The rapid spread of COVID-19 and the rapid action taken by every level of government has created a perfect storm for Canadian businesses. Two of the biggest challenges businesses face are uncertainty and rapid change. In this moment, we are seeing an unprecedented level of both, and we understand that clients are looking for answers.
While the situation continues to evolve and new programs become available, we will provide what updates we can to help clients navigate the situation. What we do know is that through the BDC and EDC, the federal government has pledged $65B in support to help small and medium sized businesses continue operating through the crisis.
Canada Emergency Business Account
Through this program and working in coordination with private financial institutions, the federal government is offering business that have an annual payroll of between $50,000 and $1,000,000 an interest-free loan of $40,000. Businesses that are able to repay $30,000 of this loan by December 31, 2022, will have the remaining $10,000 will be eligible for complete forgiveness. This program comes into effect the week of April 6, 2020, and businesses are encouraged to contact their primary business bank to coordinate the application for and funding of the loan.
EDC Loan Guarantees
EDC has a new domestic mandate to support Canadian businesses through this crisis. As a result, EDC will be working with financial institutions to issue new operating credit and cash flow term loans of up to $6,250,000 to small and medium sized businesses. These loans will be 80% guaranteed by EDC and are to be repaid within one year. In order to be eligible, the businesses must have been impacted directly or indirectly by recent events and have been financially viable prior to the impact of COVID-19. This program comes into effect the week of April 6, 2020, and businesses are encouraged to contact their primary business bank to explore this funding option.
BDC Co-Lending Program
BDC will be partnering with financial institutions to co-lend term loans to businesses for their operational cash flow requirements. Eligible businesses, those impacted directly or indirectly by recent events, may obtain incremental credit amounts up to $6,250,000. 80% of these loans will be provided by BDC, while the remaining 20% will be provided by the business’ financial institution. In combination with the EDC Loan program, eligible companies could obtain up to $12,500,000 in financing to get through these difficult times.
Next Steps
We will continue to monitor the situation and government announcements and provide useful updates when possible. We encourage all of our clients to get in touch with their primary business bank to explore financing options that will help you get through this, and we are happy to help with any legal issues you may have, as well as any documentation you may require to access these new federal programs.
Please do not hesitate to contact me or one of the other members of our business law group if you have any questions regarding matters covered in this post.
Bob Bell
Associate – Business Law Group
Disclaimer: This article is provided as an information resource. This article should not be relied upon to make decisions and is not intended to replace advice from a qualified legal professional. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. Please note that this information is current only to the date of posting. The law is constantly changing and always evolving.