Member Article

Since the start of the spread of COVID-19 in Canada, the federal and provincial governments have announced various programs and subsidies to help Canadian businesses survive in light of the challenges posed by necessary social distancing measures, as discussed in our previous blog post here. Despite recent announcements to respond to gaps in government programs for growth stage innovation companies, as discussed in our blog post here, many small businesses and entrepreneurs have continued to fall through the cracks without any government assistance.

The Canadian government recently announced more support for businesses and entrepreneurs who are still struggling amid the current crisis, including additional funding to support women entrepreneurs. Additionally, the federal government announced it would be expanding the Canadian Emergency Business Account (“CEBA”) eligibility requirements to allow for an increase in the number of eligible businesses.

$15 Million in Capital to Support Women Entrepreneurs

Women entrepreneurs have been disproportionately impacted by the ongoing pandemic. COVID-19 has severely affected sectors such as retail, hospitality and food services—industries where women entrepreneurs are present in higher numbers. In addition to typically operating smaller businesses and having less access to capital, many female business owners have taken on a larger share of childcare due to the closures of schools and daycares and elder care as a result of COVID-19 response measures. US-based seed accelerator 500 Startups surveyed 199 female founders about the impact of the pandemic so far, and two-thirds believe they will be disproportionately impacted by COVID-19 compared to their male peers. A recent survey by the Canadian Women’s Chamber of Commerce and Dream Legacy Foundation determined that 85% of underrepresented entrepreneurs (including women, minorities and those with disabilities) reported losing contracts, customers or revenue during this crisis.

On May 16, 2020, Minister of Small Business Mary Ng announced that the Government of Canada had committed $15 million in capital to support women entrepreneurs during the COVID-19 pandemic. The government will provide this capital through Women Entrepreneurship Strategy (“WES”) Ecosystem Fund, and it will be funded directly to select organizations that are currently WES Ecosystem Fund recipients. This additional capital is intended to help women entrepreneurs across the country navigate their businesses in the current economic climate.

Expansion of CEBA Eligibility Requirements

On May 19, Prime Minister Justin Trudeau announced an expansion to the eligibility criteria for CEBA to allow for an increase in the number of eligible businesses that are sole proprietors who receive income directly from their business, businesses that rely on contractors and family-owned corporations that pay employees through dividends rather than payroll. The initial threshold to qualify for CEBA required small businesses and not-for-profits to have an eligible payroll between $50,000 to $1,000,000 in 2019, which was later lowered to a minimum 2019 payroll of $20,000.

To qualify for CEBA under the expanded eligibility criteria, applicants with payroll lower than $20,000 must have:

• a business operating account at a participating financial institution;
• a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return; and
• eligible non-deferrable expenses between $40,000 and $1.5 million.
  
  

The federal government advised that eligible non-deferrable expenses could include expenditures such as rent, utilities, insurance and property taxes. CEBA is being administered by banks and credit unions, and businesses interested in the program should contact their financial institution for more information.

This latest expansion of CEBA significantly broadens the eligibility requirements and will allow a greater number of Canadian small businesses to access interest-free loans.

NOTE: Due to the rapidly changing legal landscape with respect to COVID-19 and our government’s response to the pandemic, please understand that any blog posts written in the past may not reflect the current applicable government programs.