Michael Denham, President and CEO of BDC (Business Development Bank of Canada), talks about the Alberta economy, its recovery and offers words of advice for struggling small business owners during the current crisis brought on by the COVID-19 pandemic.
Calgary’s Business: What does Alberta’s current economic outlook and recovery look like?
Denham: “We expect a provincial GDP contraction this year of around nine per cent and a recovery next year of around six per cent. And then a full recovery I guess back to where we were sometime over the course of 2022 up to the midpoint of 2023. There’s obviously lots of variables in play around public health and the pandemic. To a certain extent, the recovery has started and you look at some of the recent employment data and from April to May employment in the accommodation and food sector is up nine per cent, wholesale retail four per cent, transportation five per cent. It’s coming back but the unemployment level is still 13-14 per cent provincewide. But at least it’s started.”
Calgary’s Business: Once COVID is done, Alberta is likely to be still dealing with lower oil prices correct?
Denham: “If you look across North America, especially, all of the storage capacity for oil is basically full. That has a real dampening effect on prices going up even as demand picks up because there’s this surplus, this excess in storage. We don’t really anticipate, even if demand increases, oil prices going up much beyond the current levels. We just introduced a new financial product. A Mid-Market, Junior Loan, but it’s basically designed to address the instability of the pricing environment in oil where the loan to larger companies it goes from $12.5 million up to $60 million of credit and it’s basically designed so that the full amount that’s borrowed, the principal, only gets repaid in four years and then some of the interest over the course of the four years also gets added to that amount. So it’s designed to have relatively low level of payments for interest over the four years but the vast majority of the amount is to be paid back in four years and that’s premised on the fact that we anticipate a little bit more stability and more of an ability to plan in four years than now. This will serve as a bridge to get these larger companies through to that point in time . . . It’s something we’re doing that acknowledges just the uncertainty around oil prices that we expect in the months and potentially years ahead.”
Calgary’s Business: What advice do you have for small business owners who are going through these tough and challenging times right now?
Denham: There’s three things we’re saying to entrepreneurs because the times are really tough. The first thing we say is take full advantage of all the support programs and credit programs that are out there. The province has done a lot. The federal government’s done a lot with the CEBA (Canada Emergency Business Account) program and the wage subsidies. The banks have done a lot in terms of offering postponements of loans. And we’ve done a lot. We’ve postponed payments on our loans. We’ve extended working capital loans at a value of I think 13 or 14 times what we normally do. So entrepreneurs should definitely take advantage of what’s being offered.
“The second thing is to make sure that we all can hope for the best but plan for the worst. We encourage every entrepreneur to really look ahead week by week and begin to map cash flows. So when’s the cash coming in? When’s the cash going out? So you can anticipate when there may be a crisis or a challenge.
“The third thing . . . is easy to say hard to do but we encourage all companies to see if they can find ways to either pivot or shift their business a bit to find new sources of revenue . . . They’re not going to fill all the revenues they lost but it does allow for some cash to come in. We encourage all companies to see if there are some creative ways to get the revenues flowing even if their traditional markets are quiet.”