Financial Hardship Due to COVID-19
In recent weeks we have all observed the growing effects of the coronavirus (COVID-19) on our economy. We have witnessed the cancellation of public events, travel restrictions, fewer people going to restaurants and a decline in discretionary spending by consumers. All of this has heightened the level of anxiety for many, especially those in small business. Many are wondering about government initiatives available, particularly to small businesses whose cash-flow has been impacted by the COVID-19 pandemic.
The Government of Canada has announced new measures intended to soften the economic blow resulting from COVID-19 and we expect further announcements in the coming days and weeks. RHN CPA is following these developments closely and we will begin updating our website with details regarding how to access these new initiatives.
The announcements to date include a broad economic stimulus package as well as changes in the way government departments administer their programs.
Enhancing Credit Access
On March 13, 2020 the Government of Canada announced that it is establishing a Business Credit Availability Program (BCAP). The program will provide for additional financing in the private sector through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). The government has committed to provide more than $10 billion in financing through these Crown Corporations.
- Business Development Bank of Canada (BDC)
The BDC is a government owned financial institution devoted exclusively to entrepreneurs. To inquire about support for entrepreneurs impacted by the coronavirus COVID-19, you may contact them at 1-877-232-2269 or access the information on their website at: https://www.bdc.ca/en/pages/special-support.aspx?special-initiative=covid19
- Export Development Canada(EDC)
The EDC provides insurance and financial services, bonding products and small business solutions to Canadian exporters and investors and their international buyers. If you are an exporter that has been impacted by COVID-19 you may contact them at 1-800-229-0575 for additional information. You can also get more information from their website at: https://www.edc.ca/
In addition to providing additional financing to businesses through the BDC and EDC, the Government of Canada has also increased the lending capacity of Canada’s large banks by reducing their reserve requirements. This measure is estimated to create an additional lending capacity of Canada’s banks by $300 billion. The Bank of Canada has also lowered its interest rate in recent days, reducing the cost of borrowing.
If COVID-19 has negatively impacted your cash flow and your ability to meet your debt obligations you may want to contact your lender to explain your circumstances. Some lenders will consider interest-only payments and other arrangements on a case-by-case basis.
Administrative Changes in Government Services
- Employment Insurance
The Government of Canada has announced that the one-week waiting period for EI benefits will be waived for employees who are in quarantine or who are ordered to self-isolate. A dedicated toll-free number for employees in quarantine who wish to get one-week waiting period waived has also been announced: 1-833-381-2725.
- Canada Revenue Agency
The CRA has announced that Covid-19 impacted taxpayers may be granted Tax penalties and interest relief (on a case-by-case basis after submitting the RC4288). Tax compliance, verification and collection activities can also be postponed where a taxpayer advises the CRA that they are impacted by COVID-19. The CRA has also announced they will be flexible in tax payment arrangements. In addition to postponing collection activities, the CRA remains flexible in extending payment arrangements. To arrange this, call your CRA collections agent ready with the information as to how Covid-19 is impacting your ability to pay your debt.
Finally, the Business Development Corporation has recommended the following for self-employed individuals:
- Minimize the risks to your supply chain. Contact your suppliers and ask about their exposure and contingency plans in case of supply disruptions.
- Protect your cash flow. Optimizing your cash flow should be a priority since your expenses are likely to go up, while your income could decrease due to disruptions to your operations. The impact of the virus will differ by sector.
- Think about contingency plans. How will you keep your workplace safe and your business running in the event the outbreak gets worse? Your plans should include a clear directive for non-essential travel, remote working procedures, enhanced cleaning measures and frequent updates for your employees.
This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.