Small businesses are struggling to find loans and accounting advice in the Yukon, according to a Department of Indian and Northern Affairs-sponsored study tabled in a recent court case.
The study – published in November 2009 but kept secret until now – paints a dire picture for Yukon entrepreneurs. It blames the Business Development Bank of Canada and Dana Naye Ventures, both chartered banks designed for loan services, for failing to support the territory’s most vulnerable companies.
A food distribution company had to go to Winnipeg to find capital. A financially sound contracting company purchased $500,000 of equipment but couldn’t find a loan for an advance. One company was asked to provide security three times the size of the loan, but couldn’t afford it. A partnership between a First Nation and a construction company fell through because they couldn’t find a consultant to help them.
These are just some of the anonymous stories outlined in the study, which was done when the Canadian Northern Development Agency was being created. The study was intended to help the new agency find a constructive role in the Yukon’s economy.
And there’s plenty of room for improvement, it found.
“Small business does not feel it is adequately supported by government or the private sector with respect to accurate business advisory services and financing,” says the study.
“There is considerable ignorance with respect to what programs are available and uncertainty as to where to get support.”
Many competent business advisers are up to their necks in clients, the report found. Even mature businesses have trouble finding help planning their financial strategy.
One loan services organization – the Canada Business Development Centre – gets especially harsh treatment in the study.
“(The development centre) is not providing a meaningful role (other than providing internet access to the community) and appears to be severely underfunded,” the study says.
Businesses complain about inflated advisory fees, according to the study.
But their biggest beef is with finding loans.
“Financing appears to be very difficult to access,” it says.
The study points fingers at its sponsor, the Business Development Bank of Canada, and Dana Naye Ventures.
“The chartered banks are not viewed favourably by local business owners,” the report says.
So, the report suggests, the Canadian Northern Development Agency, which was still in its infancy at the time of publication, could replace Dana Naye as a borrowing service for Yukon businesses.
“The influence of (Dana Naye) as a business advisory and financial service could be diminished,” the report says.
The Canada Business Development Centre would also become redundant, it says.
The study advocates the creation of another financing service popular in rural areas, a Community Futures Development Corporation.
Such a corporation would be “unbiased” and help non-aboriginal borrowers, because the study found Dana Naye Ventures favours First Nations.
Dana Naye Ventures would not return a request for comment.
The study was tabled as evidence in a court case filed by Dana Naye. It’s suing the Department of Indian and Northern Affairs and the Business Development Bank of Canada over the study’s findings.
The researchers hired for the study heard Dana Naye “lacks sufficient staff resources to provide mentoring to clients post-lending.”
There is also a “high staff turnover” that indicates management problems.
The board of directors is “dysfunctional” and the manager is often absent, says the study.
The “staff lacks experience, which often leads to wrong advice,” it says. The management and staff are “not very sophisticated,” it adds.
Dana Naye originally sued for defamation in June. They argued the study – passed around federal government departments – counts as a form of publication.
But last week they filed court applications to have one of the study’s researchers, Eric Brown, confess who told him the negative information. The study was tabled as evidence in the request.
Brown lives outside the Yukon, and Dana Naye asked the court permission to find him and serve him with a notice that he must provide information on his sources. They have yet to serve Brown with an a request for the sources’ identities.
Contact James Munson at