Enhancement to existing programs

MAY 11, 2020

A couple of significant enhancements were made to the government assistance for business owners this past week. In addition, a new program was announced.

  1. Extension of enhanced 75% wage subsidy

This program has been extended through until August 29, 2020. Previously the program terminated on June 6.

Remember that there are multiple ways to determine whether you qualify – and the program is designed around monthly results – so even if you are not consistently down 30% each month you can still qualify for those months where you meet the test.  

2. Expansion of small business loans of $40,000 

If you run a small business that does not have a payroll the previous rules disallowed the company from applying. The new rules permit many more companies to apply. To apply the only criteria are:

· An existing business operating account

· A business number with CRA and having filed a 2018 or 2019 tax return

· Eligible non deferable expenses of between $40k and $1.5 million

These loans are interest-free and $10,000 is forgiven provided the remainder of the loan is repaid and the terms of the loan are met

3. New Regional Relief and Recovery Fund (“RRRF”)

RRRF provides interest-free loans to help support fixed operating costs of businesses that have been affected by COVID-19. This fund is intended to help those that did not qualify for or have been declined for current Government COVID-19 relief measures – so, if you haven’t applied for BDC assistance that is already offered you will need to do that first. Priority may be given to those businesses in the manufacturing, technology, tourism and other sectors key to the region. Applications are received and accepted on a first-come, first-served basis and there is only $200 million available so quick action is required.

We suggest you consider this program if you have a business with high non-payroll costs – for example, if you run a manufacturing business with large monthly lease and rental payments this program may be worth considering. If you are a service business with high payroll costs then the wage subsidy program is a smarter route.

Eligible applicants

Applicants must:

  • Have 1 to 499 full-time equivalent employees and face funding pressures with fixed operating costs as a result of COVID-19

  • Have been a viable business before COVID-19 pandemic and plan to continue to operate their business or resume operations

  • Have already applied to other Government of Canada emergency credit relief measures for which they are eligible including

    • Canada Emergency Business Account (CEBA);

    • Business Credit Availability Program (BCAP) – Business Development Bank of Canada (BDC) Co-Lending and Export Development Corporation (EDC) Loan Guarantee programs; and

    • BDC COVID-19 Working Capital loans.

Funding

Two funding options are available (and both programs are interest-free)

  • Funding option 1

    • the amount of the loan will be the lesser of three months eligible and supported fixed operating cost or $40K

    • no payments required until Dec 31, 2022 and up to 25% or $10K forgivable if the remainder of the loan is paid back by December 31, 2022

  • Funding option 2

    • the amount of the loan will generally be the lesser of three months of eligible supported fixed operating costs or the max loan amount based on revenues (ranging from up to $50K for revenues below $1M to $500K for those that have revenues of $5M to $10M and above)

    • This loan is fully repayable

    • No payments required until Dec 31, 2022. Fixed payment schedule begins January 2023

Eligible expenses

Eligible expenses may include:

  • Capital lease payments for existing equipment and machinery and other interest expenses;

  • Salaries and benefits for which the business is not eligible for the wage subsidy.

  • Property taxes; utilities and rent (Applicants are expected to pursue with their landlord access to the Canadian Emergency Commercial Rent Assistance (CECRA) for small businesses);

  • Professional fees and insurance payments; and

  • Other fixed operating costs applicable to the applicant.

Reporting requirements

For both funding options, the SME will be required to submit a Final Report that includes a description of how the funds were used, the number of employees maintained as a result of the program and a copy of the financial statements.

Application

Applications for funding are accepted on an ongoing basis with no submission deadlines, until the Fund is fully committed administered by FedDev Ontario. The application can be accessed here: RRRF Application for Funding.