UPDATE: Special Government Initiatives to Assist Canadian Businesses Impacted by COVID-19
Over the recent weeks, there has been a panoply of government programs and special measures aimed at providing assistance to businesses and not-for-profit organizations that are facing growing hardship and challenges during COVID-19. While it may not be exhaustive of all initiatives launched by each level of government, this summary will highlight a number of programs that could be of interest to small and medium-sized enterprises (SMEs) – including start-ups and early-stage companies.
THE GOVERNMENT OF CANADA’S COVID-19 ECONOMIC RESPONSE PLAN
Since the announcement of its COVID-19 Economic Response Plan, which committed some $107 billion in support to Canadians and businesses, the federal government has introduced several initiatives dedicated to assisting SMEs:
The Canada Emergency Commercial Rent Assistance for Small Businesses (“CECRA”)
On April 24th, the Prime Minister announced the implementation of CECRA, a relief measure to assist “eligible” small businesses that are currently struggling with the payment of their commercial rent. An eligible small business is a commercial tenant that pays a monthly rent of up to $50,000.00 and who had to close its business temporarily or whose pre-COVID-19 revenues decreased by at least 70%.
Under CECRA, the federal and provincial governments will provide forgivable loans to qualifying commercial property owners to cover 50% of the monthly rent payments payable by “eligible” small business tenants during the period of April to June 2020. In order to qualify, the property owners must agree to reduce the eligible small business tenant’s rent by at least 75% for the said period. More specifically, the property owner would reduce the rent by 25%, the federal and provincial governments would cover 50% (or 25% respectively) and the small business tenant the remaining 25%. Worthy to note that the forgiveness agreements would include a condition whereby the landlord cannot evict the tenant during the term of the agreement.
The Canada Emergency Wage Subsidy (“CEWS”)
This program first announced in mid-March went through several iterations in order to make it more flexible and expand its reach. The latest parameters for a business to qualify for assistance under the CEWS over a 12 week period are:
- With the exception of public sector entities, eligible employers include for-profit and not-for-profit organizations of all sizes operating in any sector of the economy whose gross revenues dropped by 15% or more based on a “Revenue Drop Test”. More specifically, to qualify for a subsidy for the period of March 15 to April 11, 2020, the gross revenue of an employer must have decreased by at least 15% in March 2020 compared to March 2019 or in comparison to the period of January-February 2020. For the other two periods, namely April 12 to May 9, 2020; and May 10 to June 6, 2020, employers are eligible for CEWS if they can show a 30% revenue reduction compared to the corresponding month of 2019 or their average revenues for the period of January-February 2020. The Revenue Drop Test is summarized in the table below:
|Period of Eligibility
|Reference Period for Eligibility Determination
|March 15 – April 11, 2020
|March 2020 over: (i) March 2019; or (ii) Average of January and February 2020
|April 12 – May 9, 2020
|April 2020 over: (i) April 2019; or (ii) Average of January and February 2020
|May 10 – June 6, 2020
|May 2020 over: (i) May 2019; or (ii) Average of January and February 2020
- The amount of the subsidy would equal to 75% of the first $58,700 normally earned by employee, or up to $847 per week for a twelve-week period (from March 15, 2020 to June 6, 2020);
- There is no cap on the total amount of subsidy or maximum number of employees for which the employer can claim a subsidy;
- Furthermore, on April 11th, the CEWS was expanded again to include a new 100% refund for certain employer-paid contributions such as for Employment Insurance and the Canada Pension Plan.
The Canada Summer Job Program
Pursuant to the temporary enhancements made to the Canada Summer Job Program, private-sector businesses, not-for-profit organizations and public sector entities alike could be eligible to receive up to 100% of the provincial or territorial minimum hourly wage for each youth employed for a summer job. This subsidy can also apply to part-time work and the required duration of employment (a minimum of 6 to 16 weeks) remains unchanged. However, the end date of employment was extended from August 28, 2020 to February 28, 2021.
The Business Credit Availability Program (“BCAP”), including the Canada Emergency Business Account, the Small and Medium-Sized Enterprise Loan and Guarantee, and the Co-Lending Program For Small and Medium-Sized Enterprises
The BCAP is one of the initial umbrella program bringing together a series of targeted economic relief measures to be delivered through private and public sector financial institutions. The BCAP rests on three main pillars:
- The Canada Emergency Business Account (“CEBA”) which is an emergency fund of $25 billion enabling financial institutions to extend government-funded and interest-free loans of up to $40,000 to qualifying businesses and not-for-profits organizations so they can pay their ongoing operating costs during COVID-19. On April 16th, the eligibility requirements were further relaxed to include businesses that paid between $20,000 and $1.5 million in total payroll in 2019, compared to the previously qualifying range of $50,000 to $1 million.
