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What Canadian SMBs need to know in the wake of COVID-19
Last Updated: March 20, 2020
In only a matter of days the economic outlook for Canadian small businesses has changed dramatically as the Coronavirus continues to disrupt all aspects of daily life. In an attempt to soften the blow the federal government has enacted a series of emergency measures, many of which are directed squarely at entrepreneurs.
While the situation is changing quickly there are a number of new measures that small business owners need to be aware of, ranging from extended deadlines for tax filings to wage subsidies to working capital loans.
We will continue to update this information as the situation continues to unfold, but for the meantime here’s what small business owners in Canada need to know in the wake of the COVID-19 outbreak.
Overview: how COVID-19 is impacting businesses in Canada
As businesses shutter their doors and employees are asked to stay home for a yet to be determined period of time, Canadian small business owners are hurting. According to a study conducted by the Canadian Federation of Independent Business only days ago, one quarter of their 8,730 small business members said they could not survive for more than a month if they suffer an income drop of more than 50%. Furthermore, 43% have reduced staff hours, 20% have begun temporary layoffs, and 38% are experiencing supply chain issues.
According to the latest government figures nearly 90% of the country’s labour force is employed by a small or medium sized business. When small businesses are hurt this badly the entire Canadian economy is at stake, which is why the federal government has enacted a number of emergency measures intended to stop the bleeding.
Temporary wage subsidies
On March 18th Canada’s Minister of Finance Bill Morneau announced a temporary wage subsidy for small business owners. The subsidy offers small businesses the equivalent of 10% of their wage costs for three months, up to a maximum for $1,375 per employee and $25,000 per business. Qualifying small businesses are able to apply the subsidy directly to the sum withheld on their employee’s income tax remittance, providing some immediate relief.
Business tax filing extension
Along with the wage subsidy the CRA is also allowing businesses to defer income taxes owing between now and September 2020 until after August 31st with no penalties or interest. That means that any balance owing for income taxes in 2019 as well as instalment payments scheduled between now and September don’t have to be paid out until then. The CRA is also suspending GST, HST and income tax audits and assessments for the next four weeks.
Working capital loans
The federal government is also partnering with the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to offer working capital loans of up to $2 million to Canadians small businesses, with flexible terms and payment postponements for up to 6 months. The Business Credit Availability Program, announced by Prime Minister Trudeau on March 17th, earmarks more than $10 billion to support small businesses through the crisis.
Business loan requests can also be made directly through BDC’s website.
The Office of the Superintendent of Financial Institutions (OSFI) will also encourage Canada’s major banks to provide more small business loans by lowering the Domestic Stability Buffer requirement for domestic systemically important banks by 1.25% of risk weighted assets. According to BDC the move is intended to create more than $300 billion in additional lending capacity.
Increasing the Canada Account
The measures announced this week also included changes to the Canada Account, which is administered by EDC and used by the government to provide support to exporters in situations that are deemed to be in the national interest. The Minister of Finance will now have the ability to determine the limits of the Canada Account in order to deal with exceptional circumstances. The move is intended to allow the government to provide loans, guarantees or insurance policies to Canadian companies during this crisis.
Where we go from here
As already stated, things are moving very quickly, and Canadian small businesses are bracing for the worst. While times are tough, however, they can at least rest assured that their federal government is working to try to soften the blow. After all, the health and wellbeing of the country’s economy depends on the health of its small and medium business community. The coming days will likely see more attempts to further that initiative, and this document will be updated accordingly.
For the meantime small business owners have a number of resources at their disposal. For example, those who are BDC clients in need of financial support are encouraged to reach out their account manager. Those who are not can also call a toll-free number for assistance between 7:30am and 8pm Monday to Friday or between 9am and 5pm on weekends: 1-877-232-2269. Business loan requests can also be made directly through BDC’s website.
The Canadian Federation of Independent Businesses is similarly making their staff available to assist entrepreneurs, and has created a dedicated COVID-19 Small Business Help Centre. Those requiring further assistance can also email CFIB@CFIB.ca, or call 1-888-234-2232.
EDC customers, meanwhile, are encouraged to keep an eye on their MyEDC account for regular updates and announcements, and are welcome to email firstname.lastname@example.org or call 1-800-229-0575 for further assistance.
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