A Review of Government Support Available for Schools and Daycares in Canada and the United States

[This post was originally published on 03/24/2020. Date of latest edit: 04/08/2020]

Our previous articles on how to avoid a cash crunch and how to provide remote education have been read hundreds of times since being published last week. In continuity of this work, we are now turning our attention to the various stimulus packages that have been announced by the Canadian and US government last week. This post will be edited on an ongoing basis since we expect that there will be additional waves of support provided to businesses and individuals in the coming weeks.

The Canadian Situation

Due to a special need for solutions and increased attention towards the livelihood of small businesses, the Government of Canada has put in place some quality initiatives.

Resource of reference: https://www.canada.ca/en/services/business/maintaingrowimprovebusiness/resources-for-canadian-businesses.html

Support for businesses:

• Initital wage subsidies for small businesses: The Government of Canada will subsidize 10% of remuneration paid to employees for a duration of 3 months, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Eligible organizations include small businesses, non-profit organizations and charities, which will be reducing their remittances accordingly (this will not be automatic).
• Improved wage subsidies: Companies will be able to get 75 percent of each employee’s salary covered on the first $58,700 earned this year (maximum $847/week). The program will be backdated to March 15 and is indeterminate of how many employees you have or the size of your business, it applies to all companies including non-profit organizations. All that is required at the moment to qualify is a 30 15 percent decline in revenue because of the coronavirus pandemic. The 30% 15% decline would ideally be calculated based on 2019 data, i.e. March 2020 year over March 2019 year, however Trudeau recently announced that January and February (over previous months) of 2020 can be used to calculate the decline as well. At the moment there is a little more of clarity on how to prove the revenue decline, albeit when the application process will become available, or in what form the 75% will be paid to employers is still a work in progress. We will update our article as details emerge. If you are able to top up the extra 25% to make the employees whole, even better, and is what the government is strongly recommending. Businesses that do not qualify for the Canada Emergency Wage Subsidy may qualify for the previously announced wage subsidy of 10 per cent of remuneration paid from March 18 to before June 20, 2020.  
• Canada Emergency Business Account: Small businesses and non profits will have access to interest-free loans of up to $40,000 to help cover operating costs during this period of frugality. To qualify, you will need to demonstrate payouts between $50,000 to $1 million in total payroll for 2019. This program will roll out in mid-April, and if interested contact your current financial institution.
• Business Credit Availability Program: The Business Credit Availability Program (BCAP) will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support. This will include working capital loans of up to $2 million with flexible terms, reduced rates, and payment postponements for up to 6 months. The way to access this program is to contact your financial institution for an initial assessment, and they will refer you to EDC and BDC. More info on this page.
• Deferred payments on income tax amounts due: the CRA (Canada Revenue Agency) is allowing businesses to defer the payment of any income tax amounts until after August 31, 2020. The CRA is also suspending re-assessments and audits.

And since any business is made of individuals, we also ought to look at the support available there.

Support for individuals:

