Prime Minister Justin Trudeau has announced additional measures to support small businesses in dealing with the economic impacts of the pandemic. The announcement came on March 27 and was part of the federal government’s COVID-19 Economic Response Plan, which commits $107 billion in support to Canadians so they can buy groceries, pay rent, and care for loved ones during this difficult time.
As part of the announcement, 75 per cent of the first $58,700 earned by each individual will be covered for qualifying businesses, for up to three months, retroactive to March 15. The aim of the program will be to help businesses keep and return workers to the payroll. Any business with at least a 30 per cent revenue decrease because of COVID-19 qualifies. The number of employees at a business does not matter and will apply to non-profits, charities and large and small companies.
“The announcement of a 75 per cent wage subsidy for small/medium employers affected by the COVID-19 crisis will not help every company or employee, but will help small firms retain hundred of thousands of workers who would otherwise be laid off,” explains Dan Kelly, president of the Canadian Federation of Independent Business (CFIB).
The complete details on eligibility have not be released but is expected before the end of March. Businesses will be allowed to defer all goods and services tax/harmonized sales tax (GST/HST) payments until June; this will include self-employed individuals.
“Small businesses are the backbone of our economy, and an important source of good jobs across this country,” explained Trudeau. “They are facing economic hardship and uncertainty during the COVID-19 pandemic, and that is why we are taking action now to help them get the financial help they need to protect their workers and pay their bills.”
A new program will be launched called “Canada Emergency Business Account,” which will provide up to $25 billion to eligible financial institutions to provide interest-free loans to small businesses. This 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 is eligible for complete forgiveness. “The interest-free loans for small businesses through the Canada Emergency Business Account will be of assistance to firms struggling with ongoing fixed costs, particularly with the news that up to $10,000 will be forgivable,” said Kelly, in a press release.
In addition, Trudeau announced the new “Small and Medium-sized Enterprise Loan and Guarantee” program. This will enable up to $40 billion in lending, supported through Export Development Canada and Business Development Bank. This is intended for small and medium-sized companies that require greater help to meet their operational cash flow requirements. This 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. These loans will be 80 per cent guaranteed and to be repaid within one year.
Additionally, the government will provide eligible small employers with a temporary wage subsidy for a period of three months. This will be equal to 10 per cent of remuneration paid during that period, up to a maximum of $1,375 per employee and $25,000 per employer.
The federal government also deferred the payment of income taxes until after August 31.
These measures all come on the same day the Bank of Canada cut its benchmark interest rates by 50 basis point to 0.25 per cent.