The government treats businesses with small onions: the average interest rate on the loans it grants them is 2.08%, which is much less than what it charges students and community organizations.
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The average rate of 2.08% granted to businesses is compared to that of 2.52% imposed on municipal organizations, to that of 2.95% paid by students and to that of 3.05% assumed by community organizations, we learn in the public accounts 2021-2022, recently published by the Quebec Ministry of Finance.
“Interest rates this low should be seen as business subsidies,” launches Nicolas Gagnon of the Canadian Taxpayers Federation.
Less than its borrowing rate
The average interest rate on business loans is significantly lower than the rate at which the government does its own borrowing, which stood at 3.06% in the fiscal year that ended March 31, the accounts show. public.
The “significant advantageous conditions” granted by Quebec on business loans cost taxpayers more than $100 million a year, calculates the Ministry of Finance.
The low average rate is largely explained by the many interest-free loans granted to businesses over the years. According to the Ministry of the Economy, these accounted for almost 36% of the total in 2020-2021.
As of March 31, 2022, Quebec had lent more than $3.6 billion to businesses. This represents nearly 56% of all loans made by the government.
Risky loans
State loans to companies are risky: barely 35% of the sum of 3.6 billion dollars is protected by collateral assets. And no less than a quarter of the portfolio is covered by provisions for losses, which means that the government expects not to be able to recover these sums.
“With the recession approaching, the government should reduce certain expenses,” said Mr. Gagnon. Why not start with business grants? »
Less pampered students
Photo taken from Linkedin
Maya Labrosse, president of the FECQ.
For the president of the Quebec Collegiate Student Federation (FECQ), Maya Labrosse, the overall question of indebtedness is more important than the sole aspect of interest rates.
For years, student organizations have been asking the government to provide more scholarships in order to reduce the use of loans.
“We have to ensure that students do not go into too much debt, which would prevent them from having to bear these interest rates,” says Ms. Labrosse.
The FECQ hopes that Quebec will be able to agree with Ottawa on the federal project to eliminate interest on student loans, recently mentioned in Le Devoir.
40% jump in just one year in the amount of financial aid
The Ministry of the Economy, led by Pierre Fitzgibbon, granted more than $1.6 billion in financial assistance to businesses in 2021-2022, or 40% more than the previous year.
The amounts paid include $33.3 million allocated under the Capital ressources naturelles et énergie fund, $208 million through the Fonds pour la développement des entreprises québécoises and $1.36 billion through the Economic Development Fund , indicate the 2021-2022 public accounts published earlier this month.
Strong impact of the Pandemic
The figures for 2020-2021 and 2021-2022 were inflated by the Concerted Temporary Action Program for Businesses (PACTE), implemented in connection with the pandemic. Over a period of approximately 18 months, some 1,479 companies received a total of $1.24 billion in loans and loan guarantees under this program.
In 2019-2020, the Ministry of the Economy provided nearly $855 million in financial assistance to businesses, mainly in the form of loans, but also equity investments.
At the end of March, the government held more than $3.6 billion in business loans. By way of comparison, Ontario, whose population is 70% larger than in Quebec, had lent just $970 million to companies on the same date.
However, the credit quality of companies to which Quebec has advanced funds seems to be stabilizing.
In 2021-2022, the government did not have to record any provisions for bad debts in respect of business loans in its financial statements.
In the previous two years, he had written off more than $1.4 billion in this capacity. In particular, the government had to write off its entire $1.3 billion investment in Bombardier’s C Series aircraft program, now known as the Airbus A220.