COVID-19 Canadian Business Assistance
Update - March 27, 2020
Today’s announcements by the federal government reveal substantial changes to the package of direct financial support, access to credit, tax deferment and wage subsidies available to small and medium size businesses (SMEs) across Canada, totalling an unprecedented $65 billion. Some of the new measures may mean all the difference for survival for businesses in the wine, hospitality and service sectors. Unfortunately, too many of these have already had to curtail their operations and their staff, or close altogether.
Below is a brief update of the measures announced by Prime Minister Trudeau, and elaborated by Minister of Finance Morneau and Bank of Canada Governor Poloz (announcement is on Finance Canada’s website.)
New Small Business Loan Program
The new program, called the Canada Emergency Business Account, offers interest-free loans to qualifying businesses and not-for-profits of up to $40,000 per entity. Access to these funds is available through existing financial institutions, in cooperation with Export Development Canada (EDC). The threshold for eligibility is that payroll in 2019 must be between $50,000 and $1 million. If businesses can repay the loan in full by December 31, 2022, they are eligible for loan forgiveness of 25% (up to $25,000).
Increased Wage Subsidy
In response to feedback by small businesses and their representative organisations, the 10% wage subsidy announced by the government on March 18 has been increased to 75% for qualifying businesses and not-for-profits. The increased subsidy is retroactive to March 15, 2020. No further details were included by government in its announcement this morning (Friday March 27), but are expected on Monday March 30.
New Loan Guarantee
The government also announced a loan guarantee program for small and medium size businesses. EDC will guarantee new operating credit and cash flow term loans that financial institutions extend to SMEs, up to $6.25 million per business. The total program cap is $20 billion, demonstrating the heightened level of commitment by the federal government to keep credit flowing and help Canadian small businesses stay afloat.
Bottom-drawer interest rate
The Bank of Canada announced a 50 basis point reduction in its overnight lending rate, to a “lower bound” 0.25%. This signals the Bank’s deepening concern with the economic fallout of the coronavirus on the country, and it represents the lowest (likely) level for the benchmark interest rate. The monetary policy toolkit shifts now from interest rate policy to more quantitative easing (bond purchases by the Bank) which was also announced this morning by Governor Poloz.
A few other measures of relevance to SMEs was included in this morning’s announcements, including deferral of GST/HST payments, as well as customs and duty payment deferrals for businesses who import - these are discussed in brief in the link to Finance Canada’s website and are also available on CRA’s website.
And as you likely also know, many provincial authorities across the country have begun to permit some innovative (for Canada) measures such as delivery of wine/liquor by restaurants along with meals (at least in British Columbia, Ontario and Nova Scotia).
I hope this brief update offers helpful information on the government measures offering assistance to the hard-hit wine, hospitality and service businesses across the country.
Please stay safe and keep well.
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(March 18, 2020) The rapid spread of COVID-19 around the world has prompted unprecedented responses by governments, including the Government of Canada and provincial governments. In addition to the flat-out efforts underway by health researchers and authorities to protect the public, governments have announced a significant and evolving set of measures designed to assist the public, businesses and employees to withstand the economic shocks that are already being felt throughout the Canadian economy.
I thought it might be helpful to summarise the principal measures announced by the Canadian government to date (as of March 18, 2020) that could assist the BC wine and hospitality sectors, both employers and employees. Most of the measures can be found on the website of Finance Canada. Please note this post is not intended as business, legal or tax advice! Rather it is intended to provide useful and timely information for your operations. It does not include any provincial government programs or measures.
Prime Minister Trudeau and Finance Minister Morneau today announced the following:
A Temporary Wage Subsidy for Qualifying Small Business Employers
The Government of Canada will make a wage subsidy available to small employers of up to 10% of remuneration paid over the period of three months, up to a maximum of $1,375 per worker and $25,000 per eligible business (i.e. those who qualify for the small business deduction, including not-for-profit and charitable enterprises). The subsidy takes immediate effect and is designed to help small employers avoid laying off their employees during the present crisis.
CRA Flexibility for Business Tax Filing
The Canada Revenue Agency is permitting businesses to defer any tax payments until after August 31, 2020. This applies to balances due and to instalment payments. CRA will not contact any small businesses about any post-assessment GST/HST or income tax audits for the next four weeks. For the majority of businesses, CRA will temporarily suspend its audit interactions with taxpayers and representatives.
Business Access to Credit
The federal government announced late last week the introduction of the Business Credit Availability Program, which offers up to $10 billion in credit to Canadian businesses (targeted to small-to-medium size) through the Business Development Bank of Canada and Export Development Canada. BCD and EDC are coordinating with private sector lenders to assist individual businesses, specifically focusing on the tourism sector.
Agricultural Businesses Can Access Assistance through Farm Credit Canada
As part of the Business Credit Availability Program, farmers and agri-food businesses are offered access to increased near-term credit through Farm Credit Canada. (At present, no additional details are posted to FCC’s website).
Easing Interest Rates and Mortgage Lending
The Bank of Canada has reduced its overnight lending rate to 0.75%, to ease financial institutions’ ability to continue to extend credit to households and businesses, and will continue to adjust its market liquidity operations to maintain financial market functioning.
The government also announced its Insured Mortgage Purchase Program which enables Canada Mortgage and Housing Corporation to provide stable long-term funding to banks and private lenders so they can continue to lend to Canadian businesses and households.
These are the principal relevant measures announced by the federal government in recent days. Some measures announced (and more forthcoming) by B.C. Premier John Horgan and Minister of Finance Carole James should complement the above announcements offering temporary relief to employers and workers.
I hope this post provides useful information to BC wineries and hospitality operators as you plan for the challenging weeks ahead. Best wishes to all.
Karen Graham is the principal of WineDrops, and also operates KMG Strategy, a public policy consultancy. She has analysed B.C. and Canadian public policy for 15 years on behalf of business organisations such as the Business Council of British Columbia and the Greater Vancouver Board of Trade.