Fall 2020 COVID-19 Update for Business Owners

October 27, 2020

Affiliate disclosure

Here are the latest updates on COVID-19 support for small businesses in Canada.

The COVID-19 pandemic has continued to impact businesses and individuals across the country throughout the second half of 2020. Since March of this year, the federal government has rolled out several relief programs for business owners and tax payers. To read through our original blog post about COVID-19, please click here. Below, we’ve compiled the latest updates surrounding COVID relief packages for Canadian small business owners.

  • Canada Emergency Wage Subsidy
  • Canada Emergency Business Account
  • Canada Emergency Rent Subsidy
  • Canada United Small Business Relief Fund

Please note the information below is general in nature, and should not be considered advice for any specific situation.

The Canada Emergency Wage Subsidy (CEWS)

The Canada Emergency Wage Subsidy provides relief to business owners by giving them back a percentage of their employees’ pay. The qualification criteria for receiving CEWS, as well as the calculation methods for calculating the amount of the subsidy has changed since the subsidy was first introduced back in March 2020.

To qualify for the first four periods, only businesses who experienced a certain level of revenue drop were eligible to receive the subsidy. This qualification was removed in periods 5 to 9, making businesses who had experienced any drop in revenue to be eligible for CEWS. The amount of the subsidy is calculated on a sliding scale, providing the greatest subsidy to those businesses who have been the hardest hit by the pandemic.

Outlined below are the main differences in CEWS Eligibility Criteria and Calculation Method between periods 1-4 and 5-9:

Periods 1 to 4 (March 15 to July 4, 2020)

  • Employers must meet a minimum of 15% (period 1) or 30% (periods 2 to 4) revenue drop to qualify for the subsidy
  • The subsidy rate is 75% of eligible employees’ remuneration, up to a maximum of $847 per week per eligible employee
  • Employees who were unpaid for 14+ consecutive days in the period can’t be included in the calculation
  • Calculation of revenue drop is based on based on the same period from the prior year, or the average of January/February of 2020

Periods 5 to 9 (July 5 to November 21, 2020)

  • No minimum revenue drop required to qualify for the subsidy.
  • The subsidy rate depends on how much revenue has been reduced (higher reduction in revenues leads to higher subsidy received)
  • Employees who were unpaid for 14+ consecutive days are included in the calculation
  • The current period’s revenue drop OR previous period’s revenue drop can be used for calculation purposes, whichever works in the employer’s favour

Who is eligible?

If you are a business owner and have seen a drop in revenue as a result of the pandemic (even a little bit) it is worthwhile to look into applying for CEWS. For more information about how CEWS is calculated, visit the Government of Canada website, or access the Online Calculator.

The federal government recently announced intention to extend the wage subsidy to June 2021. Information has not yet been released regarding details for period 10 and onward, but we will update as more information is announced.

How to Apply

Eligible employers can apply through the Canada Revenue Agency’s My Business Account portal as well as a web-based application.

To make sure you can apply and receive the subsidy:

We recommend signing up for CRA’s My Business Account if you have not already, and setting up direct deposit with CRA.

Canada Emergency Business Account (CEBA)

The Canada Emergency Business Account (CEBA) provides interest-free loans to small business and not-for-profit organizations. The federal government recently announced the extension of the application deadline for CEBA to December 31, 2020. The amount of funding support has recently been expanded from $40,000 to $60,000, and the eligibility criteria expanded to include businesses who operate out of a personal bank account.

Who is Eligible?

To be eligible for the loan the applicant must meet the following criteria:

  • A Canadian business with an active CRA business number in operation on March 1, 2020
  • Have filed an income tax return with the CRA for a tax year ending in 2019, or 2018 if the 2019 tax return has not yet been submitted
  • Have an active business chequing or operating account with the lender administering the loan at the time of application
  • Not applied previously for the CEBA at another institution, or used the program in the past
  • Intention to continue to operate the business or resume operations

Application Process

The application process follows one of two streams:

The Payroll stream for businesses with employment income (payroll) paid in the 2019 calendar year between $20,000 and $1.5 million

  • Complete application process with your financial institution
  • Government of Canada will assess the application, and inform the financial institution of the approval or decline of the loan
  • If approved, the financial institution will deposit the funds into the chequing or operating account.

The Non-Deferrable Expense stream for businesses with less than $20,000 in total employment income paid in the 2019 calendar year. Businesses applying under this stream need to demonstrate having eligible non-deferrable expenses between $40,000 and $1.5 million in 2020. Eligible non-deferrable expenses include rent, insurance, property taxes, utilities - a full list of eligible expenses can be found here.

  • Complete the online pre-screen to determine eligibility
  • Complete application process with your financial institution - As a part of the application process applicants will be directed to a CEBA website to provide supporting documentation for 2020 Eligible non-Deferrable Expenses
  • Government of Canada will assess the application, and inform the financial institution of the approval or decline of the loan
  • If approved, the financial institution will deposit the funds into the chequing or operating account.

Interest-Free Period

No interest applies to the loan until January 1, 2023.

Beginning January 1, 2023, interest accrues on the balance at a rate of 5% per annum, payable monthly on the last day of each month.

Debt Forgiveness

Repaying the balance of the loan on or before December 31, 2022 results in loan forgiveness of 25% (up to $10,000)

For example, if your balance is $40,000 on January 1, 2021 and you repay $30,000 on or before December 31, 2022, the remaining $10,000 will be forgiven. 50% of the additional $20,000 will be forgivable as well (so $20,000 total) if the full $60,000 is taken.

If you do not repay 75% of the balance of the term loan on or before December 31, 2022, the full loan balance and all accrued and unpaid interest will be due and payable on December 31, 2025.

How to Apply

Contact your financial institution to apply. A full listing of Financial Institutions administering the program can be found here.

