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Federal government expands criteria for Canada Emergency Business Account

Last week Prime Minister Justin Trudeau announced an expansion to the criteria of eligibility for the Canada Emergency Business Account (CEBA) to make more owner-operated small businesses eligible.
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Last week Prime Minister Justin Trudeau announced an expansion to the criteria of eligibility for the Canada Emergency Business Account (CEBA) to make more owner-operated small businesses eligible. 

The Canadian government made the changes to the criteria to help protect more jobs and small businesses throughout the country during the Covid-19 pandemic.

The government says the changes will allow for more Canadian small businesses to access interest free loans to help cover operating costs with reduced revenue during the pandemic.

With the changes the program will now be available to more businesses that are sole proprietors receiving income directly from their businesses, businesses that rely on contractors, and family-owned businesses that pay employees through dividends rather than payroll, according to the government.

To qualify under the expanded eligibility criteria, applicants with payroll lower than $20,000 would need:

A businesses operating account at a participating financial institution.

A Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return.

Eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.

“Canadians are counting on us to protect their jobs and help them pay their bills during this difficult time,” said Trudeau. “By expanding the CEBA, we will be giving more businesses access to the support they need, so they can help protect workers and the jobs they rely on. Today we are helping to keep more businesses open and more Canadians working, so we are better prepared for the recovery to come.”

The government says more details — including the launch date for the applications under the new criteria — will come. Over 600,000 small businesses have accessed the CEBA and the government says they will work with the business owners who operate through their personal bank account, as opposed to a business account, or have yet to file a tax return, such as newly created businesses. 

“Our government has been taking action since the start of this crisis to support the small businesses that define our Main Streets and provide jobs that Canadians rely on,” said Minister of Finance Bill Morneau. “We have been listening to you throughout this, and will continue to, to make sure we’re delivering the support Canadian businesses need to get through this tough time and be well positioned for success once the recovery begins.”

“Small businesses are at the heart of our communities, and they drive our national economy,” said Minister of Small Business, Export Promotion and International Trade Mary Ng. “By making our lending supports more generous and inclusive, we’re working hard to save Canadian jobs and businesses. We will continue to be there for Canadian businesses and workers every step of the way through this crisis.”


MP Cathay Wagantall still disappointed

Although the federal government has expanded the criteria for CEBA, Yorkton-Melville MP Cathay Wagantall says she’s still disappointed by the Liberals’ “non-sensical” approach to determine which small businesses should be eligible for federal support.

“It appears the prime minister prefers doing incremental announcements that allow him to keep dictating communications rather than doing what’s best for our small businesses,” said Wagantall.

“Right from the beginning of the Covid-19 crisis, my conservative colleagues have put forward practical, common sense solutions which would have had an immediate impact on our small businesses,” said Wagantall. “Our solutions have ranged from refunding the GST remitted to provide immediate cash, to expanding the eligibility criteria and removing the requirements of having a business account to qualify to CEBA.”

“While I am pleased to see that the liberals are implementing one of the proposed changes and will now allow more businesses, including sole proprietors and dividend earners, to apply for CEBA, the business account requirement remains in place.”

Wagantall — who is a small business owner — says many small business owners use their personal bank accounts for their operations. She says the type of bank account used by a business owner should have no bearing on eligibility for government support.

“Conservatives are calling on the government to make the CEBA more accessible to businesses by removing the requirement to have a business account,” said Wagantall. “Canada’s conservatives will continue to put forward practical solutions to fix the Trudeau government’s programs so that no small business falls through the cracks.”


CFIB pleased with changes to program

The Canadian Federation of Independent Business (CFIB) said they’re pleased with the criteria expansion announcement for CEBA from the government. CFIB has been advocating the government to expand the $40,000 interest-free loan program to more businesses, specifically businesses being excluded use to their payroll being under $20,000 in 2019.

“CEBA loans have been a lifeline to many small firms, particularly as 25 per cent of the loan (up to $10,000) is forgivable, helping them cover some of their fixed expenses,” said CFIB President Dan Kelly. “It is good news that family businesses that pay themselves in dividends, those that employ contractors, or those that rent chairs will soon be bale to access the program. It is critical that this expansion of the program be rolled out as quickly as possible, as the firms that were excluded have gone two months with little assistance and are now facing another rent deadline of June 1.”

“It is also encouraging to hear that new businesses and those with personal bank accounts will soon be included through a separate stream of the program. We stand ready to work with government on ensuring the details of this program work for small business owners.” 

Although CFIB is happy with the advancements the government has made with the CEBA program, they’d like to see the criteria for the application continue to expand to reach more businesses.

“With many provinces now looking towards reopening their economies, small businesses will need ongoing support to get through the months ahead,” said Kelly. “CFIB has recommended to the government that it increase the total amount of the CEBA loans and the forgivable portion. The initial $40,000 may not be enough for many businesses who continue to be shut down or those facing a long recovery period. Further expansions for firms with a 2019 payroll above $1.5 million should also be considered.”

