Business owners today are working hard to navigate through the COVID-19 crisis. But the waters are muddy, and understanding what relief is available – and what is right for both the present and the future of the company – isn’t always clear. As you make choices to help manage short- and mid-term expenses, it’s important to consider how your business will be able to deal with the outcome of those choices down the road.
As you look at ways to infuse capital into your business, you’ll want to start with options that limit future debt, and then work your way forward from there. If you do find that taking advantage of a lending program is the right path for your business, it’s important to know what may be available to match your business needs.
If revenue is down, here are five ways that may help bring money into your business so that you can continue paying your suppliers, landlord and employees. After all, it’s these relationships that will help you get through this time and move forward once a new normal begins.
1. Tap into Any Cash Reserves
If you had been saving for a rainy day, well, that day is here. If your company has any money in cash management funds, bank deposits or government securities, these funds will be valuable sources of cash flow as they are liquid and easy to access. It may also be worth asking your financial advisor if any of your other business investments could or should be cashed to expand your runway. Carefully weigh the pros and cons of sourcing cash from personal savings to give your business finances a boost. Consult your financial advisor as to whether this may be an appropriate option for you.
2. Consider Wage Subsidies
People come first. And during these times, owners are doing their best to keep employees on their payroll. But many have had to make some very hard decisions. If you have been able to keep some or all of your employees, there are two wage subsidies that may be available to help you retain staff and ultimately help you operate your business.
The Canada Emergency Wage Subsidy (CEWS) provides eligible employers that have experienced an eligible reduction in revenue to receive a subsidy of 75% of employee wages for up to 24 weeks, retroactive from March 15, 2020, to August 29, 2020.
For detailed information about the program, eligibility, and how to apply, refer to the Government of Canada website.
3. Reach out to Your Financial Partner
Canadian financial institutions have reacted quickly to the changing needs of business owners, and many have put relief measures in place as a means to support those financially affected by COVID-19.
For instance, RBC is offering a number of temporary relief solutions1 for eligible small business and commercial clients. Temporary relief support may include:
- Business loan payment deferrals
- Reimbursement for Credit Card Interest Charges: Effective April 6, 2020, RBC will provide business and commercial card clients receiving minimum payment deferrals with a credit to their credit card account(s) to reimburse them for 50% of the interest charged to their account(s) during the period they are receiving the deferrals. The credit(s) will be displayed on upcoming statement(s).
- Waived setup fees for new enrollments to cash management solutions
- Waived Stop Payments fee
RBC also provides additional solutions that are tailored to individual circumstances based on the assessment of the needs of businesses on a case-by-case basis. Those solutions may include:
- Temporary increases to operating line of credit limits
- On-request deferral of your minimum payment obligations on your credit cards
If you’re an RBC business client, please contact your advisor to discuss your options.
4. Review New Tax Payment and Filing Deadlines
For most businesses, taxes owing represent a major line item in the “cash out” category. While taxes won’t be forgiven during this time, the federal government has introduced payment deferrals that can help owners keep more cash in the business over the short term.
If your corporation would typically have a filing due date after March 18 and before June 1, 2020, the filing deadline has been extended to June 1, 2020. The corresponding payment date has been extended to September 1, 2020.
The filing date for partnership returns was extended to May 1, 2020.
The filing deadline for self-employed individuals and their spouses or common-law partners hasn’t changed and returns must be filed June 15, 2020. The payment deadline for balances and instalments due on or after March 18 and before September 1, 2020 has been extended to September 1, 2020.
The CRA has also pushed back the deadline for GST/HST remittances. Normally, GST/HST amounts are due to the CRA by the end of the month following your reporting period. For any remittances due on or after March 18, 2020, the deadline has been extended to June 30, 2020.
5. Explore Government Relief Options
There are a number of programs that offer loans to businesses that need an infusion of capital to keep running through a period of reduced revenue.
As you consider these programs, think about which ones will give you the capital and flexibility your business needs. Also consider the implications of taking on additional debt that will need to be paid back out of future revenues. Forecasting when your business might again generate pre-COVID revenue will help you determine how future loan payments might affect your business. As you forecast, create a few different scenarios with your financial advisor to assess the possible impacts.
Read “Managing Cash Flow in a Time of Crisis: 6 Strategies for Business Owners” for ways to optimize your cash flow during COVID-19.
Here are a few of the Federal Government relief programs2 available to eligible business owners:
Canada Emergency Business Account (CEBA):
The CEBA provides interest-free loans of up to $40,000 to eligible small businesses and not-for-profits to help cover their operating costs while their revenues have been temporarily reduced.
To qualify, currently, you need to demonstrate you paid between $20,000 and $1.5 million in total payroll in 2019. You can apply through your bank or credit union. The Federal Government continues to adjust the CEBA qualifications – if your small business or not-for-profit does not currently qualify, adjustments coming in the near future may fit your situation.
The BDC Co-Lending Program:
The BDC Co-Lending program is designed to support Canadian businesses of all sizes that have been negatively impacted by COVID-19. Eligible applicants can access funding from their primary financial institution up to $6.25 million CAD (maximum loan amounts dependent on business revenue) to cover operating expenses (such as rent, payroll and other operating expenses) and working capital needs.
The EDC Business Credit Availability Program (BCAP) Guarantee:
The Government of Canada announced the availability of the Export Development Canada (EDC) BCAP Guarantee to help eligible Canadian businesses affected by COVID-19. Eligible applicants can access up to $6.25 million CAD in short-term liquidity (such as short-term loan or other credit facility) to cover expenses that are critical to business continuity such as rent, payroll and other operational costs.
