By Nizam Shajani, CPA, CA, MBA
Recent announcements by Prime Minister Trudeau anticipate new interest free or low interest loans to be provided to Canadian businesses in the coming days.
Canada Emergency Business Account
This program will provide up to $25 billion to eligible financial institutions so they can provide interest-free loans to small businesses. These loans – guaranteed and funded by the Government of Canada – are supposed to ensure that small businesses have access to the capital they need, at a zero per cent interest rate, so they can pay for rent and other important costs over the next number of months.
The account will provide funding to eligible financial institutions so that they can provide interest-free loans in the form of lines of credit of up to $40,000 to businesses with payrolls of less than $1 million. A quarter of this loan (up to $10,000) is eligible for complete forgiveness.
Small and Medium-sized Enterprise Loan and Guarantee
Up to $40 billion in lending, supported through Export Development Canada and Business Development Bank, for guaranteed loans when small businesses go to their financial institutions to help weather the impacts of COVID-19. This is intended for small and medium-sized companies that require greater help to meet their operational cash flow requirements.
Export Development Canada will provide guarantees to financial institutions so that they can issue new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized businesses. These loans will be 80 per cent guaranteed by Export Development Canada, to be repaid within one year.
Small and medium-sized businesses can also get support through a new Co-Lending Program that will bring the Business Development Bank of Canada together with financial institutions to co-lend term loans to these businesses for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program, which will be risk-shared at 80 per cent between the Business Development Bank of Canada and the financial institutions. Eligible financial institutions will conduct the underwriting and funding directly for customers.
Prepare to contact you bank if you require this funding. Details on qualifications and the application process are anticipated to be released in the coming days.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP