Canada's Economic Response Plan for the Coronavirus Pandemic

Between March 18th and March 30th, 2020, the Canadian government announced various economic measures to help stabilize the economy during this challenging period. These measures, delivered as part of the Government of Canada’s COVID-19 Economic Response Plan, will provide up to $27 billion in direct support to Canadian workers and businesses.

Help for Small and Medium Sized Enterprises (SME) 

The Canadian government established a Business Credit Availability Program (BCAP) to provide $65 billion of additional support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).

BDC and EDC are working with private sector lenders to coordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation, exportation and tourism.

This program includes:

Canada Emergency Business Account: 

The new Canada Emergency Business Account will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.

To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019.

Loan Guarantee for Small and Medium-Sized Enterprises:

EDC is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million to SMEs. The loans will also be 80 percent guaranteed by EDC and are expected to be repaid within one year.

Co-Lending Program for Small and Medium-Sized Enterprises:

BDC is working with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program. Eighty percent of the loans will be provided by BDC with 20 percent from the financial institutions. 

Eligible financial institutions will conduct the underwriting and funding directly for customers.

BDC noted that eligible companies could obtain up to $12.5 million through these two lending streams provided that they have been impacted directly or indirectly by “recent events” and have been financially viable prior to the impact from COVID-19. How BDC or financial institutions will be making that assessment has yet to be disclosed.

These programs will roll out in the three weeks after March 27, and interested businesses should work with their current financial institutions.

Tax Deferrals: 

The federal government is also set to defer Goods and Services Tax/Harmonized Sales Tax (GST/HST) payments, as well as duties and taxes owed on imports, until June. 

The deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

For GST and customs duty payments for imported goods, deferral will include amounts owing for March, April and May.

These amounts were normally due to be submitted to the Canada Revenue Agency and the Canada Border Services Agency as early as the end of this month.

Canada Emergency Wage Subsidy

On March 30, 2020, the Canadian government updated its previous subsidy plan. The stated purpose of the subsidy is to ensure that as many people as possible can keep their jobs and paycheques by providing businesses of any size with a wage subsidy of up to 75%. Business applicants must have suffered at least a 30 per cent decline in revenue because of COVID-19 to qualify for the subsidy.

For those that get the subsidy, the government will then cover “up to 75 per cent” of employees’ wages, but only for the first $58,700 worth of salary.

That means the maximum amount of subsidy would translate to $847 per week, unless an employer tops up any salary exceeding $58,700 from the business’s own funds.

How all of that will be calculated, and whether it will come in the form of a payroll deduction or a cheque from the government isn’t entirely clear at this time.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such.