Federal Government Launches Programs to Support Small and Emerging Businesses Impacted by COVID-19

The federal government has introduced various programs to support small and emerging businesses impacted by the COVID-19 pandemic.

On April 9, Canadian banks opened applications for the Canada Emergency Business Account (“CEBA”), which is designed to provide interest-free loans of up to $40,000 to small businesses and not-for-profits that have suffered a reduction in revenue due to COVID-19. The program is fully funded by the Government of Canada.

In order to be eligible for a loan of up to $40,000, Canadian employers must have had between $20,000 and $1.5 million in total payroll in 2019 and must be operating as of March 1, 2020. If the loan is repaid by December 31, 2022, 25% of the loan (up to $10,000) will be forgiven. If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at an interest rate of 5%.

To apply for CEBA loans, businesses must go through their current financial institution. Online application platforms have been made available by many of Canada’s large banks. The government hopes that loans will be processed within two days, but this may vary depending on the applicant company and the applicable financial institution.

In addition to CEBA, the federal government has also introduced the Business Credit Availability Program (“BCAP”) as part of its COVID-19 emergency plan. The BCAP is positioned to provide $40 billion through various loan programs administered through Export Development Canada and the Business Development Bank of Canada.

Lastly, BDC Capital (the investment arm of the Business Development Bank of Canada) is launching the BDC Capital Bridge Financing Program, which is intended to support venture-backed companies impacted by COVID-19 that may not qualify for other relief measures implemented by the federal government (click here to read our blog post on the BDC Capital Bridge Financing Program).

Author: Matt McDonald