Best COVID-19 Government Programs & Cashflow Strategies for Self-Employed People
As the COVID-19 global battle ensues, there has been decisive action by the Canadian government to give small businesses and workers the best chance of weathering the storm. We have compiled a live list of government grants and cash flow strategies that we believe are worth consideration for your small business so that you can continue to save for a mortgage down payment or make current payments on time. As we are mortgage advisors and we are not certified lawyers, accountants, or financial advisors, all of the below is simply valuable information to consider and discuss with the appropriate party.
One thing we will fully advise is that while in the short-term you need to make tough decisions on preserving cash flow, prioritize your people and loyal customers because this is when they need you most. Don’t be the employer that preemptively slashes half of someone’s salary just to be extra safe without thinking about the consequences of their morale and your reputation.
In the mid-term, you have a golden opportunity to prepare for the upturn in the economy and ensure your business is adapted to the digital world and that the important but not urgent projects are addressed.
Relief Programs & Strategies for the Self-Employed & Business Leaders
1. Consider holding off on personal and corporate income tax installments – the new government initiative has deferred all payments without interest until after August 31st 2020.
2. Consider holding off all payments for Provincial taxes – PST, Employer Health Tax, Municipal and Regional Tax - these payments of taxes and filing or returns have been deferred until September 30th 2020.
3. Apply for a Wage Subsidy – this is directly taken off of your payroll remittance for the next 3 months and is equal to 10% 75% of remuneration to employees (it used to be 10% and now it’s much more) details of how to calculate can be found here https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html
*Update: You must also prove that your business has lost 30% of revenue (or more) since March 15th. The government will cover up to 75 percent of the salary on the first $58,700 which means weekly payments can be up to $847.
4. Apply for BDC Line of Credit – you can increase your available working capital by up to a significant $100,000 or more by applying for a line of credit financing through the BDC. Here is the link https://www.bdc.ca/en/financing/business-loans/working-capital-financing/pages/working-capital-loan.aspx. You need to ensure to indicate that the additional loan is for the impacts of COVID-19
5. Consider contacting your Banker and Defer Loan Payments -- You can look into the deferral of business term loan payments. You may ask them for a deferral of payments on your business term loans for as long as they will let you do it. Keep in mind that banks will be overwhelmed by inquiries so if you cannot get through to them you need to decide whether you hold back or you simply don’t make the payments and hope you can have the conversation once they ask you for them.
b. Defer personal mortgage payments for up to 6 months – request the 6 months of deferral on your personal mortgage (again the banks are going to be overwhelmed with requests, you may need to force the situation. Consider not waiting for their permission if they are not getting back to you.)
c. Apply for an increase to your Line of Credit or Credit Card to give you extra working capital
6. EI Employee Work Sharing Program – talk to your employees to see if they would be willing to go to reduced hours using a work-sharing program that is topped up by EI. Honestly, it’s a strange program which we see feasibility issues with but perhaps it fits your business model: https://www.canada.ca/en/employment-social-development/services/work-sharing.html
7. Emergency Response Benefit – this benefit is a $2,000 per month benefit for up to 4 months and replaces the previously announced Emergency Care Benefit and EI Sickness Benefit. This is available for you and your employees if you have a loss of income due to the virus (for example, you lost key customers or contracts due to the effects of COVID-19). It is available to anyone over 15 years of age with income over $5,000 in the last 12 months. The target release of funds is April 6th. Keep in mind that this amount is available to everyone experiencing a loss of income and even if it is later determined you are not to be eligible, the amount is repayable without interest! Details of how to apply have not been released yet, so check back here momentarily.
8. Review your Credit to Customers – some customers will not be able to pay for your services so this is the time to be flexible. Be cautious about who to grant credit to and take upfront payment or deposits as much as possible. Another strategy is to offer free additional services as long as they keep their normal payments up. You do need to go above and beyond and trust that karma will come back in the future.
9. Tax Refunds – if you are expecting personal or corporate tax refunds, now is definitely the time to get the returns filed to receive the refunds.
10. Commercial Rent Payments – if you are renting, consider contacting your landlord and make arrangements for deferral of rent payments. Currently, there is no requirement for them to do so but they have the ability to defer their mortgage payments and there will be a 50% reduction of a portion of the property tax so they would have the ability to facilitate this.
11. Hydro Payments – If you are making payments directly to BC Hydro (or the equivalent of it in your province), contact them and make arrangements to defer the payments. You can do so without penalty and here is the link to details https://www.bchydro.com/news/press_centre/news_releases/2020/bill-relief-covid-19.html.
