As your small business guide, we’re here to help you navigate through this tough time. We have all been hugely affected by COVID-19 and for small business owners, there are many questions around the various programs offered by the Canadian government and what initiatives apply. So, to help make sense of it all, we hosted our first webinar for our small business clients in Calgary and Okotoks, Alberta last week.
In case you missed it, here are the topics we discussed during our webinar:
- 75% Canada Emergency Wage Subsidy
- Canada Emergency Response Benefit (CERB) of $2,000/month
- Canada Emergency Business Loan of $40,000
- Other cash-saving (and generating) alternatives
We compiled the top questions from the webinar to help other small business owners in Canada below. For more detailed information about the programs and how to apply, check out our COVID-19 blog page.
Canada Emergency Response Benefit (CERB)
QUESTION: As a business owner, I pay myself in dividends. Do I qualify for the Canada Emergency Response Benefit (CERB)?
ANSWER: Short answer, yes. For your first CERB application, you qualify if:
- You reside in Canada
- You are 15 years old or more when you apply
- You have stopped or will stop working due to reasons related to COVID-19
- For the period you are applying for, you will NOT receive:
- employment income
- self-employment income
- provincial or federal benefits related to maternity or paternity leave
- You have NOT quit your job voluntarily
- You did not apply for, nor receive, CERB or EI benefits for the same period
- You earned a minimum of $5,000 income in the last 12 months or in 2019 from one or more of the following sources:
- employment income
- self-employment income - wages, dividends, or sole proprietor income
- provincial or federal benefits related to maternity or paternity leave
QUESTION: Can you earn any income while applying for CERB?
ANSWER: No, you have to be completely out of work for 14 consecutive days due to COVID-19 to apply for the first 4-week $2,000 payment. After that, you must have zero income for the next three 4-week applications to qualify.
QUESTION: Can I pull money from my company (e.g. a shareholder loan) and still get the CERB?
ANSWER: This is a tough one to answer, as repayment of a shareholder loan would not be considered income. Rather it is a repayment of a liability, and would be on account of capital (and difficult for the government to find out about it). So you're probably good, but we can't be 100% certain.
QUESTION: How does the CRA verify that I've lost my income due to COVID-19? Will I have to provide documentation?
ANSWER: The application for CERB simply asks you to verify that you meet all the requirements set out. The government has been paying out everyone that applies. It is likely that everyone will be audited on their eligibility for this program next summer. Be prepared to produce documentation or payroll records showing your income in February and March 2020, and then something to prove that your dismissal or unpaid leave is directly related to COVID-19 (e.g. letter from an employer).
QUESTION: Is there an option for part-time workers who have been laid off due to COVID-19? (EI says I do not have enough hours to be eligible.)
ANSWER: Yes, you can apply for CERB.
QUESTION: Do full-time students qualify for CERB if they can't find a summer job?
ANSWER: No. You can only apply if you have lost a job or work because of COVID-19. The CRA says that students do not qualify for CERB.
Canada Emergency Business Loan
QUESTION: What do I need to apply for the Canada Emergency Business Loan?
ANSWER: This is an interest-free loan of up to $40,000 for small businesses that is administered by the banks, and the loans are guaranteed by the federal government. Talk to your banker about this loan application. To qualify, your business will need to show that you paid between $50,000 to $1 million in total payroll in 2019 (this is found on your T4SUM form). We assume there will also be a credit check involved.
The intention of this loan is to help businesses cover their operating costs due to a decline in revenue because of COVID-19. Learn more about the Canada Emergency Business Account. This is a good program for small businesses, but it’s not free money. If your business defaults on the loan, it could possibly transfer to your personal debt to the CRA.
There doesn’t seem to be a requirement to show that your business is struggling because of COVID-19. However, the funds from this loan shall only be used to pay non-deferrable operating expenses of the business, including but not limited to the following:
- Payroll
- Rent, utilities, insurance and property tax
- Regularly scheduled debt payments
The funds may NOT be used to pay down other debt or make payments to owners (e.g. pay dividends or distributions), or increase the compensation of management.
QUESTION: If we are still busy, should we apply for the emergency business loan just in case we need it six months down the road?
ANSWER: There is no harm to applying, but you will need to pay it back by December 31, 2022. The loans will be administered through your bank and the government is guaranteeing the loan, so there may be some credit at risk.
Temporary Wage Subsidy (10%)
QUESTION: If I reduce payroll remittances by 10% of gross payroll, would this need to be repaid at some point?
ANSWER: No. It is a subsidy, which will be considered taxable income to your business. It doesn’t look like it needs to be repaid as long as you calculate it correctly and don’t try to “game the system."
It was great chatting with everyone, and we can’t wait to host more of these! Read more about Small Business Basics topics that may be helpful to you and your small business.
