What support is there for Canadian entrepreneurs financially impacted by the coronavirus COVID-19?

The Government of Canada has an action plan to help Canadians facing financial hardship as a result of the COVID-19 pandemic. The COVID-19 Economic Response Plan will provide direct support and tax deferrals to Canadian workers and businesses. According to the Minister of Finance Bill Morneau, there will be a significant increase in the availability of credit to small businesses and flexibility towards businesses experiencing adversity.

Temporary Wage Subsidy

To support businesses that are experiencing revenue losses and to help prevent lay-offs, the government will provide eligible small employers with a temporary wage subsidy for three months. As cases of the novel coronavirus continue to spread across the country, the previously announced 10 per cent wage subsidy has been increased to 75 per cent for all businesses that meet certain criteria.

During Prime Minister Trudeau’s Monday, March 30, 2020, press conference, he announced that companies that have experienced a decrease in revenues of at least 30 per cent, will receive up to 75 per cent of a salary on the first $58,700, up to a maximum of $847 a week. This means employers have an increased ability to keep staff on the payroll, even if business slows down or stops. The prime minister encouraged businesses to top up their employees’ wages with the remaining 25 per cent of their salaries. This wage subsidy will be backdated to March 15. He also asked companies that get the subsidy to rehire workers laid off over the last two weeks, and ensure that all the money through the program goes to employees.

Small businesses can benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure include corporations eligible for the small business deduction.

Flexible Tax Filing 

The Canada Revenue Agency is allowing all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing between now and before September 2020.  This relief applies to tax balances due, as well as installments. No interest or penalties will accumulate on these amounts during this period. 

GST/HST Remittance Deferral

To support Canadian businesses, the Minister of National Revenue is extending GST and HST payments (January -March reporting period) until June 30, 2020. Trudeau said, “If you’re struggling to get by right now and you have a payment due at the end of the quarter, we’re going to give you more time. It will also allow you to keep the money that you would have sent to the government and use it instead for your immediate needs”.

In addition to the GST and HST payment deferral, duties and taxes owed on imports are also being deferred until June, which Trudeau said amounts to $30 billion in interest-free loans to businesses.

Access to Business Credit

On March 13, 2020, the Government announced the establishment of a Business Credit Availability Program (BCAP) to help Canadian businesses access financing during this time of financial anxiety. Through this program, the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) will provide more than $10 billion of support for small and medium-sized businesses. Businesses interested in accessing the BCAP should first contact their financial institution, which will contact BDC and/or EDC where appropriate.

During his Friday, March 27, 2020, press conference, Trudeau announced that the government will be making additional investments to support Canadian businesses from the economic impacts of COVID-19.  A new $25 billion program, Canada Emergency Business Account, will provide government-backed loans of up to $40,000 to small and medium-sized businesses that will be interest-free for one year. The loan will help small businesses cover their operating costs. To qualify, companies will need to show they paid between $50,000 to $1 million in total payroll in 2019. Businesses that repay the loan on or before December 31, 2022, will also be forgiven 25 per cent of that loan, up to $10,000.

Business Development Bank of Canada (BDC) is the only financial institution in the country dedicated to entrepreneurs. Their new relief measures for qualified businesses include:

Working capital loans of up to $2 million with flexible repayment terms such as reduced rates on new loans, flexible repayment terms, and the postponement of principal payments for up to 6 months for existing BDC clients with total BDC loan commitment of $1 million or less.

Canada’s COVID-19 Economic Response plan, including the temporary wage subsidy, flexible tax filing, GST/HST remittance referral and increased access to business credit should help viable Canadian businesses remain resilient during this perilous time. If you have any questions, please remember that your friendly accountant has been deemed an “essential service”.