The federal government introduced a new guaranteed loan program that they say will help Canadian businesses hit hardest by the COVID-19 pandemic.
Starting Feb. 1, businesses will be able to apply for government backed loans under the Highly Affected Sector Credit Availability Program (HASCAP). Successful applicants must show revenue decreases of at least 50 per cent over three of the last eight months.
Small Business, Export Promotion and International Trade Minister Mary Ng made the announcement on Tuesday. She said the government wanted to show business and community leaders the federal government has their back during a difficult time.
“We know that HASCAP will give the businesses the support they need not just to survive this crisis, but to recalibrate, to plan, and to make sure that they are on that road to recovery and to future prosperity,” she told reporters during the announcement.
“We know that supporting hard hit businesses isn’t just the right thing to do for our economy. It’s the right thing to do for the employees, families, and the communities that these businesses support,” she added.
The Canadian Federation of Independent Businesses welcomed news of the new program, but said it needs some tweaking to fulfill its intended role. CFIB president Dan Kelly said many businesses will welcome the infusion of cash as they enter month 11 of the COVID-19 pandemic. However, he also urged the government to make a portion of the loans forgivable.
“Most small firms are just not able to manage more debt at this time, and will need a percentage of the loan forgiven for the program to be helpful,” Kelly wrote in a statement posted to the CFIB website.
“With the right changes, the federal COVID-19 support programs can help prevent thousands of business closures in the coming months, ensuring a faster economic recovery once the crisis is over,” he added.
The CFIB says one in six small businesses is currently considering permanent closure after months of restrictions and low revenues. They say Canada could lose as many as a quarter of its small businesses by the time lockdown restrictions end.
The Canadian Chamber of Commerce also welcomed the federal government’s announcement. The Chamber was one of several business organizations consulted about the program. They released a statement saying they were pleased with the government’s response.
“Businesses in the hardest hit sectors, including tourism, travel, accommodations, and food services, have seen extreme revenue declines for over 10 months and have been needing a lifeline for some time,” the statement reads. “Today’s HASCAP loan program will help provide that.”
Under HASCAP, businesses can apply for loans from $25,000 to more than $1-million, based on the size of their operation. The loans will have a fixed interest rate of four percent, with a repayment term of up to 10 years.