Loan Guarantee Program

In response to the recommendations received from the Minister’s Council on Forest Sector Competitiveness, the Ministry of Natural Resources has implemented new programs with the goal of addressing the competitiveness challenges faced by the Ontario forest sector. These programs aim to provide a positive climate for investment and strengthen the industry’s future through joint industry and government actions.

The Loan Guarantee Program (LGP) has the capacity to provide a series of loan guarantees up to a maximum of $350 million over five years. The loan guarantees will be issued to the forest industry’s lenders to support and leverage new capital investment projects in:

• New value-added manufacturing
• Increased fibre use efficiencies
• Energy conservation/efficiency – where this is a primary purpose
• Development of co-generation

Applicants may seek project support under either the LGP or the Forest Sector Prosperity Fund (FSPF) or both. The LGP targets:

• Proposals with demonstrable socio-economic benefits to northern and rural Ontario
• Proposals contributing to the longer-term health and sustainability of the Ontario forest products sector
• Proposals which enhance the diversification of the Ontario forest products sector
• Proposals which achieve results in more than one of the identified project investment areas
• Proposals for which issuing of the loan guarantee is a key determining factor in the project proceeding
• Value-added manufacturing and fibre efficiency projects for northern and rural Ontario
• Those energy efficiency and co-generation projects that demonstrate significant reductions in energy consumption and progress toward energy self-sufficiency

Eligible projects:

• Restricted to projects for the purposes outlined above
• Restricted to sites in northern or rural Ontario. (Rural Ontario includes all of Southern Ontario excepting seven major urban areas; The Greater Toronto Area, Hamilton, London, Niagara Region, Ottawa, Waterloo Region and Windsor. In Niagara and Waterloo Regions, areas outside the urban centres with a population of less than 100,000 are considered rural).

Eligible costs include cost of capital construction / improvements such as:

• Engineering and design
• Pre-construction site preparation
• Buildings and utility services
• Installed machinery and equipment
• On-site roads and transportation infrastructure

Loan Guarantee applications will undergo a screening. The process for evaluating applications for proposed projects is described below:

• Interested parties will contact the Ministry of Natural Resources (MNR) to receive necessary information, application requirements and directions
• If the prospective applicant satisfies the initial eligibility criteria, the applicant then approaches a qualifying lender
• The lender will assess the project proposal
• Once the applicant has reached tentative agreement with a lender, the application including a detailed project proposal is submitted to MNR
• MNR initiates 3 rd party due diligence
• MNR reviews the comments and recommendations of the due diligence provider prior to the submission of the application to the loan guarantee approval committee and the authorizing Ministers
• Upon approval, the lender and applicant will be notified and the province will commence the loan guarantee agreement process with the lender
• MNR and the lender will continue to monitor the loan and project status once the loan guarantee agreement has been executed and the loan is in place

Key aspects of the program are as follows:

• Terms for loan guarantees are generally a minimum of 2 years and maximum of 5 years
• Individual loan guarantees under the program will generally range from a minimum of $500,000 to a maximum of $25 million
• The loan guarantee is up to 100% of the loan received for the project
• The form of the guarantee can be either Residual or 1^st call, depending on the circumstances.
• Guarantee fee of 0.5% one time if Residual; and 1% one time if 1^st call.

Please direct your inquiries to:

Loretta Alexander at loretta.alexander@ontario.ca

Phone: (705) 945-6765

Fax: (705) 945-6796