New Supports for Small Businesses Impacted by COVID-19

The Prime Minister and Minister Morneau today announced several updates to Canada’s COVID-19 Economic Response Plan. These updates are of consequence to small businesses and not-for-profits.

Update to thresholds for eligibility to the Canadian Emergency Business Account (CEBA)

The CEBA was initially established in order to provide interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover their operating costs during a period where their revenues have been temporarily reduced. These loans are guaranteed by the federal government. If the balance of the loan is re-paid on or before December 31, 2022, up to 25% of the loan amount will be forgiven (up to $10,000).

The main eligibility criteria for CEBA loans prior to updates made today has been evidence of a payroll of between $50,000 and $1 million (CAD) in 2019 along with federal tax registration numbers. The business must have been in operation as of March 1, 2020. In addition, the borrower would need a chequing or operating account with the Lender, which would be the financial institution of the applicant.

Updates made today will expand eligibility for this program. The payroll thresholds will now be 2019 payrolls of between $20,000 and $1,500,000 (CAD).

The funds from this loan are meant to be used by the Borrower to pay non-deferrable operating expenses of the Borrower including payroll, rent, utilities, insurance, property tax and regularly scheduled debt service. It is not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

It is interesting to note that 195,000 loans have already been approved under the CEBA program in the short time-frame it has been live. This would translate into approximately $7.8 billion of funds. By expanding eligibility criteria, it would follow that draws on this account will continue to increase. $25 billion in funds had been earmarked for this program when it was originally announced.

The CEBA now has its own web page, located at: Updates will be provided directly on this site for potential applicants to keep current on this program.

Canada Emergency Commercial Rent Assistance Program (CECRA)
The response to date has had a clear gap in terms of helping particularly hard-hit businesses with commercial rent assistance.

The program will seek to provide loans, including forgivable loans, to commercial property owners who offer small businesses rent relief in the April, May and June timeframe.

Based on comments made by the Minister of Finance, it would appear that the intent of this program would be to provide assistance to landlords. Accordingly, given certain provincial jurisdictions, it was made clear that work with the provinces is required to bring this program to an operational state. There was no definition provided in terms of what constitutes a “small-business” under this program.

There will be more operational details provided in the coming days.

Welch LLP will continue to monitor developments in these areas. If you have any questions, please be in touch with your Welch LLP representative.

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