Are you self employed, or a small business owner who’s reeling from the impact of COVID-19? You’re not alone. A recent survey by the Canadian Federation of Independent Business (CFIB) found that half of Canadian small businesses reported a drop in sales due to coronavirus. Find out what the Canadian government is doing to help.
6 Small Business Questions Related to COVID-19
Whether you’ve managed to stay open or have temporarily shut down your business, you probably have a lot of questions. While our free financial consultations usually focus on individuals and couples, more and more of our clients are forming part of the gig economy, so it’s important to us to be able to provide a little guidance on how to address small businesses amid this crisis. Below are a few questions we’ve heard from our clients during these trying times.
Do I have to close my business?
To stop the spread of the coronavirus, provinces are shutting down businesses that are determined to be “non-essential,” “non-priority,” or “non-critical.” Failure to comply with these government regulations can result in hefty fines and lengthy prison terms. Of course, many non-essential businesses can still operate if they’re able to conduct business without direct interaction with someone. Take, for example, eCommerce businesses.
How do I know if my business is considered essential?
This determination (and whether closures are to be partial or full) is made by individual provinces and territories. While most lists are similar, there are variations (for example, car dealerships are considered essential in Ontario, but not in Quebec) so it’s best to check your provincial government website. Here’s a list of each for easy reference:
What can I do if I can’t afford my rent or lease?
While mortgage deferral programs have been put into place for those impacted by COVID-19, a rent freeze has yet to be enacted (although measures surrounding rent relief and eviction bans are being put into place to help Canadians). The website Liv has a comprehensive list of what provincial governments are doing (or aren’t doing yet) for tenants.
It’s always best to connect with your landlord to discuss your current situation. If you have a good history with them, they may be willing to negotiate. If you are able to come to an agreement, be sure to get it in writing. The government of Nova Scotia has created two forms that you and your landlord can use as a template to formalize your deferral agreement:
If your landlord is unwilling to negotiate, you should speak with your bank regarding emergency financing. For example, money may be available through the new Canada Emergency Business Account. This provides funding to eligible banks so they can offer interest-free loans in the form of lines of credit of up to $40,000 to businesses with payrolls of less than $1 million.
Are there any government programs that support small businesses?
If you have a small business that's been in operation as of March 1st, 2020 and you've been operating it using a non-business bank account, you can apply for a Canada Emergency Business Account (CEBA) loan. To apply for a CEBA loan, you must open a new business account at a Canadian financial institution that is participating in CEBA. If you are interested in applying, contact your primary financial institution. The deadline to apply for the loan is December 31st, 2020.
The Government of Canada is working with Canadian banks to help businesses and sectors that have been most impacted by COVID, including tourism, hospitality, hotels, arts, and entertainment. They are doing so by introducing the Highly Affected Sectors Credit Availability Program (HASCAP) where the government will be providing loans between $25,000 and $1 million to qualifying businesses for a maximum term of 10 years at a fixed annual interest rate of 4%.
Here is a list of other federal and provincial supports available to businesses that may qualify.
What do I do about employees now that business has slowed?
This is an unfortunate situation, but one that many small businesses are likely to find themselves in. Ultimately, you’ll have to closely review your finances to determine what makes the most sense: Staying open, hitting pause, reinventing your business, working remotely, or just shutting down. Depending on what you decide, you may need to let some or all your employees go, or cut back on their hours.
You should also be aware that Export Development Canada and Business Development Bank were awarded an additional $12.5 billion to provide guaranteed loans to small and medium-sized businesses, and the Canadian government will cover 75% of payroll wages for small businesses and give those companies access to one-year interest-free loans in order to avoid layoffs.
Whatever you decide to do, it’s important to be honest with employees about their job security and income options. Perhaps some of them know of another position they could take elsewhere, making eliminating positions that much easier for you.
If you do need to let them go temporarily or permanently, ensure they are aware of Employment Insurance (EI) benefits and other benefits they may be eligible for. For example, the Canada Recovery Benefit (CRB) provides $500 per week for up to 26 weeks for workers who have stopped working or had their income reduced by at least 50% due to COVID-19, and who are not eligible for Employment Insurance (EI).
How can I support other small businesses?
If your business hasn’t been impacted, or has even seen some growth like some eCommerce businesses have, you may want to help out your fellow small business owners who are struggling. Here’s a handful of ideas:
- Purchase fruits and vegetables from a local greengrocer
- Order takeout or delivery from local restaurants
- Buy gift cards from local businesses for future use when they re-open
- Pre-pay for future appointments, such as the nail or hair salon
- Maintain memberships at local gyms and studios, if you’re able to; some are even conducting virtual sessions with a trainer
- Buy a book, music, or artwork from a local shop online or directly through a local author, artist, or musician’s website
- Buy birthday or Christmas gifts for loved ones now to help local businesses
Have a great idea of your own? Let us know in the comments.
Credit Canada is Here For You
During these difficult times, it’s important that we all stick together—even while remaining socially distant! Credit Canada has created a COVID-19 Financial Resource Centre and will be holding free webinars in the coming weeks. As always, we’re available for free one-on-one phone consultations, too. If you need to speak with a knowledgeable and caring Credit Counsellor, you can call 1.800.267.2272 or book online.
A Survival Guide for Tough Times
When times are tough, we're here for you. Fill out the form to download tips for dealing with creditors, managing monthly expenses & calculating savings.