While the federal government moved relatively quickly to introduce financial assistance programs for businesses and workers affected by the COVID-19 pandemic, it has become apparent in recent weeks that certain sectors and individuals were ineligible for some of the programs meant to provide them with some relief.
In response, Prime Minister Justin Trudeau has made a number of announcements with respect to updates and revisions to some of the programs, including several last week.
While further revisions are expected in respect of some of these programs in the coming weeks, we highlight the recent updates and new programs as at April 17, 2020, below.
Updates to the Canada Emergency Response Benefit (CERB)
The CERB – which was rolled out by the federal government in late March to provide financial assistance to workers affected by the COVID-19 crisis – underwent further changes to its eligibility criteria last week. The changes were aimed at expanding the number of workers who are eligible for the $2,000 per month benefit.
As of April 16, 2020, the CERB is available to workers[1]:
Residing in Canada, who are at least 15 years old;
Who have stopped working because of reasons related to COVID-19 or are eligible for Employment Insurance (“EI”) regular or sickness benefits or have exhausted their Employment Insurance regular benefits between December 29, 2019 and October 3, 2020;
Who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and,
Who have not quit their job voluntarily.
Workers must apply for the benefit (which is currently available for up to 16 weeks) every 4 weeks. Whereas the previous eligibility criteria provided that an applicant could not have earned any income in the 14 days preceding their initial application, now an applicant can have earned up to $1,000 in employment income in the 14 days preceding their claim. When submitting subsequent claims, a worker cannot have earned more than $1,000 in employment and/or self-employment income for the entire four-week benefit period for the new claim.
These changes to the eligibility criteria mean that the CERB is now open to workers making less than $1,000 per month, seasonal workers whose anticipated jobs are gone due to the pandemic and those who have otherwise exhausted their EI benefits.
Notably, the CERB is a flat-rate benefit, which means that eligible workers who earn less than $1,000 in employment income will still receive the full $2,000 per month.
While the expanded eligibility criteria has made CERB more accessible to workers affected by the pandemic, gaps remain. For example, university students who were expecting summer employment or jobs upon graduation remain ineligible for the benefit if they did not earn $5,000 in the 12 months preceding their application. Similarly, self-employed individuals or employees who have seen their work or hours significantly reduced, but who make more than $1,000 per month, remain ineligible for CERB.
Additional revisions to the eligibility criteria for this program are expected in the coming weeks, which we will update here.
COVID-19 Economic Support Programs for Businesses
To assist businesses and not-for-profits affected by the COVID-19 crisis, the federal government has introduced a number of support programs, in addition to the previously announced wage subsidy programs rolled out in March 2020 (detailed in our article COVID-19 Crisis: Highlights From the Latest Federal and Provincial Updates and Announcements for Employees and Employers. These programs are designed to help Canadian businesses access financing in order to manage the ongoing economic impacts of the COVID-19 crisis.
Business Credit Availability Program (BCAP)
On March 13, 2020, the federal government announced the establishment of the $65 billion Business Credit Availability Program (“BCAP”) in cooperation with the Export Development Corporation (EDC) and the Business Development Bank of Canada (BDC). This program is geared towards assisting businesses in various sectors and regions obtain financing during the COVID-19 crisis. The BCAP includes the following initiatives:
The Canadian Emergency Business Account (CEBA); and
The Small and Medium Enterprise Loan and Guarantee Program
Canada Emergency Business Account (CEBA)
The Canada Emergency Business Account (“CEBA”) has been implemented by the federal government in cooperation with EDC and various financial institutions in order to assist small businesses and not-for-profits cover their operating costs during a period where their revenues have been temporarily reduced. This $25 billion program provides interest-free loans of up to $40,000 to eligible small businesses and non-for-profit organizations (collectively, the “Borrower”). An added incentive to this program is that 25% of the loan (up to $10,000) will be eligible for complete loan forgiveness if the balance is fully repaid on or before December 31, 2022.
The eligibility requirements for CEBA are as follows:[2]
The Borrower is a Canadian operating business in operation as of March 1, 2020.
The Borrower has a federal tax registration.
The Borrower’s total employment income paid in the 2019 calendar year was between $20,000 CAD and $1,500,000 CAD.
The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020.
The Borrower has not previously used CEBA and will not apply for CEBA at any other financial institutions.
The Borrower acknowledges its intention to continue to operate its business or to resume operations.
The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.
However, some Borrowers are excluded from applying to the CEBA, including:
A government organization or body, or an entity owned by a government organization or body;
A union, charitable, religious or fraternal organization or entity owned by such an organization (unless it is registered T2 or T3010 corporation that generates a portion of its revenue from the sales of goods or services);
An entity owned by individual(s) holding political office; and
An entity that promotes violence, incite hatred or discriminate on the basis of sex, gender, sexual orientation, race, ethnicity, religion, culture, region, education, age or mental or physical disability.
Borrowers should know that there are some restrictions as to how CEBA funds can be used for the business. For example, the loan can only be used to pay non-deferrable operating expenses of the business (i.e. payroll, rent, utilities, insurance, property tax, etc). The CEBA funds may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions or increases in management compensation.
Borrowers can apply for support from CEBA directly through their banks and credit unions.
Small and Medium Enterprise Loan and Guarantee Program
This $40 billion program provides two lending streams for small and medium-sized enterprises:[3]
a) EDC Loan Guarantee for Small and Medium Enterprises
Through this program, small and medium-sized businesses may be able to obtain support from co-lend term loans through their financial institutions for their operational credit and cash flow requirements. Canadians businesses in all sectors that were otherwise financially viable and revenue-generating prior to the COVID-19 crisis are eligible to apply for this program.
Eligible businesses may obtain operating credit and cash flow term loans of up to $6.25 million from their financial institutions, with 80% of the funds guaranteed by the EPC. The funds are to be used for operational expenses and may not be used for dividend payouts, shareholder loans, bonuses, stock buyback, option issuance, increases to executive compensation or repayment/refinancing of other debt.
b) BDC Co-Lending Program for Small and Medium Enterprises
This program is similarly intended to provide support to businesses that were financially viable and revenue-generating prior to the COVID-19 crisis. However, it is designed in three segments to target support to different business sizes:
Loans of up to $312,500 to businesses with revenues of less than $1 million.
Up to $3.125 million for businesses with revenues between $1 million and $50 million.
Up to $6.25 million for businesses with revenues in excess of $50 million.
*Eligible businesses are provided term loans for operational and liquidity needs of the business, which include interest payments on existing debt. Loans would be interest-only for the first 12 months, with a 10-year repayment period.
*Note on Eligibility: the application process and eligibility for the Small and Medium Enterprise Loan and Guarantee Programs are made and adjudicated through authorized financial institutions with whom the applicant has an existing banking relationship.
We continue to monitor the CERB and other support programs and will update notable changes to eligibility criteria as they arise.
Prepared by Grace Kim and Laura Bracco-Callaghan
Scott Venturo Rudakoff’s employment group is here to assist employers and employees navigate the uncertainty created by the COVID-19 crisis. Do not hesitate to call or email any of our employment law practice members if you have a question about your obligations as an employer or rights as an employee.
No Legal Advice. This article is provided solely for information purposes. The information presented does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice.
[1] https://www.canada.ca/en/services/benefits/ei/cerb-application.html
[2] https://ceba-cuec.ca/
[3] https://www.canada.ca/en/department-finance/programs/financial-sector-policy/business-credit-availability-program.html