Canada Emergency Rent Subsidy (CERS)

The Canada Emergency Rent Subsidy provides rent and mortgage support for organizations affected by COVID-19 and is planned to be in effect until June 2021. The CERS application process is going to be provided directly to tenants, differing from its predecessor the CECRA (Canada Emergency Commercial Rent Assistance) which required property owners to apply on behalf of impacted tenants.

Organizations will be able to receive support on a sliding scale, with coverage up to 65% of eligible expenses. If a business is required to close due to a public health order, they will be eligible to receive an additional 25% subsidy, in addition to the 65% under CERS.

Who is Eligible?

Four conditions must be met in order to qualify for the rent subsidy.

1. One of the following conditions applies to your business:

  • A - You had a CRA business number on September 27, 2020
  • B - You had a payroll account on March 15, 2020
  • C - You purchased the business assets of another person or partnership who meets the payroll account requirement above, and has made an election under the special asset acquisition rules. The special asset acquisition rules are the same rules that apply to CEWS. More on those rules here.

If you qualify under criteria B or C and do not have a business number, you will need to set one up prior to making your CERS application.

1. You are an eligible business, charity or non-profit

  • This includes individuals (sole proprietors), corporations, and various non profit and other organizations. A full list of qualifying entities can be found here.

2. You have experienced a drop in revenue

  • No minimum revenue drop is required to qualify for the subsidy. The revenue drop is calculated by comparing current year revenue to the same months in 2019, or January and February of 2020.

3. You have eligible expenses relating to a qualifying property

What is considered a qualifying property?

  • Any building or land in Canada that an organization uses or rents in the course of ordinary business activities.

What is considered an eligible expense?

For Renters:

  • Base rent
  • Regular payments required under a net lease - including rent, regular operating expenses, property and similar taxes

For Owners:

  • Property and similar taxes
  • Property insurance
  • Interest on commercial mortgages

For the above expenses to be considered eligible they also must be:

  • Paid to an arm’s length party
  • Be in respect of the claim period
  • Paid or payable under a written agreement in place before October 9, 2020

How is the amount of the subsidy calculated?

The calculation for the CERS is similar to the CEWS, and includes both base and top-up amounts, offering the most support to organizations that have been hit the hardest, or forced to close by the pandemic.

The base rate applies to a maximum of $75,000 in expenses per location. The base subsidy rate is based on the percentage of revenue drop in comparison to prior year, or January and February of 2020.

The top-up rate (aka lockdown support) is available for businesses who have been affected by public health restrictions. Lockdown support is available for businesses who have locations which have temporarily closed or restricted for a week or longer due to a public health order.

More on calculating the rent subsidy rate can be found here or by using the online calculator here.

How to Apply

Applications can be completed through the CRA’s My Business Account or through an authorized representative via Represent a Client.

Applications must be filed within 180 days of the end of a claim period.

Canada United Small Business Relief Fund (CUSBRF)

The Canada United Small Business Relief Fund provides relief grants of up to $5,000 to small businesses who incurred additional expenses as a direct result of COVID-19. Expenses must have been incurred after March 15, 2020.

Three categories of purchases are eligible for reimbursement under the program:

  • Purchase of Personal Protective Equipment
  • Renovation of space to adhere to reopening guidelines
  • Enhancement of website/developing e-commerce capability

Who is Eligible?

  • Small to medium sized companies from all sectors and all regions of Canada
  • Incorporated businesses, sole proprietors or partnerships that were operating in Canada as of March 1, 2020
  • No more than 75 employees
  • Annual sales between $150,000 and $3,000,000
  • Continue to be in operation after September 1, 2020
  • Able to provide all necessary receipts, invoices and accompanying documents with the application (this includes proof of expenses and proof of commercial general liability insurance)

How to Apply

A pre-application checklist can be found here. To apply, visit the Canada United Small Business Relief Fundapplication pagehere.

What to do if you don’t know where to start

We have been working hard over the last months to get government funding into the hands of our clients to help them weather this storm. If your current record-keeping is holding you back from accessing these funds, please reach out to us. We are helping business owners like you get their records back on track to get these funds in their accounts and we’re here to help you too.

Work With Avalon

Our goal is to help small businesses thrive, and we want to help as many businesses as we can.

Here are a few ways that we can help ⬇️

🤝Hire Avalon
We offer full-service bookkeeping and accounting services for small businesses in Canada.

We start by helping incorporated businesses navigate the maze that is tax compliance in Canada. We provide clarity on your business' financial performance so you can make informed decisions with the guidance of our expert team.

If you're interested in hiring Avalon, check out our Services Page or get an idea of the Service Packages that we offer.

🏫Learn New Skills
For those wanting to learn the skills needed take on your own bookkeeping and accounting, we offer online courses.

We've taken our years of experience working with hundreds of small business owners and distilled them down into practical online lessons.

Check out our Business Courses page to take your skills to the next level.

📖Share Our Knowledge
We know that being a small business owner is challenging.  There are so many hurdles to overcome and questions to answer when running a business.

We aim to help as many business owners as possible to overcome those hurdles and answer those questions by sharing our knowledge.

Check out our Blog, YouTube Channel and Downloadable Guides that have helped thousands of people get answers to their questions.  

You can also sign up to our Weekly Newsletter to get tips from Joe on building a successful business.

We speak in plain language and put out the most useful content that we can.

Thanks for reading!
Article by
Originally published
October 27, 2020
If you enjoyed this article, please consider sharing!

Let's Get Started

Use the form below and we'll respond within two business days

How can we help?
Is your business incorporated?
What's your  annual revenue?
Tell us about the services you require or advice you need

Want to hear more business tips?

Sign up to our newsletter to get tax and business tips from Joe as well as his expert insight into running a successful business.