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Gov't to Small Biz: Stimulate Yourselves

Of billions flowing to boost BC economy, a mere trickle for start-up owners.

By Geoff Dembicki 6 Mar 2009 | TheTyee.ca

Geoff Dembicki is a reporter for The Tyee.

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Quesnel's Greg Woodward: Move to Saskatchewan?

He's an entrepreneur in the heartland of B.C. A Quesnel-based businessman who lives with his wife, dogs and small child on an acreage near town and chops firewood in the winter cold. For years, he's wanted to build a set of advanced greenhouses that could grow year-round produce for local markets.

So when Greg Woodward heard about the $14 billion stimulus package announced in this year's provincial budget, he went searching for a $60,000 loan. Days later, he emerged from a bureaucratic maze of answering machines and e-mail convinced he wouldn't receive a penny from the B.C. government. The process left him so discouraged he's thinking about relocating to Saskatchewan, where he said he could get $15,000 in start-up money.

As the province enters its most protracted recession in years, some insiders believe modest, local businesses offer a way out of the financial crisis. But with most stimulus money in the Feb. 17 budget targeted towards multi-million dollar infrastructure projects, the government's plan may do little to alleviate B.C.'s economic woes.

"I think they've missed the boat," said Jerry Botti, general manager of Community Futures Nadina, which provides loans and advice to prospective business owners. "For true community stability, long-term investments in small businesses really make a difference."

Tough economic times

Woodward started thinking about growing tomatoes and peppers in the harsh winter climate of interior B.C. six years ago. Expensive technology postponed his plan, but recent food price hikes and cheaper artificial lighting have made the venture feasible.

Depending on its size and scope, he estimated the business could create up to 20 Quesnel jobs in the midst of a financial crisis. Like dozens of hard-hit B.C. communities, the forestry downturn has put scores of labourers out of work and sent shockwaves through the local economy.

"You notice it in the mall parking lots," Woodward said. "The base of commerce is falling apart, people aren't shopping."

Rising unemployment, spiraling household debt and tightened credit mean traditional lenders aren't eager to help. When Woodward approached his local bank for a start-up loan, he couldn't meet the institution's stiffer-than-usual criteria.

Undeterred, he approached Community Futures, a federally-funded non-profit agency with 34 branches in B.C. The organization loans money to riskier ventures, but asks for down payments of about 20 per cent and rigorously monitors fledgling businesses.

Woodward said his greenhouse project would likely qualify for support -- and he has enough capital to meet the requirements -- but he decided to look for funding sources with less red tape. That's when his headache began.

'Complete waste of time'

In early February, Premier Gordon Campbell announced $14 billion in stimulus spending over three years, with hundreds of millions of dollars fast-tracked for the coming months.

Though the money is slated for major infrastructure projects such as road upgrades, Woodward began contacting government departments to see if prospective business owners would see any benefits.

"That turned out to be a complete waste of time," he said.

Woodward spent two days clicking on broken web links and leaving unreturned voice messages. When he did get officials on the phone, they directed him to government websites or told him to contact someone else.

Eventually, a mid-level bureaucrat at the Ministry of Agriculture informed him that small businesses won't receive any additional start-up funding in this year's budget.

The Tyee contacted Gary Webb, business services advisor at Small Business B.C., to verify Woodward's story. According to its website, the non-profit agency is "British Columbia's key resource centre for business information and services."

When people ask for help in finding loan sources, Webb told The Tyee he sends a "standard response by e-mail" with a list of available options.

Asked if prospective business owners would have a hard time finding start-up money through the B.C. government, Webb agreed the process could be discouraging.

"As soon as you mention grants, you're probably going to get a standard statement on where to go or they'll just try to pawn you off because there's not really any free money to start a business," he said.

What's in a stimulus package?

During tough economic times, governments need to spend money where they're sure to get a return, said John Winter, president of the B.C. Chamber of Commerce. In this year's provincial budget, that translates to billions of dollars for shovel-ready projects and an estimated 88,000 jobs over three years.

Far from shutting the door on small business, Winter said independent firms in the construction industry -- and those that service it -- will see huge benefits from the spending package. But he acknowledged that many companies not involved in either sector will have little to celebrate.

And tough luck for fledgling entrepreneurs.

"It's not designed to be a new business stimulant, it's designed to be a current business support," he said. "This is a very precarious time of an economic cycle to invest in new businesses."

Instead, the provincial budget cuts the small business tax rate by two percentage points and boosts worker training programs. Those measures complement a recent federal infusion of $350 million into the Business Development Bank of Canada, Winter said.

"To the province's credit, they didn't go off on a tangent and start creating all new stimulus programs," he said. "They leveraged the federal dollars."

B.C. Minister of Small Business, Technology and Economic Development Ida Chong did not return The Tyee's phone calls.

Province missed out

Jerry Botti runs the Nadina branch of Community Futures out of Houston, a northern B.C. town with a 60-foot-tall fly-fishing rod, the world's largest. He told The Tyee his small staff is struggling to deal with a deluge of loan applications caused by forestry layoffs and withheld credit.

"We've seen a lot of people come forward looking for some financing to get them through a tough period," he said. "All of us expect that the demand is going to become much higher over the next couple of years."

Botti isn't opposed to large-scale infrastructure spending, but he thinks the province missed a golden opportunity in its recent budget.

Generally speaking, he said, small businesses provide long-term jobs, generate dependable revenues and spend more in the local economy than big contractors from outside the area. "A million dollar project can have some great benefits for a community but it's here and then gone," he said.

Over the last 15 years, his Community Futures branch has helped start almost 700 businesses -- and 75 per cent are still operating.

"Most CF's have similar statistics," Botti said. "We've certainly had a huge amount of job creation out of that."

Saskatchewan beckons

After his experience with the B.C. government, Woodward decided to look to other provinces for loan sources. He was blown away by the difference.

"After two days of busting my head up against the wall here, I started sourcing info in Saskatchewan, and in under two minutes they had me on the phone with Farm Credit Canada."

Woodward has applications in with the federal lending agency and is seriously considering a move to the prairies. According to government sources he spoke to, he's likely eligible for $15,000 in provincial funding under the Small Business Loans Association Program. And he said the province appeared willing to help him find land for his greenhouses.

All this has Woodward shaking his head in disbelief.

"It's a totally different approach," he said. "The attitude is way better."

Over the last few days, Woodward received a glimmer of hope from the B.C. government. During a last minute conversation before deadline, he told The Tyee he'd been contacted by several bureaucrats who'd lamented the current loan system and promised to look into the issue.

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