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
Resource of reference: https://www.canada.ca/en/department-finance/economic-response-plan.html
Support for businesses:
- 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).
- 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.
- 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.
- A new Emergency Support Benefit is coming for workers who are not sick but face unemployment or reduced hours and are not eligible for EI. More info to come.
- 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.
The US Situation
While there has been much talk recently about a direct check to Americans, federal fiscal stimulus measures for the US are still being debated by Congress at time of writing (March 23, 2020).
This portion of the article will be updated once measures are signed into law, however for the time being, the main tool available to US businesses is seemingly the Small Business Administration (SBA) Disaster Loan, which provides up to $2 million at a rate of 3.75% for small businesses, and 2.75% for non-profits. An application can be put in here; all US states and territories are currently eligible due to Coronavirus (COVID-19).
This Forbes article is also quite helpful to see the relief programs available to specific states and cities.