Capital Fund for Business Succession

The Capital Fund for Business Succession was created to support business transfers in regions serviced by a Community Futures Development Corporation (CFDC) or Business Development Centre (BDC), by increasing their equity to levels acceptable to venture capital firms recognized in Quebec, while paying special attention to priority sectors in these regions.

Canada Economic Development will invest up to $8 million to create the Capital Fund for Business Succession via the CFDCs’ Common Fund.

This initiative will be in effect from November 1, 2006 to October 31, 2007, or until depletion of the $8 million.

 Submission of applications

Applications must be submitted to a venture capital firm recognized in Quebec.

Target clientele

 SMEs located in eligible regions.

Target venture capital firms

Venture capital firms recognized in Quebec that can provide the support services required for successful completion of projects.

Eligible regions

Regions serviced by Quebec CFDCs and BDCs as well as municipalities in adjacent areas. However, particular attention will be given to projects outside of urban areas. A list of all CFDCs and BDCs is included.

Potential project contributions from partners

Entrepreneur (owner's equity):

• Minimum of $125,000.

CFDC through the Capital Fund for Business Succession:

• Minimum of $125,000, equal to the entrepreneur's investment up to $500,000.

Venture capital firm(s):

• At least double the amount as the total investment by the CFDC or BDC through the Capital Fund for Business Succession.
  
  
• Minimum of 50% to be the same type of funding as the CFDC or BDC.
  

CFDC or BDC through their regular fund:

• At least 20% of the total amount invested by the Capital Fund for Business Succession. In case of a loan, the interest rate will be set according to the applicable CFDC or BDC rate.
  

Type of assistance

• The Capital Fund for Business Succession helps to increase the Capital of enterprises (share capital or convertible debentures) to levels acceptable to venture capital firms recognized in Quebec.
  
  
• Priority is given to entrepreneurs to buy back CFDC or BDC shares at the initial investment price, at any time within a five-year period.
  
  
• Failing a buyback by the entrepreneur by the end of the five-year period, the enterprise has three months to buy back the shares, under the same conditions.
  
  
• If the enterprise does not execute a buyback within three months, CFDC or BDC shares are converted into interest-free debt payable to the CFDC or BDC within a period of three years.
  
  
• Failing repayment of the debt, the applicable CFDC or BDC interest rate takes effect.
  

Minimum eligibility requirements

• The enterprise is located in an eligible region.
  
  
• The client meets the minimum criteria normally required by venture capital firms recognized in Quebec.
  
  
• The entrepreneur agrees to the support process proposed by the CFDC, BDC or venture capital firm.
  

CFDC management fees

Maximum of 2%.

Evaluation

Results and impact of the fund will be evaluated by CED.

CFDCs and BDCs targeted by the Capital Fund for Business Succession