The federal government today announced changes to the Canada Emergency Business Account loan program that should expand access to interest-free loans for small- to medium-sized businesses left reeling by the COVID-19 outbreak.
Under the new rules, small businesses and not-for-profits that can demonstrate payroll expenditures in 2019 of between $20,000 and $1.5 million, will be eligible for interest-free loans of up to $40,000 each. If the loan is paid off by December 31, 2022, 25 per cent of the balance will be forgiven.
In addition, the government also announced plans to launch a new Canada Emergency Commercial Rent Assistance program. The initiative—to be rolled out in conjunction with the provinces—would help small businesses with rent payments for the months of April, May and June, 2020. Additional details are expected in the days ahead.
Previously, Canada Emergency Business Account loans were restricted to organizations with payroll of between $50,000 and $1 million in 2019. Many in the business community argued the qualifying rules excluded a vast number of SMEs with lower payroll expenses, but that were in desperate need of immediate credit due to widespread industry shutdowns or sharp pandemic-related revenue declines.
Prime Minister Justin Trudeau today announced that a total of $7.5 billion in loans have been issued to more than 195,000 companies since the launch of the program.
To qualify under CEBA eligibility requirements, a borrower must:
- Be a Canadian operating business as of March 1, 2020
- Be registered to pay federal tax
- Have paid total employment income of between $20,000 and $1.5 million in the 2019 calendar year
- Have an active business with a business or chequing account with a qualifying lender (e.g., their primary financial institution). The account must have been opened on or before March 1st, 2020
- Have not previously used CEBA or have applied for the program at another financial institution
- Acknowledge their intention to continue (or resume) operating their business
Government agencies, unions, charities and religious organizations are excluded from the program. Under federal guidelines, CEBA loans should be used to pay for business operating expenses such as rent, payroll or utilities, and not to pay down loans, increase management compensation or fund other non-operating expenses.
Our team will keep you updated on the latest measures to aid businesses impacted by COVID-19 as they become available. If you have questions about CEBA or other government relief programs, please contact a member of our team.
Armando Iannuzzi, Co-Managing Partner