Description: Ten percent or more of loans are in trouble at the Atlantic Canada Opportunities Agency (ACOA). That doesn’t sound like a very positive use of our taxpayer dollars. Banks typically have a loss rate of about one percent on business loans. Another federal government agency, the Business Development Bank of Canada, reports that only 3.3 per cent of its loans are in trouble.

Date:  October 28, 2019

Source:  financialpost.com

Link: https://business.financialpost.com/entrepreneur/fp-startups/east-coast-funding-agency-acoa-grapples-with-high-rate-of-bad-loans-worth-tens-of-millions

Discussion points: 

 1) Have you ever worked for a company that had an ACOA loan? How was the company doing?

2) Why do you think the rates of impairment would be so different for ACOA versus the banks?

3) Governments and banks both loan money to businesses. In making these loan decisions, they use various measures and indicators to determine credit worthiness. Take a look at page 543 of Wiley’s Financial Accounting: Tools for Business Decision-Making and read the various ratings the Dominion Bond Rating Service uses to rate the credit-worthiness of companies. What is the highest quality rating?