• The Canadian Government is waiving the requirement to provide a medical certificate to access EI sickness benefits for employees who are sick, quarantined/self-isolated or forced to stay home to care for children. Importantly, the Government is also waiving the one-week waiting period for those individuals; this temporary measure will be in effect as of March 15, 2020. For your employees to benefit from this measure, according to this page, you need to put them on unpaid sick leave or in the case of Ontario, which passed the new Infectious Disease Emergency Leave, employers can put employees on unpaid Leave of Absence for as long as the quarantine measures continue (employees who qualify will get EI and their jobs are protected). Provinces like Saskatchewan even removed the time requirements to qualify for EI.
  EI sickness benefits seem best for businesses that are open but have employees not able to come to work. Employees can receive up to 55% of their insurable earnings up to a maximum of $573 a week. We always recommend that you do your own diligence or consult with legal counsel as applicable before choosing the best path forward.
• If you are self employed and/or do not qualify for EI sickness benefits, you will be able to receive up to $900 bi-weekly, for up to 15 weeks, under the brand new Emergency Care Benefit, which will be administered by the CRA. Applications for the benefit will be available in April on CRA MyAccount, My Service Canada Account, or by phone.
• The government introduced the Canada Emergency Response Benefit (CERB) to support workers and help businesses keep their employees, providing $2,000 a month for up to four months for workers and entrepreneurs who are not receiving a paycheque as a result of COVID-19. The CERB would be a simpler and more accessible combination of the previously announced Emergency Care Benefit and Emergency Support Benefit. The portal to apply should be available April 6th.
• If your business is closed and employees cannot work at all, remotely or otherwise, you can terminate them for the usual ‘Shortage of work’ reason, but nothing new here.
• Individuals have now until June 1st, 2020, to file their taxes and until after August 31, 2020, to pay for them.
• The Government is increasing the Canada Child Benefit by $300 per child for the year 2019-2020.
• The Government is proposing a one-time payment through the Goods and Services Tax credit by $400 for single individuals and $600 per couple, on average, for low and modest income families.
• The Government has requested financial institutions to be lenient with people asking mortgage payment deferments.

Our take: we think these measures are helpful but that if the Government wants to avoid mass unemployment, a better measure would have been an aggressive wage subsidy of 75-100% of salaries with a cap in order to keep people employed for a few months until the pandemic blows over. We would expect that additional measures will be taken in the next few weeks as it is hard to see how the majority of Canadians can survive on 55% of their usual earnings, especially the ones living in major cities. As we expected at time of writing, the government did take additional measure with a payroll subsidy of 75%.

The US Situation

While still developing at the time of writing, and under current guidelines, the U.S. has put forth measures to ensure the wellbeing of small businesses across the country. 

Resource of reference:
https://www.usa.gov/coronavirus

Support for businesses:

• The Paycheck Protection Program: This program is a boon for employees of small businesses because the government is authorizing a massive amount of money toward helping businesses like yours retain employees and curb difficult to pay expenses during this time.Small businesses and eligible nonprofit organizations who are eligible may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount. Loan payments will be deferred for six months. If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
• Economic Injury Disaster Loans and Loan Advance: Small business owners in all U.S. states are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. The program provides small businesses like yours with short term loans of up to $2 million that can help overcome the temporary loss of revenue you are experiencing and boost liquidity. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid. To apply for a COVID-19 Economic Injury Disaster Loan, click here.
• Debt Relief: The ‘Debt Relief’ program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis. Under this program the SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020. In addition the SBA will pay the principal and interest of current 7(a) loans for a period of six months. For more information on the types of loans on offer by the SBA, including 7(a) and if it applies to your business, here is a useful website.
• Express Bridge Loans: The Express Bridge Loan Pilot Program allows small businesses to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. Terms and benefits include $25,000 hassle free, fast turnaround to acquire, but will need to be repaid in full or in part by proceeds from the EIDL loan. Find an Express Bridge Loan Lender by connecting with your local SBA District Office.
• Payroll Tax Credits: Small and midsize employers can begin taking advantage of two new refundable, reimburseable payroll tax credits for providing paid leave to their employees. You will be able to claim these credits based on qualifying leave provided between the effective date and December 31, 2020. See more information here.

Support for individuals: 

• Assistance for American workers and families: In the current aftermath of this crisis, Americans will see fast relief in the form of Economic Impact Payments.The government announced March 30th that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people. Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.
• The Paycheck Protection Program: The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses. Individuals will benefit directly from wages being made available by the program that would have otherwise been lost.
• Coronavirus Tax Relief: The deadlines to file and pay federal income taxes are extended to July 15, 2020. This is an extension of time from the previous April 15th deadline.
• Paid Sick Leave: For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when schools are closed or child care providers are unavailable. For full details click here.

This Forbes article is also quite helpful to see the relief programs available to specific states and cities.