As you try to manage your business during these novel times, staying up to date on all Federal and Provincial business assistance updates can be challenging. For your reference, we have provided a summary of the most commonly asked about business assistance programs. For a detailed review of which programs are best suited to your needs, we recommend that you contact a lawyer at Hawthorne Piggott and Company directly.
Employee Assistance
Emergency Wage Subsidy
The Canada Emergency Wage Subsidy (“CEWS”) is one of the most wide sweeping and high value programs the federal government has released in their efforts to assist businesses that are facing financial difficulties due to the COVID-19 pandemic. The purpose of CEWS is to encourage and assist employers in retaining their employees.
The CEWS covers 75% of an employee’s wages up to $847 per week, will be in place for a 12-week period, from March 15 to June 6, 2020, and can be applied for retroactively. Additionally, employers who are eligible for the CEWS are entitled to receive a 100% refund for certain employer contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.
To be eligible for this subsidy, the employer must have suffered a drop in gross revenues of at least 15% in March, and 30% in April and May, when compared to the employer’s gross revenue for the same months in 2019. Although most employers (individuals, taxable corporations, partnerships, etc.) are eligible, public institutions are not.
Applications for the CEWS opened on April 27, 2020, with first payments expected to arrive by May 7, 2020.
Temporary 10% Wage Subsidy (“TWS”)
The TWS came into effect approximately one month prior to the CEWS. As such, many employers have already been utilizing the TWS and have questions as to how it will interact with the CEWS. Fortunately, the Department of Finance has recently clarified that “for employers that are eligible for both the CEWS and the Temporary 10% Wage Subsidy for a period, any benefit from the Temporary 10% Wage Subsidy for remuneration paid in a specific period will generally reduce the amount available to be claimed under the CEWS in that same period.” As such, it appears that the TWS and CEWS will work in conjunction to provide a 75% wage subsidy.
For those who are not familiar with the TWS, the TWS is a three-month program designed to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency by 10%. This allows employers to have immediate access to the 10% wage subsidy from their withheld CRA remittances. Eligible employers include individuals (excluding trusts), partnerships, non-profit organizations and Canadian-controlled private corporations. However, partnerships are only eligible for the subsidy if their members consist of individuals, registered charities, or Canadian-controlled private corporations eligible for the small business deduction.
Access to Credit
Interest free loans
The Canada Emergency Business Account (“CEBA”) will provide interest-free loans of up to $40,000 to small businesses. By repaying the balance of the loan on or before December 31, 2022, small businesses will receive loan forgiveness of 25%. To qualify for the CEBA, organizations will need to demonstrate that they paid $20,000 to $1.5 million in total payroll in 2019. Applications are open now, and can be completed through your bank or credit union.
Commercial Rent Assistance
The Canada Emergency Commercial Rent Assistance (“CECRA”) program represents an agreement between the federal government and all provinces and territories to provide rent assistance to small businesses. The CECRA aims to reduce rent by 75% for small businesses affected by COVID-19 through providing forgivable loans to qualifying commercial property owners to cover 50% of monthly rent payments that are owed by small business tenants for April, May and June. These loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement. The small business tenant will still be responsible for paying the 25% remaining after the mortgaged property owner’s reduction.
To be eligible for CECRA, you must be a small business tenant paying less than $50,000 per month in rent and have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID revenues.
CECRA is expected to be in operation by mid-May. At the time of this posting, it does not appear that CECRA will be retroactive for any months other than April. As such, if you think that you may be eligible for CECRA, it is imperative that you contact a lawyer at Hawthorne Piggott and Company before the end of May.
More details are expected to be announced in the near future concerning this program.
Loan Guarantees
The Business Credit Availability Program (“BCAP”) has been established to assist the Business Development Bank of Canada and Export Development Canada in providing credit solutions to individual businesses. Key elements of this program include a loan guarantee and a co-lending program for small and medium sized enterprises. Eligible businesses may receive incremental credit amounts of up to $6.25 million through the program, with credit limits corresponding to the pre-COVID revenue generating capabilities of the business. These funds are expected to be used for operational expenses, excluding the payment of dividends, shareholder loans, bonuses, or other payments of this nature.