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Canadian And Ontario Governments Lend A Helping Hand To Businesses With COVID-19 Programs
Critical financial support for those hit hard by the COVID-19 pandemic, aims to help companies continue operations, protect jobs, cover costs and play a role in our economic recovery
Businesses of all sizes and in all sectors across the Windsor Essex region have been severely affected financially by the year-old COVID-19 global pandemic.
But, there is relief available under a variety of programs funded by the Province of Ontario and the Government of Canada.
Rakesh Naidu, President and Chief Executive Officer of the Windsor-Essex Regional Chamber of Commerce, says the various government financial grants and programs have been helpful, but can’t fully replace lost revenues.
“Margins are so razor-thin in many businesses that if you take away 10 to 15% of the revenue, then businesses owners end up dipping into savings or taking out loans to pay their bills,” Naidu comments. “It became a cash flow deficit very early on in the pandemic so wage subsidies and business account loans were essential to help businesses stay afloat.”
According to Naidu, a recent survey conducted by the Canadian Chamber of Commerce estimates that one in six businesses will not survive the pandemic and will close permanently.
“I fear it could be worse,” he adds. “Locally, in addition to the lockdown and closures, we’re also dealing with the impact of the border closure for the past 12 months and that has had an impact on local businesses as well.”
The provincial government’s financial commitment to help businesses survive during an unprecedented world-wide health crisis, includes $1.4 billion to launch the Ontario Small Business Support Grant to help small businesses that are required to close or significantly restrict services under the province-wide shutdown, with grants starting at $10,000 and up to $20,000.
The Ontario government has also committed $869 million in additional investments for the hospital sector for supplies and equipment to address the surge in COVID-19 cases, including testing, swabs, saliva tubes and test kits, bringing the total increase in funding to hospitals since 2019-20 to $3.4 billion.
There’s also $609 million to support the procurement of additional Personal Protective Equipment (PPE), critical supplies, equipment and continued support for essential supply chain operations; $398 million in additional support to respond to the impact of COVID-19 in the long-term care sector and $235 million in additional supports to protect children and staff in childcare and early years’ settings.
In addition, the federal government had spent $240 billion by early December on more than 100 new and existing programs and measures to help individuals, businesses, organizations and government entities survive the pandemic.
“I dread to think what it would have been like without these programs,” Naidu expresses.
Biz X magazine reached out to a number of experts in a variety of sectors to help area businesses understand what is available to help them survive and come out the other end of the pandemic still standing.
Highly Affected Sectors Credit Availability Program
Through this program (HASCAP), the Business Development Bank of Canada is working with participating Canadian financial institutions to offer government-guaranteed low-interest loans up to $1 million.
Severely affected businesses (for example, a chain of hotels or restaurants with multiple locations under one entity) could be eligible for up to $6.25 million. Applications opened February 1, 2021.
“My gut feeling is there will be lots of stimulus from the government to spur economic growth and we have the expertise to help our clients access these funds,” says Craig Hoover, a Senior Manager at Baker Tilly Windsor LLP.
HASCAP will also help businesses with their day-to-day operating costs during the COVID-19 crisis, allowing them to invest in their long-term prosperity.
The program is available to businesses across Canada in all sectors that have been hit hard by the pandemic. This includes restaurants, businesses in the tourism and hospitality sectors and those that rely on in-person services.
To be eligible, a business needs to show year-over-year revenue decline of at least 50% in three months, within eight months prior to their application.
Companies must also be able to show their financial institutions they have previously applied for either the Canada Emergency Wage Subsidy or the Canada Emergency Rent Subsidy.
Source: Craig Hoover, Baker Tilly Windsor LLP
Ontario Small Business Support Grant
Many small businesses are struggling right now due to the government restrictions imposed to help stop the spread of COVID-19.
Ontario has introduced several programs to help these businesses through this tough time. The Ontario Small Business Support Grant is one of these programs and was introduced in January 2021.
The grant is intended to help small businesses with the impact of the province-wide shutdown that came into effect on December 26, 2020.
If you are a qualifying small business that was required to close or significantly restrict services because of the shutdown, you can receive between $10,000 and $20,000 of grant money from the Ontario government.
To be eligible, businesses must have less than 100 employees and must have had a decrease in revenues of at least 20% when comparing the month of April 2020 to April 2019. The government decided to use April as the basis because similar shutdown restrictions were in effect at that time and it feels that the impact of the latest shutdown would likely be similar.
