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News

A second wave of support for Canadian business

This article is a preview of The Logic’s Daily Briefing newsletter, sent every weekday. Sign up for a free trial.

Prime Minister Justin Trudeau announced Friday a series of changes and expansions to Ottawa’s emergency relief programs for companies affected by the COVID-19 pandemic. Here’s what you need to know.

News

A second wave of support for Canadian business

By Murad Hemmadi
Minister of Finance Chrystia Freeland holds a press conference on Parliament Hill in Ottawa on Thursday, Sept. 24, 2020. Photo: The Canadian Press/Sean Kilpatrick
Oct 9, 2020
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This article is a preview of The Logic’s Daily Briefing newsletter, sent every weekday. Sign up for a free trial.

Prime Minister Justin Trudeau announced Friday a series of changes and expansions to Ottawa’s emergency relief programs for companies affected by the COVID-19 pandemic. Here’s what you need to know.

Bypassing the landlord: Businesses whose revenues have dropped 70 per cent or more because of the pandemic can get up to 65 per cent of rent or mortgage-interest payments via the new Canada Emergency Rent Subsidy (CERS); companies whose income has fallen less will receive a smaller payout. Firms forced to shut their doors by public health orders will get an extra 25 per cent. The Canada Revenue Agency-operated program replaces the much-criticized Canada Emergency Commercial Rent Assistance (CECRA), which gave landlords forgivable loans worth up to half of tenants’ monthly owings. Small-business groups blamed that structure for low uptake, since it required landlords to waive a quarter of rent. Property owners’ associations and realtors cited the complicated application process. The CECRA sent $1.68 billion to landlords on behalf of 120,000 tenants before it expired at the end of September; Ottawa had expected $2.97 billion in payouts. Finance Minister Chrystia Freeland estimated the new CERS program will cost Ottawa $2.2 billion through the end of the year, although she warned the total amount could change based on the length and severity of the pandemic. Businesses missed by the CECRA program during its April–September run won’t be able to apply for retroactive funding from the new program. Freeland instead called on provinces to use a combined $72 million in unspent CECRA allocations to help local small businesses. 

Help on payday: Ottawa is halting the phased reduction of payouts from the Canada Emergency Wage Subsidy (CEWS). Companies will receive up to 65 per cent of qualifying staff salaries through the end of December—an extra two pay periods. Changes announced in July would have dropped the rate to a maximum of 45 per cent in November. Last month’s throne speech promised CEWS would run “right through to next summer”; on Friday, Freeland said it was too soon to say how the program will operate next year. The CEWS had paid out $41.12 billion to 327,290 firms as of Sunday. The pace of both applications and payouts accelerated in late August and early September, but have since dropped. 

Credit where it’s due: Firms will be able to get an additional $20,000 loan from their regular bank or credit union, underwritten by Ottawa via the Canada Emergency Business Account (CEBA). Half that amount will be waived if the business repays the principal by Dec. 31, 2022. The new financing adds to the original $40,000, one-quarter-forgivable CEBA facility. “Businesses will need to attest to losses in revenue due to the pandemic” to access the cash, Freeland said, promising more details “in the coming days.” Friday’s announcement answers the Canadian Federation of Independent Business’s call for the loan amount to be raised to $60,000, but not the lobby group’s recommendation that half be forgivable; the combined write-off will be equivalent to one-third. The CEBA has proved popular: financial institutions had issued $30.42 billion in loans to 762,456 firms as of the beginning of October.

Govern yourself accordingly: The new and expanded measures are “not for everyone,” Freeland said, noting that “some businesses are able to work at full capacity despite COVID-19, and they are doing well.” Later, she called it “targeted support, based on need … for businesses that through no fault of their own cannot operate at full capacity, because of public health measures.” It’s a slight moderation of the no-quarter-given tone of the throne speech, in which the government insisted it was “not the time for austerity.”

#COVID-19 #federal government

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Photo: The Canadian Press/Sean Kilpatrick

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