- The Small and Medium-Sized Enterprise Loan and Guarantee Program administered by the Export Development Bank (“EDC”). Under this program, EDC will guarantee operating credit and cash flow term loans of up to $6.25 million (including up to $5 million coming from EDC) that financial institutions grant to SMEs.
- The Co-Lending Program for Small and Medium-Sized Enterprises whereby the Business Development Bank of Canada (“BDC”) and financial institutions can co-lend to SMEs term loans of up to $6.25 million (including up to $5 million per loan coming from BDC).
- The Insured Mortgage Purchase Program whereby the Canadian government could purchase through the Canada Mortgage and Housing Corporation (“CMHC”) up to $150 billion of insured mortgages to facilitate continued lending to individuals and businesses.
Special Initiatives for Targeted Business Segments, including for Start-Ups and Young Entrepreneurs
On April 17th, a series of measures were introduced to address the lack of access to emergency funding by some businesses due to their location, type of activities or early stage of business development. Among them are the following:
- For Young Entrepreneurs, access to $20.1 million through the Futurpreneur Canada Program;
- For Early-stage companies will be able to access $250 million through the Industrial Research Assistance Program (“IRAP”);
- For Regional SMEs unable to access the COVID-19 support measures already introduced will be able to access an emergency fund of up to $675 million through the Canada’s Regional Development Agencies, while the Community Future Networks will provide up to $287 million to rural businesses and communities;
- For the Cultural, Heritage and Sport Organizations, a COVID-19 Emergency Support Fund of $287 million was established so they can continue to support artists and athletes;
- For Farmers, Fish Harvesters and Food Production and Processing employers, an amount of $50 million was set aside to assist with the costs associated with the mandatory 14-day isolation period required for their workers coming from abroad;
- In support of the Fishing and Seafood Industry, a $62.5 million aid package was announced on April 25th to protect workers from COVID-19 and keep the fishing and seafood market alive.
At the onset of the implementation of its COVID-19 Economic Response Plan, the federal government announced on March 18th that all taxpayers, including businesses, can defer until August 31, 2020 the payment of any income tax amounts that become owing on or March 18th and before September 2020. Noteworthy is that no interest or penalties will accumulate on these amounts during said period. In addition, GST/HST payments that become owing from March 27th until the end of May can also be deferred until the end of June 2020.
ONTARIO’S ACTION PLAN 2020: RESPONDING TO COVID-19
On March 25th, the Ontario government unveiled its Action Plan that would make available approximately $10 billion in support of individuals and businesses during the COVID-19 pandemic. A series of announcements outlining tax reductions and deferrals and other financial aid packages followed the introduction of the Action Plan.
Electricity Rate Relief for Families, Small Businesses and Farms
This measure consists in holding electricity prices for time-of-use customers at the lowest off-peak rate of 10.1 cents-per-kilowatt-hour for a period of 45 days. It is expected that this will result in a rate reduction of over 50% compared to on-peak rates.
Deferral of Ontario Workplace Safety and Insurance Board (“WSIB”) Premiums
As of March 26th, employers covered by the WSIB’s workplace insurance were allowed to defer without any penalties all premium payments due under the WSIB for a period of 6 months, until August 31, 2020. This relief measure is applied automatically and there will be no negative consequences for business who defer premium reporting and payments.
Deferral of Provincial Taxes
Provincially-administered taxes such as the Employer Health Tax (EHT), Fuel Tax and Mining Tax and others are deferred until August 31, 2020. Furthermore, the upcoming June 30 quarterly municipal remittance of education property tax to school boards are deferred for 90 days without any penalty or interest. Provincial Land Tax Payments are also deferred for a period of 90 days from their next due date.
Launch of the “Ontario Together Fund”
A new funding program of $50 million was announced on April 1st to assist companies and organizations across the province to retool in order to manufacture essential medical supplies and equipment such as masks, gowns, testing equipment and ventilators. On April 17th, another $1 million was provided to connect workers and employers in the primary agriculture, food processing and grocery retail sectors to ensure continuous functioning of the food supply chain functioning.
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