NTI seeks southern lending power for local businesses
$163 million in expansion costs too rich for local banks to handle
Inuit leaders are courting southern investors to provide more than $160 million that Inuit businesses need to fill their appetite for growth.
A recently released survey shows that up to one-third of Inuit-owned firms are looking for a combined $163 million in capital to take on more employees and more contracts in the next three years. Some businesses will need the money to expand in other ways, such as buying real estate or financing the construction of new buildings.
But the business owners said they can’t access the cash because sizeable loans are difficult to set up with local banks in Nunavut.
NTI president Paul Kaludjak said Inuit leaders have tried drumming up more support for business through government programs.
But now, he says it’s time to tap investment groups in the South.
Kaludjak said taking investments from outside Nunavut will make the territory more independent in the long-run, because the influx of capital will allow local firms to compete with bigger businesses from the South.
“A lot of what we’ve seen is what’s called a vacuum effect, where the cash goes out and benefits people outside of Nunavut,” Kaludjak said. “We want Nunavut to become the vacuum.”
Delegates for Nunavut Tunngavik Inc. ordered the survey at their annual general assembly in 2003. The survey, released to media earlier this month, provides a rare snapshot of Inuit firms operating in the territory’s private sector.
Aarluk Consulting, an Iqaluit-based firm, based their report on the responses on mail-out surveys and phone interviews with 112 companies, or 38 per cent of NTI’s Inuit firm registry.
Almost half the businesses reported over $1 million in sales. One third of businesses surveyed said they planned to expand.
Terry Forth, managing partner of Aarluk Consulting, said the survey results show NTI that funding is still needed to help Inuit businesses.
Forth compared the $163 million projection with the mega-construction project done by the Nunavut Construction Corp. in the 1990s. That covered the three regions of Nunavut and involved more than 200 housing units, nine office buildings, and the legislative assembly.
“Is it a drop in the bucket?” Forth said. “I don’t have anyway of measuring that. But it sounds like a pretty big number to me.”
Forth cautioned that the report doesn’t necessarily mirror trends within the entire Inuit business community, because it’s missing feedback from around 200 businesses.
But he said the information gap doesn’t hide how much Nunavut needs a loan agency like Atuqtuarvik Corp., a for-profit organization based in Rankin Inlet that provides loans over $1 million to Inuit-owned businesses.
Atuqtuarvik was created by NTI to help economic development in 1999 to help the exact problem identified in the survey results – local businesses have big credit needs.
But Atuqtuarvik now faces the dilemma of how to re-fill its loan coffers, after lending out more than $49 million to Inuit firms. The NTI executive has been lobbying the Nunavut Trust for about a year, to chip in at least $8 million. But the trustees refuse, arguing that they would be jeopardizing the trust capital, held on behalf of Nunavut land claim beneficiaries.
Ken Toner, president and CEO of Atuqtuarvik, said he can keep up his current rate of loans for the next 18 months.
In the meantime, Toner said he’s been setting up loan partnerships through lending agencies like the Nunavut Business Development Corp.
“I think the whole way is getting all these organizations together working as a team,” Toner said.
The report shows that businesses are frustrated with more than a lack of investors and loans.
The firms listed several major obstacles to expanding their businesses, including:
* limited market size (46 per cent of respondents);
* competition from “southern businesses” (38 per cent of respondents);
* and lack of community infrastructure (31 per cent).
Most firms said they want extra financing over the next three years in order to expand how much business they do in Nunavut.
But many companies also hoped they could find funds to pay for new buildings, new real estate and new specialized equipment.
Almost three quarters of the firms that responded were 100 per cent Inuit-owned.