Business Owners COVID-19 - Now What?

What has the Government of Canada reported as far as support for business owners with the effects of COVID-19.  The total package thus far will be an $82 billion response package for Canadians. 

Here is what we know so far as well as other areas to consider.  We will continue to update as more details are known and programs are available.  It is good to see that it is not only employees that will receive the support but also those who do not qualify for Employment Insurance as well as business owners. Here is the Economic Response Plan:

https://www.canada.ca/en/services/benefits/ei/cerb-application.html

Canada Emergency Response Benefit  

For employees, Employment insurance is a way to have income for 15 weeks because you have been let go from your employment due to no fault.  But for those who are self-employed and have never paid into Employment Insurance, the Federal Government announced the future implementation of an Emergency Care Benefit and an Emergency Support Benefit.  More details were released on March 25, 2020, and the coverage was expanded to more individuals and was replaced with one benefit called the Canada Emergency Response Benefit.  

Who is Eligible

The criteria to be eligible for the Canada Emergency Response Benefit is that you must be:

1.     15 years of age

2.     Resident of Canada

3.     Had a total income of at least $5,000 in 2019 or the previous 12 months before an application is made.

4.     Who has stopped working because of COVID-19 and have not voluntarily quit their job.

5.     And lastly the worker or self-employed individual must expect to be without income due to COVID-19 for at least 14 consecutive days within the initial 4 week period.  Also, for the subsequent benefit periods, it is expected that you will have no income.

What is classified as ``Stopped Working``

Some of the examples of stopped working include some of the following however is not fully limited to these examples.  

1.     Your hours have been reduced to zero but you have not yet been let go or laid off

2.     In quarantine or sick due to COVID-19

3.     Away from work to care other who are sick or in quarantine

4.     Away from work to care for children or other dependents whose child care facility is closed

What is the Benefit Amount

The benefit amount is a taxable benefit of $500 week for up to 16 weeks and Canadians can expect to receive their income within 10 days of application.  The benefit is eligible to be paid from March 15, 2020, until October 3, 2020.  The benefit amount is paid in blocks of four week periods.  

How to Apply

1.     Online April 6, 2020

2.     Automated Telephone Line

3.     Toll-Free Number

4.     CRA has provided a schedule as to when to apply based on the month of your birthday based on the schedule below:

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EI or Canada Emergency Response Benefit?

If you are eligible for Employment Insurance, you should apply.  Those who have applied for EI on March 15, 2020, or after, your application will automatically be processed through the Canada Emergency Response Benefit.

Those who are not Eligible

If you are still able to perform your work from home and can earn an income this benefit will not be available.  It is there for those self-employed business owners who cannot go to work and cannot earn an income. 

If you did not have a job before COVID-19 and were planning on working beginning now, the Government of Canada is indicating that you are not eligible for this benefit.  

https://www.canada.ca/en/services/benefits/ei/cerb-application.html

Wage Subsidy

An update to the wage subsidy came out March 27, 2020 indicating that the previous 10% subsidy offer was not enough.  This was following meeting with the G20 and realizing the support other countries were providing small businesses. It was stated that the government will cover up to 75% for both individuals as employers, taxable Corporations, as well as charities and not for profits.  

As of now, we know the following is the criteria:

-       15% decrease in revenues in March 2020 AND 30%decrease in revenue in April onward.  The increased amount will be in comparison to the same time 12 months ago for the months.  For example, comparing April 2020 to April 2019.  A second comparison was recently added to include the current month revenue to the average of January and February 2020.  You must use the same method going forward

-       Employers must verify that everything possible is being done to pay the balance of the 25% employee wage  

This will accomplish two things.  Gives the Employee some job security knowing that the business still plans to be there when times become normal.  It will also take the strain off the system having fewer people apply for Employment Insurance. 

Benefit Details

The 75% subsidy will be available up to 12 weeks and can be paid retroactively to March 15, 2020. There is also a maximum amount that can be claimed per employee. This maximum amount is the lesser of $875 per week and 75% of the employee's wage before March 15, 2020.

There is also no maximum for the number of employees just a maximum per employee.

Who qualifies as an employee?  Existing employees on payroll before March 15, 2020, new Employees, related employees and rehired employers.   

·      Existing Employees – the wage subsidy will be based on their earnings from Jan 1 – Mar 15, 2020 

·      New Employees – the wage subsidy can also apply to new employees which are fantastic.

·      Related Employees – even family members can qualify.  

·      Rehired Employees – you can also rehire employees previously laid off.  If those employees earned the CERB, that benefit will need to be paid back as their income will be replaced by the wage subsidy.

Applications are not yet ready online.  Once online it was indicated that funds would be available in 6 weeks.  This is not a program to take advantage of.  There will be severe penalties if the program is taken advantage of and I am sure that CRA will be auditing business over the next year who participate.  

Government Lending - Canada Emergency Business Account

The Federal Government has also announced enhance credit funding.  In talking to small business owners utilizing this program is not a first go to.  Most business owners fear getting into more debt and this is a big uncertainty to them.  If they get through this, figuring out how to pay that debt off afterwards is just as much of a concern to them.  

This is however, an opportunity as a business owner you should be considering, especially since $10,000 loan forgiveness is available (no firm details on what available is) if $30,000 is paid back by December 31, 2022

Loan Details

-       $40,000 government-backed loan to help business owners with cash flow.

-       Available through your financial institution where you bank as a business owner.

-       0% interest until Dec 31, 2022

-       No principal payments unless you have not paid off the loan by Dec 31, 2022. At that time payment along with 5% interest will begin.

-       The full balance must be paid off by December 31, 2025.

Loan Criteria

The biggest loan criteria are the following 2 points

1.    In 2019 your payroll must have been between $50,000 and $1,000,000

2.    You agree to use the funds for paying operating expenses that cannot be deferred.  Some examples are rent, insurance, property tax, utilities, payroll  etc

You can only apply for this loan at one financial institution. You will most likely be contacted post-funding by a government agent as well you need to continue to operate your business or will resume your business options once COVID 19 ends.  

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What`s everyone else doing:

Most business owners are faced to make very difficult decisions.  Many business owners are being forced to lay off employees and are striving to hold onto key managers and utilize the programs such as the wage subsidy to keep key employees on the payroll.  For how long they can do this is unknown. 

In talking with employees being laid off from a stable thriving company before this pandemic feel that job security is there for them when this all settles out.  The business that might be hurt for the long term and might need to close their doors for good are feeling uncertain during this time.  During this time, it is important to survive and persevere through this and show up full throttle when this is over. 

Canadians are all concerned about their own business and families but the government of Canada is also concerned for everyone. They are doing what they can during this time to have Canada as a whole survive.