Throughout the pandemic, we’ve been reporting on the myriad of COVID-19 credits and loan amounts that the Canadian government has released to support startup businesses. For many business owners, navigating the compliance regulations and eligibility requirements of so many COVID-19 credits and subsidy programs has at times felt like an entirely separate full-time job. That’s why the Technology & Startups team at Zeifmans has been committed to remaining on top of the latest options and conveying this information to our clients.
Today, we’re going to take a look at some of the available COVID-19 credits (and recent changes to them), discuss possible auditing implications, and survey the biggest lessons learned during this time.
Feminist Response and Recovery Fund
This new opportunity provides $100 million of available funding to organizations that address the systemic inequality that has affected women and girls throughout the pandemic. Funding can be used to launch new projects or scale up existing opportunities for female-identifying individuals to participate in economic, social, democratic, and political life in Canada.
Deadline: March 25, 2021, 12:00 pm PST
Highly Affected Sectors Credit Availability Program (HASCAP)
Guaranteed low interest loans from $25k to $1M for small to medium-sized Canadian businesses hard-hit by the pandemic. To be eligible, a business must have received payments from Canada Emergency Rent Subsidy (CERS) or Canada Emergency Wage Subsidy (CEWS) and have experienced at least a 50% revenue decline over at least three of the last eight months. Businesses have up to 10 years to repay the loan and can defer the first 12 principal payments at the beginning.
Timeline: February 1, 2021 to June 30, 2021
Business Credit Availability Program (BCAP)
BCAP provides $10Bn to businesses with cash flow challenges. Funds are distributed by Export Development Canada (EDC) and the Business Development Bank of Canada (BDC). Interested businesses will need to be assessed first by their financial institution. If the need extends beyond that institution, they will be referred to the EDC or BDC.
Working Capital (BDC)
Up to $2M with flexible terms. Qualifying businesses can postpone payments for 6 months. Reduced rates are also available on new eligible loans.
Co-lending for SMEs (BDC)
Up to $6.25M for operational cash flow. Maximum finance amounts differ based on business revenues. Financing shared between BDC (80%) and your financial institution (20%).
BCAP Guarantee (EDC)
Credit and cash flow loans for small and medium-sized businesses that were thriving prior to COVID-19. Financial institutions issue loans of up to $6.25M for existing clients, 80% guaranteed by EDC.
Canada Emergency Business Account (CEBA)
As of December 7, 2020, banks can lend up to $60k to eligible owner-operated small businesses to cover operating expenses when revenue is decreased. This is an additional $20k increase from the original $40k. Businesses who already received the $40k can apply to receive the additional $20k. Zero interest is charged until December 31, 2022. Businesses who repay 75% of the loan by that date can keep the remaining 25% up to $10k. If it cannot be repaid in this timeline, it can be converted into a 3-year, 5% interest rate loan.
- Canadian-based and operated since March 1, 2020
- 2019 payroll between $20k and $1.5M or eligible non-deferrable expenses between $40k and $1.5M
- Must use loan to continue/resume operations
- Have not previously used program and can’t apply at another financial institution
- Federal tax registered businesses
Deadline to apply: March 31, 2021
Innovation Assistance Program
The Industrial Research Assistance Program (IRAP) facilitates this offer. It provides a 12-week wage subsidy to eligible employers. Businesses who have been denied funding through CEWS and are SMEs pursuing technology-driven innovation can apply. As of November 6, 2020, the Canadian government announced an additional $155M for existing recipients.
Canada Emergency Rent Subsidy (CERS)
Canadian charities, non-profits, and businesses who lost revenue as a result of COVID-19 can qualify for up to 65% subsidy to cover part of property expenses or commercial rent from September 27, 2020 to June 2021. Businesses eligible for the base subsidy may also qualify for lockdown support.
Indigenous-Owned Business Support
Small and medium-sized businesses owned by Indigenous Canadians can qualify for loans up to $50k if they are ineligible for other existing subsidies. The loans are provided by the Aboriginal Financial Institutions. Up to 50% of the loan is a non-repayable grant with no interest on the loan until December 31, 2022.
Regional Relief and Recovery Fund (RRRF)
The RRRF provides interest-free loans to support fixed operating costs of SMEs during COVID-19. As of February 11, the government released an additional $500M, $250M of which is directed at Western Canada. New applicants are eligible to receive a loan up to $60k and existing recipients can access an additional $20k.
Southern Ontario applicants have two options:
- Up to $60k conditionally repayable interest-free loan. Those who repay 75% by December 31, 2022 can be forgiven up to 25% (up to $10k). For amounts between $40k to $60k, forgiveness terms increase to 50%.
- Between $40k and $1M fully repayable, interest-free loans.
Canada Emergency Wage Subsidy (CEWS)
As of December 22, 2020 the government increased the maximum wage subsidy rate to 75% for the period beginning December 20,2020 to March 13, 2021. For more information on CEWS, see our earlier post.
If there’s ever been a complicated time for financial reporting, it’s now. It’s critical that businesses have an understanding of how the crisis has affected their reporting requirements – particularly for those businesses who have accessed subsidy funding and COVID-19 credits during the pandemic. At Zeifmans, our team can assist you in creating a plan that will suit the needs of your business, while taking into consideration all necessary compliance mandates.
Issues to consider will include reimbursements, debt restructuring, revenue recognition, asset impairment, and penalties. Sufficient disclosures will be required on the notes to financial statements detailing any information that may be important to creditors, lenders, and investors.
Though the pandemic hasn’t been ideal for anyone’s business, it has delivered a number of valuable lessons that we’ll be able to take with us into the future.
One of the first things that became apparent when the pandemic hit was the value of agility. The companies that were able to quickly pivot their offerings to serve consumers sheltering in place were among the most successful. As lockdowns came and went, bricks-and-mortar businesses found ways to serve customers curbside or digitally, with many shifting to, or enhancing an existing online presence.
Health and safety
Cleanliness has taken centre stage in the safety discussion for businesses across the industry spectrum. Collective efforts to sanitize spaces, and also to remain compliant to sanitation protocols company-wide will continue well past the pandemic’s end.
Staying focused on the consumer not only enabled businesses to remain profitable during the pandemic, but also in many cases further endeared brands to their loyal clientele. Those companies who were willing to adjust business practices and offerings to suit the changing needs of their customers will continue to see the benefits into the future.
Enlist the experts
This year, we truly learned the meaning of the old adage: “It takes a village”. We’ve been honoured to serve our clients during this unprecedented time, and in many ways we’ve drawn closer to our Zeifmans community than ever before. If there’s a singular message we’d like to convey to you, it’s this: We’re here for you.
Allow our team to help your startup business in identifying the subsidies and COVID-19 credits that will enhance your operations and keep you successful during this time. Reach out to us today to start a conversation.