Large Employer Emergency Financing Facility (LEEFF):
The LEEFF program provides bridge financing to Canada’s largest employers, whose needs during the pandemic are not being met through conventional financing.
The program is open to large for-profit businesses – with the exception of those in the financial sector – as well as certain not-for-profit businesses, such as airports, with annual revenues generally in the order of $300 million or higher. Eligible businesses must be seeking financing of about $60 million or more, have significant operations or workforce in Canada, and not be involved in active insolvency proceedings.
Canada Emergency Commercial Rent Assistance (CECRA):
Canada Emergency Commercial Rent Assistance (CECRA) for small businesses provides relief for eligible small businesses experiencing financial hardship due to COVID-19. It offers forgivable loans to eligible commercial property owners so that they can reduce the rent owed by their affected small business tenants by at least 75% for the months of April, May and June, 2020.
Additional federal programs:
Further relief programs are available to support eligible rural businesses, young entrepreneurs, innovative and early-stage businesses, and small- and medium-sized businesses unable to access other support measures. Learn about these additional programs on the Government of Canada website.
Many provinces are also offering temporary relief programs over and above what is offered by the Federal Government 2. For current information on provincial relief programs, consult the provincial link at the end of each section.
The Alberta government is offering deferrals for a number of payments, including:
Corporate income tax
Education property tax
B.C. relief is available for commercial property owners and tenants, including payment deferrals for customers of:
The B.C. government is also providing a number of resources to help businesses get online and pivot operations. Regional initiatives are also available.
Manitoba Gap Protection Program: To help small businesses who are not eligible for federal programs, with $6,000 in immediate provincial support
Manitoba Summer Student Recovery Jobs Plan: To encourage the hiring of summer students with 50/50 in matching wages, totaling $5,000 in funding for up to 5 students per organization
Commercial Rent Assist Support: To enhance federal rent assist program with funding for commercial operations in Manitoba
Working capital for small business owners: Small business owners affected by the COVID-19 pandemic can apply for working capital loans up to $100,000 through the NB Small Business Emergency Working Capital Program.
Working capital above $100,000: For larger businesses, Opportunities New Brunswick is making working capital loans available from $100,000 to $1 million.
- Support for non-profit organizations: Through the Community Investment Fund, funding is available for small to medium-sized non-profits in the form of a grant between $500 and $10,000.
Worker Emergency Bridge Fund: Supports people who are self-employed or laid-off who don’t qualify for Employment Insurance.
Virtual business support hub: A centralized online hub will connect businesses with support programs available from post-secondary institutions and other regional organizations. Business support workers will help connect businesses with the programs they need.
Fee deferral: To support businesses, many program and service fees are deferred until 30 June 2020. This includes workers compensation premiums and licence, permit, registration, renewal and service fees.
The Ontario Government is offering deferrals for a number of payments, including:
Corporate income tax
Education property tax
The Ontario Government is also committing $241 million to partner with the federal government and deliver more than $900 million in urgent relief to small businesses and their landlords through the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA).
Commercial Lease Rent Deferral: Supports small and medium-sized businesses who are struggling to pay rent during the COVID-19 pandemic.
- COVID-19 Business Adaptation Advice Program: Provides a non-repayable contribution to Prince Edward Island businesses, entrepreneurs, not-for-profits, and non-governmental organizations to access professional advice and support to adapt or recover from the impacts of COVID-19.
COVID-19 Support for Essential Workers – Earning $3,000/Month or Less: Provides a temporary wage top-up to essential workers employed during the Public Health State of Emergency.
Emergency Working Capital Financing: A financing program has been developed to provide emergency working capital financing to assist PEI’s small businesses.
Revenu Québec has extended to June 1, 2020 all administrative deadlines that would normally fall in the period between March 17, 2020 and May 31, 2020. This extension covers the following:
Corporate income tax returns
Elections under Québec tax laws or regulations, such as rollovers (excluding QST elections)
Tax credit applications requiring supporting documents
Fuel tax refund applications
Information request response times
Mandatory or preventive disclosure of tax planning
Applications under the Québec education savings incentive (QESI)
The Saskatchewan Small Business Emergency Payment (SSBEP) provides a payment to small and medium-sized enterprises directly affected by government public heath orders related to COVID-19. Payments are paid based on 15% of a business’s monthly sales revenue, to a maximum of $5,000.
The seasonal SSBEP provides a payment for seasonal small businesses directly affected by government public health orders related to COVID-19. Payments will be paid based on 15 per cent of a business’s average sales revenues for the operating months in the previous year, to a maximum of $5,000.
- Saskatchewan businesses which are unable to remit their PST due to cash flow concerns will have three-month relief from penalty and interest charges.
All Crown utilities will implement bill-deferral programs allowing a zero-interest bill deferral for up to six months for Saskatchewan customers whose ability to make bill payments may be impacted by the COVID-19 restrictions.
Saskatchewan Workers Compensation Board (WCB) is waiving premium penalties for employers effective April 1 until June 30, 2020.
1. While some of these options may be available to you and your business, they may increase your interest costs or your outstanding principal balance over the life of your loan or increase the outstanding balance on your credit card during the relief period, if applicable. You should carefully evaluate your financial situation and priorities before exercising any of these options to the extent they are available to you. The RBC Client Relief Program is subject to change and is available for a limited time with some options available only until June 30, 2020
2. While information presented here is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. If you have further questions about any of these programs please consult the applicable government websites or, if you are an RBC business client, speak to an RBC advisor by booking an online appointment.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.