Feds announce further support for small businesses during COVID-19 crisis

On Friday, March 27 the Government of Canada announced new measures to support small businesses dealing with the economic impacts of the coronavirus (COVID-19) pandemic.

Part of the government’s COVID-19 Economic Response Plan, which is already committing $107 billion in support to Canadians so they can buy groceries, pay rent, and care for their loved ones, and also supports businesses.

The new measures will include:

• Announcing a 75% wage subsidy for qualifying businesses, for up to three months, retroactive to March 15, 2020, designed to help businesses to keep and return workers to the payroll. More details released by the Prime Minister indicated businesses of all sizes with revenues that have decreased by at least 30% because of the COVID-19 pandemic will be eligible for the subsidy, and it will cover 75% of each employee’s wages to a maximum of $847 a week.
• Allowing businesses, including self-employed individuals, to defer all Goods and Services Tax/Harmonized Sales Tax (GST/HST) payments until June, as well as customs duties owed for imports. This is designed to help businesses so they can continue to pay their employees and their bills, and help ease cash-flow challenges across the country.
• Launch the new Canada Emergency Business Account. This program will provide up to $25 billion to eligible financial institutions so they can provide interest-free loans to small businesses. These loans – guaranteed and funded by the Government of Canada – will ensure that small businesses have access to the capital they need, at a zero per cent interest rate, so they can pay for rent and other important costs over the next number of months.
• Launch the new Small and Medium-sized Enterprise Loan and Guarantee program that will enable up to $40 billion in lending, supported through Export Development Canada and Business Development Bank, for guaranteed loans when small businesses go to their financial institutions to help weather the impacts of COVID-19. This is intended for small and medium-sized companies that require greater help to meet their operational cash flow requirements.

More details:

• The new Canada Emergency Business Account will provide funding to eligible financial institutions so that they can provide interest-free loans in the form of lines of credit of up to $40,000 to businesses with payrolls of less than $1 million. A quarter of this loan (up to $10,000) is eligible for complete forgiveness.
• The new Small and Medium-sized Enterprise Loan and Guarantee program will operate as follows:
  • Export Development Canada will provide guarantees to financial institutions so that they can issue new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized businesses. These loans will be 80 per cent guaranteed by Export Development Canada, to be repaid within one year.
  • Small and medium-sized businesses can also get support through a new Co-Lending Program that will bring the Business Development Bank of Canada together with financial institutions to co-lend term loans to these businesses for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program, which will be risk-shared at 80 per cent between the Business Development Bank of Canada and the financial institutions. Eligible financial institutions will conduct the underwriting and funding directly for customers.
• The government has already introduced several measures to support businesses affected by COVID-19:
  • Providing eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration.
  • Extending the maximum duration of the Work-Sharing program, from 38 weeks to 76 weeks, for workers who agree to reduce their normal working hours because of developments beyond the control of their employers.
  • Establishing a Business Credit Availability Program, largely targeted to small and medium-sized businesses, through the Business Development Bank of Canada and Export Development Canada. These organizations are working closely with private sector lenders to coordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation, and tourism.
  • Deferring the payment of income taxes. The government is allowing all taxpayers to defer, until after August 31, 2020, the payment of income tax amounts owed on or after March 18 and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.