A Letter to Small Business Owners:

Hope that you are all keeping well and safe as we progress through this crisis.
 
We wanted to reach out to you again because you likely would have seen some of the Federal government’s announcements over the past few days as it attempts to bolster its Economic Response Plan for small businessesWhile we are still undergoing a deeper review of the details, there are new some measures put in place to support small businesses like yours. A few highlights that may be relevant for you include:  
 

1 – 10% Temporary Wage Subsidy (TWS)

 
This subsidy is available to eligible employers on remuneration paid from March 18, 2020 to June 19, 2020, up to a maximum of $1,375 per employee and $25,000 per employer. This is a separate program for those who do not qualify for the 75% Canada Emergency Wage Subsidy (see #2 below)
This subsidy is eligible for employers who are individuals (excluding trusts), partnerships, non-profit organizations, registered charities, or Canadian-controlled private corporations (including a cooperative corporation) eligible for the small business deduction that had an existing payroll program account on March 18, 2020 and pay remuneration to individuals that are employed in Canada. This does not include subcontractors or consultants.
In terms of receiving the subsidy, it is available to you immediately in the form of a reduction in your payroll remittances (income tax portion only, do not reduce your CPP/EI remittances) due to the CRA on each pay run. In fact, if you are currently using Stonehenge to manage your payroll then you likely have already benefited from this subsidy on your last pay run. 
The payroll service providers have been slow to adopt system changes to accommodate this new program. I believe that QBO Advanced Payroll has adopted this into their system, with Ceridian and ADP to follow suit. That being said, you can immediately access this benefit regardless of what your payroll service provider is doing by making the CRA remittances (net of subsidy) yourself as opposed to allowing these services to process the payments for you. To help you do that, we’ve created a Temporary Wage Subsidy Calculator (see attached) to assist you with making the calculations. 
 

2 – 75% Canada Emergency Wage Subsidy (CEWS)

 
This subsidy is available to eligible employers who can show that their gross revenues have dropped by at least 30% in March, April, or May when compared to the same period in 2019. It is our understanding that your eligibility will be assessed on a period-by-period basis by submitting applications each month. 
 
This would apply at a rate of 75 per cent of the first $58,700 normally earned by employees – representing a benefit of up to $847 per week from March 15, 2020 to June 6, 2020 (12 weeks). It would be claimed against wages in three claiming periods – from March 11 to April 11, April 12 to May 9, or May 10 to June 6.
Eligible employers would include employers of all sizes and across all sectors of the economy.
 
In terms of receiving the subsidy, you must pay the employee wages first, then apply for the CEWS through your CRA’s My Business Account portal. Payment will then be received through direct deposit, if possible. You then are required to keep records of both your revenues and employee remuneration. 
More details regarding how to apply for the program will follow but it is our understanding that this portal will take 3-6 weeks to develop with funds being disbursed sometime after that. So, this will not produce an immediate benefit to you, unlike the 10% Temporary Wage Subsidy (see #1 above).
 
We are told that there will be serious consequences for businesses that try to “game” the system, which can include fines and possibly imprisonment.  
Those of you that do not qualify for this subsidy may continue to qualify for the 10% Temporary Wage Subsidy (see #1 above).  
 

3 – Canada Emergency Business Account (CEBA)

 
The government will guarantee interest-free revolving lines of credit up to $40,000 to specifically pay for operating expenses, payroll, and other non-deferrable expenses which are critical to your business until December 31, 2020.
 
After December 31, 2020 any outstanding balance on the revolving line of credit will be converted into a non-revolving 5-year term loan maturing on December 31, 2025, at which time the balance must be paid in full. 
 
No interest applies until January 1, 2023, at which point it will carry interest at 5% per annum, payable monthly on the last day of each month.
 
If you pay 75% of the balance of the term loan on or before December 31, 2022, the remaining balance of your term loan will be forgiven. For example, if your balance is $40,000 on January 1, 2021 and you repay $30,000 on or before December 31, 2022, the remaining $10,000 will be forgiven. 
 
To be eligible for this loan, your business must have been registered and operational on or before March 1, 2020 and your annual payroll expense must have been between $50,000 and $1 million in 2019. 
 
Loan applications are going to become available online through your primary financial institution (i.e. RBC, BMO, TD, etc) sometime during the week of April 6, 2020.  
 
This would be a very good way to inject some liquidity into your business and improve your cash flow on very favorable loan terms. So, I would encourage all of you to take advantage of this if you can.  
 

4 – Tax Payment Deferrals

 
There are various tax payment deferrals available to help you boost short-term cash flow during these difficult times, including:
– Personal income tax payments are deferred to September 1, 2020 on amounts that come due on or after March 18, 2020;
– Corporate income tax payments are deferred to September 1, 2020 on amounts that come due on or after March 18, 2020; and
– GST/HST payments (on filing or by instalments) are deferred to June 30, 2020 on amounts that come due on after March 30, 2020. 
There is no deferral of your payroll source deduction payment deadlines. These still need to be made on time, net of the 10% wage subsidy if applicable. 
Penalties and interest will not be charged on any outstanding balances if the deferred payments are made by these revised due dates.
 

5 – Canada Emergency Response Benefit (CERB)

 

For those of you who have been shutdown because of COVID-19, this may provide you with temporary income support of $500 per week for up to 16 weeks from March 15, 2020 to October 3, 2020. It will be paid in blocks of four weeks in the amount of $2,000. 

This benefit is for individuals (including the self-employed) residing in Canada who have stopped working because of COVID-19 and had an income of at least $5,000 from employment; self-employment; maternity, or parental benefits income in the past 12-months. 

Benefits will start within 10 days of you submitting an application. There is no waiting period.    

The CRA released today that it will begin accepting applications on Monday, April 6th either online or by phone. To help them manage the wave of applications that are expected, the CRA has set up specific days for you to apply. 

For more details see the below link:

 

6 – Business Credit Availability Program (BCAP) / Small and Medium-sized Enterprise Loan and Guarantee Program

 
Measures have been taken to ensure that businesses have access to credit by allowing the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses. 
To be eligible for these loans, you typically will need to have a least 2-years of operating history and be able to provide them with a business plan with proforma financials. So, this is similar to their regular loan application process, perhaps with some additional flexibility. Please let us know if we can assist you with your application. 
 
The banks are all providing lending and other assistance to help you get through this crisis. So, make sure to reach out to your bank contacts for assistance. 
 
It is typically better to get the credit if you can, even if you think that you can ride this out since you never know how long this crisis can last for. Best to start with your bank first and if unsuccessful try applying with the BDC. We have contacts with the BDC should you need them. Let me know.
 
Feel free to reach out should you have any questions or concerns about these updates. Happy to schedule a call with you to discuss. Hang in there! 
 
-Matt