CFIB believes the eligibility expansion for the CEBA program was a good start, but the government must continue to do more, particularly with helping businesses through their rent program.

“CFIB also continues to advocate for important changes to the Canada Emergency Commercial Rent Assistance program,” said Kelly. “Too many businesses will go without the help they badly need because they have no way to access the assistance if their landlord does not participate. CFIB has asked the government to allow commercial tenants who are eligible to access the 50 per cent government portion of the program directly if their landlord does not wish to participate.”

Businesses responses to CFIB’s weekly survey on how they are being impacted by Covid-19 (6,404 small businesses across Canada responded):

28 per cent of Canadian businesses say they are fully open, 23 per cent say they are fully closed. 29 per cent of Saskatchewan businesses say they are fully open.

73 per cent of Canadian businesses say they’ve seen a drop in revenue of 30 per cent or more. 73 per cent of Saskatchewan businesses say they’ve seen a drop in revenue of 30 per cent or more. 

43 per cent of Canadian businesses say they’ve seen a drop in revenue of 70 per cent or more. 35 per cent of Saskatchewan businesses say they’ve seen a drop in revenue of 70 per cent or more.

The average cumulative costs for Canadian business due to Covid-19 is $315,617. In the last eight weeks the average cost of losses for Canadian business has increased $252,980.

65 per cent said they’re worried about business cash flow, 61 per cent said they’re worried about debt.

39 per cent of Canadian businesses say they feel like they’re being left behind in their provinces current economic reopening plan. 29 per cent of Saskatchewan businesses say they feel like they’re being left behind in their provinces current economic reopening plan.

CFIB VP, Western Canada and Agri-Business Marilyn Braun-Pollon is happy with the expanded criteria for CEBA and says the government is moving in the right direction, but the speed at which it is administered is key.

“I think when you look at expanding the CEBA to cover many more businesses, it’s a great start,” said Braun-Pollon. “It’s urgent that it’s implemented in time for June 1 and we’d like to see the government increase the forgivable portion of CEBA which would go a long way to cover other shortfalls of the federal rent program.”

“When we asked our members, should CEBA be accessible to as many small businesses as possible? 83 per cent of Saskatchewan business owners certainly supported that and we also have strong support that CEBA should be changed so more non-repayable money is offered.”

With Saskatchewan’s Phase 3 of their provincial reopening set for June 8, Braun-Pollon says there’s optimism for small businesses, but the government needs to continue to help.

“They’re getting close now,” said Braun-Pollon. “As business owners look to reopen their businesses with many provinces looking towards reopening their economies, small businesses will need ongoing support through the months ahead.”

“Businesses are cautiously optimistic as we move into the reopening plan in phases. Currently we have 39 per cent of Saskatchewan businesses fully open so that number is expected to grow with the announcement of June 8 being the target date for Phase 3. In the future we’ll see restaurants and bars open half their seating space, other personal services can open, and gyms. It’s good to see that the share of businesses fully open will be more than the fully closed due to Covid-19.”

“It’s good news that more firms are beginning to open across the country, but it’s important to keep in mind that right now in Saskatchewan about 60 per cent remain fully or partially closed due to Covid-19. So business owners are cautiously optimistic and looking forward to reopening.” 

“We’ve asked our members what some of the top reasons preventing them from fully reopening,” said Braun-Pollon. “The top reasons they’re closed are half are government mandated closures, a third are concerned about health and safety of staff and customers, and another third say sales are too low to make it worth while. So if you’re only allowed to be open at 50 per cent capacity, it may be too costly to remain open.”

“This is uncharted territory for sure,” said Braun-Pollon. “Business owners have a lot of questions about what the requirements are and that’s why CFIB put together a number of resources for businesses to help them transition to that new normal. As Saskatchewan starts to reopen there are lots of rules and regulations to follow and CFIB has a back to business kit to give businesses what they need to get back up and running quickly and safely so we’re encouraging businesses to contact CFIB.”

Braun-Pollon says although things are trending in the right direction as Saskatchewan reopens, there’s still plenty of concerns among small business owners and CFIB will continue to work with the government through the Covid-19 crisis.

“There are many concerns for business owners around Covid-19,” said Braun-Pollon. “But the number one concern — 79 per cent of Saskatchewan small business owners said — is the economic repercussions on provincial, national, and our global economy, 73 per cent are worried consumer spending will be reduced even following the Covid-19 crisis, 65 per cent are still very worried about business cash flow and the mounting cost with limited income, 62 per  cent are worried about the long-term debt.”

“We’re committed to working with the government to successfully and safely reopen Saskatchewan in the days and weeks ahead and we appreciate the ongoing dialogue with the provincial government.”

“If you look at all the uncertainty related to Covid-19 for businesses there’s so many unanswered questions,” said Braun-Pollon. “A third of our members are worried they’ll have to close their business.”