COVID-19 - New Loan Programs for Businesses
Canada Emergency Business Account (CEBA)
This program is designed for small businesses to have access to capital. It will be implemented by eligible financial institutions in cooperation with Export Development Canada (EDC).
This $25 billion program 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.
Small businesses and not-for-profits should contact their financial institution to apply for these loans.
To qualify, these organizations will need to demonstrate they paid between $20,000 to $1.5 million in total payroll in 2019, verifiable by Canada Revenue Agency documentation (a T4 summary of remuneration paid, or T4SUM). Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).
Business Credit Availability Program (BCAP)
The federal government has established a Business Credit Availability Program (BCAP) to provide $40 billion of additional support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).
BDC and EDC are working with private sector lenders to coordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation, exports and tourism.
This program includes two elements, the Loan Guarantee for Small and Medium Sized Enterprises, and the Co-Lending Program for Small and Medium Sized Enterprises.
Loan Guarantee for Small and Medium-Sized Enterprises
This program provides credit and cash flow term loans to small and medium-sized enterprises. Canadian businesses in all sectors that were otherwise financially viable and revenue generating prior to the COVID-19 outbreak are eligible to apply.
It allows financial institutions to issue operating credit and cash flow term loans of up to $6.25 million to existing clients, with 80 per cent guaranteed by EDC.
This money is to be used for operational expenses, not for dividend payouts, shareholder loans, bonuses, stock buyback, option issuance, increases to executive compensation or repayment/refinancing of other debt.
This program is now available at various financial institutions and credit unions.
Co-Lending Program for Small and Medium-Sized Enterprises
This program provides term loans for operational and liquidity needs of businesses, which could include interest payments on existing debt. Similar to the EDC program, this program is available to businesses that were financially viable and revenue-generating prior to the COVID-19 outbreak.
The program is designed in three segments to target support to different business sizes.
- Loans of up to $312,500 to businesses with revenues of less than $1 million.
- Up to $3.125 million for businesses with revenues between $1 million and $50 million.
- Up to $6.25 million for businesses with revenues in excess of $50 million. Loans would be interest-only for the first 12 months, with a 10-year repayment period.
Applications details will be made available in the days to come by financial institutions.