There are also provisions for new businesses established after April 2019.
Applications for this and other programs may be completed using the links provided on the Ontario government website.
Source: Jennifer Hunt, Chapman, Sanger & Associates LLP., Chartered Professional Accountants
Regional Relief and Recovery Fund
The Regional Relief and Recovery Fund (RRRF) provides financial assistance to businesses and social support organizations that are unable to meet eligibility criteria for other assistance programs. The fund provides interest-free loans to help support fixed operating expenses in situations where revenues have decreased due to the COVID-19 pandemic.
The goal of the fund is to provide support to enable businesses to continue operations and keep paying their employees. The RRRF can help close the remaining financial gap that many local businesses and other organizations experience from other federal relief measures, by providing additional support.
The RRRF was recently updated for southern Ontario, through FedDev Ontario, to include increased contribution and non-repayable (grant) amounts. RRRF conditionally-repayable loans have now increased from $40,000 to $60,000.
Repayment forgiveness is based on repayment of the loan portion prior to December 31, 2022. If eligible, the amount of repayment forgiveness is 25% on the first $40,000, plus 50% on amounts between $40,000 and $60,000.
RRRF interest-free loans may provide up to $1 million and can significantly reduce financial pressures because no payments are required until January 1, 2023.
To qualify, applicants must be a Canadian or provincially incorporated business, co-operative or Indigenous-owned business located in southern Ontario with 1 to 499 employees. Economic development organizations and social development organizations engaging in commercial activities are also eligible.
A requirement of the fund is that the business is expected to have already applied to other relief measures for which they are eligible, including CEBA (Canada Emergency Business Account). The RRRF will consider eligible costs not covered by these other programs.
The fund provides support for costs such as payments for existing equipment and machinery, salaries and benefits, and operating expenses such as utilities and rent. RRRF support is meant to be complementary to other COVID-19 relief measures and will therefore not duplicate any support provided by other government sources.
Ineligible costs are those which are not directly related to the business’ fixed operating expenses, such as mortgage payments, refinancing, new capital expenditures or land acquisitions.
Applications can be submitted online up to March 31, 2021; however, applications will be reviewed as they are received until the fund has been fully committed.
Source: Adrian Visekruna, KPMG LLP.
Canada Emergency Business Account
The Canada Emergency Business Account (CEBA) is an interest-free loan provided by the government to support businesses during the COVID-19 pandemic.
A portion of this loan is considered forgivable provided the loan is paid back by the deadline. This of course is subject to conditions set by the Government of Canada. Further information can be found by logging on to Ceba-Cuec.ca.
Businesses could originally apply to receive a CEBA loan of up to $40,000.
The federal government has since authorized an expansion of an additional $20,000 for qualified businesses. The deadline to apply for a CEBA loan of $60,000 or the $20,000 expansion is March 31, 2021. Up to 33% of the CEBA loan amount is forgivable.
Let us assume for arguments sake your business received a CEBA loan in the amount of $40,000. The forgivable amount for that loan would be $10,000 provided of course that the remaining $30,000 is repaid in the time frame that has been set by the government.
The forgivable amount of the CEBA loan, even though it may be forgiven at some time in the future, is still taxable in the year that the loan was received.
For instance, your business has received a $40,000 CEBA loan in 2020. Your deadline for repayment of that loan is some time in 2022. That $10,000 forgivable amount must be claimed as income on your 2020 tax return assuming you have a December 2020 year-end.
There is an election that, if filed in 2020, will provide for a deferment. The business that received the loan must reduce their non-deferrable expenses by $10,000 in 2020.
Essentially, by doing this, the business would eliminate the income inclusion in 2020 for the amount of the loan that is considered forgivable.
Should a CEBA loan recipient fail to repay the loan by the deadline that has been set, then there may be no portion of the loan that would be forgivable.
For example, you have received a $40,000 CEBA loan with a repayment date of December 31, 2022. By the repayment date, you will be required to pay $30,000 with the extra $10,000 being forgivable. If you have not repaid the $30,000 by December 21, 2022 then the $10,000 would no longer be forgiven. The full amount of $40,000 would be due.
If the CEBA loan is deemed unforgivable, the recipient of the loan can claim a deduction for the previously included income on their taxes in the year that the CEBA loan is repaid.
Source: Chandra Sekhar Kancheti, Managing Partner, Maurice Morneau Tax