Canada Emergency Business Account and New Loan Programs for Small Businesses

Today, Prime Minister Justin Trudeau announced that the Canadian government will increase its wage subsidy for eligible small businesses to 75% from 10% announced earlier as part of the COVID-19 Economic Response Plan. During the press conference, he also announced that the Government of Canada is launching a new Canada Emergency Business Account through which banks will offer $40,000 loans which will be interest-free for the first year.

The government has also established Canada Emergency Response Benefit (CERB) that will give eligible Canadians a taxable benefit of $2,000 per month for up to four months.

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Department of Finance Canada has announced the details of the loan program through a news release. It stated that Canada Emergency Business Account will be implemented by eligible financial institutions in cooperation with Export Development Canada (EDC) to help small businesses have access to the capital they need to see them through the current challenges. This is a $25 billion program and small businesses and not-for-profits should contact their financial institution to apply for these loans.

Canada Emergency Business Account will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus.

25 percent (up to $10,000) loan forgiveness : Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).

Eligibility for Canada Emergency Business Account Loan:

To qualify, small businesses and not-for-profits will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019.

How to Apply for Canada Emergency Business Account Loan:

Small businesses and not-for-profits should contact their financial institution to apply for these loans.

  • How to Apply For Canada Emergency Business Account Through CIBC

New Loan Guarantee for Small and Medium Enterprises – $20 Billion

To support Small and medium-sized enterprises’ (SMEs) operations, EDC will guarantee new operating credit and cash flow term loans that financial institutions extend to SMEs, up to $6.25 million. The program cap for this new loan program will be a total of $20 billion for export sector and domestic companies.

A New Co-Lending Program for Small and Medium Enterprises – $20 Billion

To provide additional liquidity support for Canadian businesses, the Co-Lending Program will bring the Business Development Bank of Canada (BDC) together with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts up to $6.25 million BDC’s portion of this program is up to $5 million maximum per loan. Eligible financial institutions will conduct the underwriting and manage the interface with their customers.

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