The Canadian government has announced significant new measures to help small and medium-sized businesses as the COVID-19 pandemic leads to business closures and layoffs.
While several initiatives were announced by Prime Minister Justin Trudeau Friday, a key piece of the announcement was the increase of the previously-announced wage subsidy from 10 per cent to 75 per cent.
The federal government also announced the launch of the Canada Emergency Business Account, which provided loans of up to $40,000 to qualifying businesses. The loans are interest-free for the first year and if certain conditions are met, $10,000 of the loans are forgivable.
An additional $12.5 billion was also announced for Export Development Canada and BDC to help with loans for operational impacts, as well as a deferral on GST, HST and duties and taxes owed until June 30.
The announcements were made by Trudeau during his daily morning briefing.
“I want to speak directly to small businesses and entrepreneurs,” he said.
“I know the last few weeks have been heartbreaking. You’ve had to slow down your operations and in some cases close up shop for the foreseeable future. Because money isn’t coming in, you can’t afford to keep your employees on your payroll.”
He said that decision has been difficult for entrepreneurs.
“You don’t want to let people go … in their time of need.”
The wage subsidy, Trudeau said, will be backdated to March 15. He said he hopes it will encourage businesses considering layoffs to reconsider.
“Our hope is employers who are being pushed to lay off people because of COVID-19 will think again,” he said.
“And for those of you who have already had to lay off workers, we hope you’ll consider rehiring them given this payroll support.”
Trudeau added that measures for people in poverty, at-risk youth and other Canadians who are struggling will be announced in the coming days.
While the PM didn’t provide a cost of the new measures Friday, he said that his government remains committed to being transparent about the money it spends. A press release from the Ministry of Finance estimated that the emergency business account, loan and guarantee program and EDC and BDC guarantees and co-lending programs will cost $65 billion. The tax deferrals are equivalent to $30 billion.
“Small and medium-sized businesses are the backbone of our economy. Canadians are counting on you, and I am counting on you to come back strong from this no matter what comes next. You’re going to get the support you need to rebuild a stronger and more prosperous economy,” he said.
“In the meantime, let’s keep listening to our public health officials, stay home, wash your hands and stay a safe distance when we need to go for a walk or go to the grocery store.”
Details of Friday’s announcement
Friday’s announcement had several elements. Here are a few, and how they’re going to work.
Few details on the new wage subsidies were available. The previous subsidy applied to small businesses that qualified for an existing small business tax credit and was applied to income tax remittances.
According to the federal government website, details on eligibility criteria will start with the impact of COVID-19 on sales and will be shared before months end.
Deferral of sales tax and customs duty payments
The Minister of National Revenue will extend until June 30 the time businesses who file monthly have to remit amounts collected for February, March and April, Quarterly filers have to remit through March 31 and annual filers have to remit during March, April or May owing for the previous fiscal year and instalments of the current fiscal year.
Businesses who pay customs and duties on imported goods normally due before the first day of the month following the one in which statements are issued will have payment deadlines of March, April and May deferred to June 30.
Canadian Emergency Business Account
Eligible financial institutions will work with Export Development Canada to provide interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover operating costs when their revenues have been temporarily reduced. Businesses should apply to their financial institution.
Organizations need to demonstrate they paid between $50 million to $1 million in payroll in 2019. Repaying the balance before Dec. 31, 2022, will result in 25 per cent loan forgiveness, up to $10,000.
New loan guarantees for small and medium-sized businesses
Small and medium-sized businesses will be able to access new operating credit and cash flow loans up to $6.25 billion guaranteed by Export Development Canada. The program cap will be $20 billion for export sector and domestic companies.
A new co-lending program for small and medium enterprises will bring the Business Development Bank of Canada together with financial institutions to co-lend term loans to small and medium-sized businesses for operational cash flow requirements. Businesses can obtain incremental credit amounts up to $6.25 million, of which BDC will contribute up to $5 million per loan. That program also has a $20 billion cap.