada's ability to foster growth at a time when a rising tide of protectionism threatens to hurt the country's economy.
Canada's biggest banks and other financial institutions launched a fund of up to $1 billion over 10 years to help small- and medium-sized companies access capital to expand 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 start at $500 million for the first year. It follows a recommendation issued last month by a federal panel advising Finance Minister Bill Morneau on 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 country," Morneau told a news conference in Toronto.
If demand from the businesses is strong and the fund's performance is good, it could be increased to a total of $1 billion over the next nine years.
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 sub-scale and it's fragmented," McKay said.
The financial sector has been meeting for about a year to try to solve that 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 who will determine which companies to invest in. It will acquire 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 – the Bank of Montreal, Royal Bank, TD Bank, CIBC, Scotiabank and National Bank. Insurance companies Manulife, Sun Life and Great-West Life are also contributing to the fund.
Elsewhere in Toronto, Economic Development Minister Navdeep Bains announced changes intended to make it easier for companies to lure workers from abroad with skills in high demand.
One of the measures to launch June 12 is meant to help high-growth Canadian companies attract specialized talent through a faster, streamlined temporary foreign worker program. The initiative would establish a two-week standard for processing work permit applications and help Canadian firms fill jobs where there is a proven gap in the domestic labour market, Bains said.
Work permit requirements for highly skilled work for short periods – 30 days or less over one year – would be dropped, he added.