OTTAWA, ON., March 27, 2020 — The federal government will cover 75% of payroll wages for small businesses and provide access to one-year interest-free loans so they can avoid laying off their employees, Canadian Prime Minister Justin Trudeau said on Friday at Rideau Cottage.
“These measures will help Canadian businesses protect the jobs that Canadians depend on, and pay their workers and bills during these difficult times,” said Trudeau.
Last week the Canadian government announced a wage subsidy of 10 per cent for employers, with a cap of up to $1,375 per employee and $25,000 per employer, but today they have increased that subsidy.
Today’s announcement is a part of the government’s COVID-19 Economic Response Plan, which has already committed $107 billion in support to Canadians so they can buy groceries, pay rent, and care for their loved ones, and also supports businesses through this difficult time.
The 75 per cent wage subsidy for qualifying businesses, is for up to 3 months, and like the Canadian Emergency Response Benefit (CERB) that was announced on Wednesday, it is retroactive to March 15, 2020. “This will help businesses to keep and return workers to the payroll,” Trudeau said.
“Small businesses are the backbone of our economy, and an important source of good jobs across this country,” said the Prime Minister. “They are facing economic hardship and uncertainty during the COVID-19 pandemic, and that is why we are taking action now to help them get the financial help they need to protect their workers and pay their bills.”
Trudeau said in an official statement that Canada will also “allow businesses, including self-employed individuals, to defer all Goods and Services Tax/Harmonized Sales Tax (GST/HST) payments until June, as well as customs duties owed for imports. The statement says, “This measure is the equivalent of providing up to $30 billion in interest-free loans to Canadian businesses. It will help businesses so they can continue to pay their employees and their bills, and help ease cash-flow challenges across the country.”
Canada’s Prime Minister also said that the Government of Canada will be launching a new Canada Emergency Business Account (CEBA). This program allows banks to offer $40,000 loans guaranteed by the government to qualifying businesses. The loans will be interest-free for the first year, and the first $10,000 of that amount will be forgiveable for businesses that meet certain criteria. The CEBA will provide up to $25 billion to eligible financial institutions so they can provide the interest-free loans to small businesses. These loans – guaranteed and funded by the Government of Canada – will ensure that small businesses have access to the capital they need, at a zero per cent interest rate, so they can pay for rent and other important costs over the next number of months.
Canada will also introduce a new Small and Medium-sized Enterprise Loan and Guarantee program that will enable up to $40 billion in lending, supported through Export Development Canada and Business Development Bank, for guaranteed loans when small businesses go to their financial institutions to help weather the impacts of COVID-19. Trudeau says, this is intended for small and medium-sized companies that require greater help to meet their operational cash flow requirements.
The Government of Canada says they will continue to carefully monitor all developments, and take further action in the near term.
More details on eligibility criteria will start with the impact of COVID-19 on sales, and will be shared before the end of the month.
COVID-19 in Canada, Ontario
As of 11 am Friday March 27, 2020 Canada has 4,018 confirmed positive cases of COVID-19 with 39 deaths. Ontario has 858 cases and 15 deaths. Toronto has 457 confirmed positive cases with 29 hospitalized and 15 in ICU according to Toronto Public Health.
Quick Facts from the Government of Canada
- The deferral to June of GST/HST payments, as well as customs duties owing on imports, will generally apply to remittances that become due in March, April, and May. These amounts would normally have been due to the Canada Revenue Agency and the Canada Border Services Agency as early as the end of this month. This measure will take effect immediately, through existing authorities.
- The Canada Revenue Agency is introducing a series of administrative measures to remove some of the burden on businesses experiencing financial hardship.
- The new Canada Emergency Business Account will provide funding to eligible financial institutions so that they can provide interest-free loans in the form of lines of credit of up to $40,000 to businesses with payrolls of less than $1 million. A quarter of this loan (up top $10,000) is eligible for complete forgiveness.
- The new Small and Medium-sized Enterprise Loan and Guarantee program will operate as follows:
- Export Development Canada will provide guarantees to financial institutions so that they can issue new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized businesses. These loans will be 80 per cent guaranteed by Export Development Canada, to be repaid within one year.
- Small and medium-sized businesses can also get support through a new Co-Lending Program that will bring the Business Development Bank of Canada together with financial institutions to co-lend term loans to these businesses for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program, which will be risk-shared at 80 per cent between the Business Development Bank of Canada and the financial institutions. Eligible financial institutions will conduct the underwriting and funding directly for customers.
- The government has already introduced these several measures to support businesses affected by COVID-19:
- Providing eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10 per cent of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration.
- Extending the maximum duration of the Work-Sharing program, from 38 weeks to 76 weeks, for workers who agree to reduce their normal working hours because of developments beyond the control of their employers.
- Establishing a Business Credit Availability Program, largely targeted to small and medium-sized businesses, through the Business Development Bank of Canada and Export Development Canada. These organizations are working closely with private sector lenders to coordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation, and tourism.
- Increasing credit available for farmers and the agri-food sector through Farm Credit Canada.
- Deferring the payment of income taxes. The government is allowing all taxpayers to defer, until after August 31, 2020, the payment of income tax amounts owed on or after March 18 and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.
with files from the Government of Canada