There is also a grant available offered by BC Hydro, see link: https://app.bchydro.com/accounts-billing/bill-payment/ways-to-pay/customer-crisis-fund.html
12. ICBC Payments – if you are making monthly payments, you will be eligible to defer payments for 90 days without penalty. Here is the link to details https://www.icbc.com/about-icbc/contact-us/Pages/covid-19.aspx
13. Monthly Software Subscriptions – consider emailing Zoom, Freshbooks, DropBox, Slack, Hubspot, and every other technology provider out there who you are currently paying. Many tech companies have been proactive and offered free trials during this tough time so you’re free to reference what the big tech companies are doing and see if that strengthens your argument.
14. Make minimum payments if you cannot defer – If you are working, we advise that you keep up with your bill and debt payments. Ensure to make at least your minimum payments to avoid late charges, penalties, and potential negative hits to your credit score.
15. The very new Canada Emergency Business Account (CEBA) zero interest $40,000 loan: This was created to provide funds to small businesses that have lost income as a result of the COVID-19 pandemic. The funds received through the CEBA can be used to cover immediate operating expenses costs. The newly developed program will provide loans to small businesses and not-for-profits for up to $40,000. Your yearly payroll requirement is $20,000 to $1.5 million. Business owners luckily will not have to worry about paying any interest for up to one year while holding the loan. Lastly, as much as $10,000 of the loan may be forgiven if the remaining loan balance is paid back in full by (or before) December 31, 2022. Budget not to have it forgiven of course but just keep this in mind.
16. Extended Summer Student Wage Subsidy: Students will be eligible for $1,250 a month from May through August. That sum can go up to $1,750 if the student is caring for a dependent or has a disability.
Trudeau also said students who volunteer over the summer will be paid between $1,000 and $5,000, depending on the hours they work. Earlier this month, Trudeau announced changes to the Canada Summer Jobs program aimed at helping young people get work in sectors that aren't shut down due to the global pandemic. On April 22, he suggested COVID-19 contact tracing and jobs in farming as examples of employment that could help the country through the crisis.
The changes include a boost to the wage subsidy — up to 100 per cent — an extension of the end date for employment to Feb. 28, 2021, and the inclusion of part-time jobs.
The Prime Minister's Office also confirmed that a student can collect multiple benefits if, for example, they apply for the $1,250 benefit, volunteer and hold a job that pays less than $1,000 a month.
Relief Programs & Strategies For Your Employees or Individuals
1. Defer personal mortgage payments for 6 months – consider contacting your lender to defer your mortgage payments for up to 6 months ONLY if you truly cannot make them because of job loss or illness. If sufficient assets and savings are seen, there is a high chance your request will be denied as Canada’s big banks sift through their recent 213,000 mortgage deferral requests.
2. EI Program - If other employees or you are laid off, you are all currently eligible for the regular EI payments (stay informed for the incoming anticipated changes) and here is the link to keep a pulse on it: https://www.canada.ca/en/services/benefits/ei/ei-regular-benefit/apply.html
Keep in mind that the Canadian government has waived the one-week waiting period for EI sickness benefits for those quarantined due to COVID-19.
3. Emergency Response Benefit – this benefit is a $2,000 per month benefit for up to 4 months and replaces the previously announced Emergency Care Benefit and EI Sickness Benefit. See full details in point #7 from the self-employed checklist above.
4. BC Hydro and ICBC Payments – As mentioned to self-employed people, you will also be eligible as well for the deferrals listed above. Details can be found here https://www.icbc.com/about-icbc/contact-us/Pages/covid-19.aspx https://www.bchydro.com/news/press_centre/news_releases/2020/bill-relief-covid-19.html
5. Apply for the BC Emergency Worker Benefit – this is a one time $1,000 payment – details can be found here alongside some other small benefits. Note that those who can apply are B.C. residents who receive federal Employment Insurance, or the new federal Canada Emergency Response Benefit are eligible. Applications for the one-time payment will open soon
6. Student Loan Payment Deferrals – Starting March 30, 2020, B.C. and Ontario student loan payments are automatically frozen for six months.
7. Child Benefit Increases: Please look out in the coming months for the government to temporarily boost the Canada Child Benefit to help parents better cover the costs of child care alongside other impacts of having to stay home.
8. Extended Summer Student Wage Subsidy: As mentioned in point #16 above, Students will be eligible for $1,250 a month from May through August. That sum can go up to $1,750 if the student is caring for a dependent or has a disability.
9. Temporary Rent Supplement: To support people and prevent the spread of COVID-19, the Province is introducing a new temporary rental supplement, halting evictions and freezing rents, among other actions.
The new rental supplement will help households by offering up to $500 a month towards their rent, building on federal and provincial financial supports already announced for British Columbians facing financial hardship. Ontario and other provinces are rolling out their own versions so consult your friend Google to keep tabs on that.
To conclude, it is important to weather the COVID-19 storm by simply being a proactive business owner and adult. However, we also need to be empathetic and responsible in what kind of assistance we ask for as there are other people who likely need it more than you do and it’s important to be mindful of that.
Stay up to date with new programs on this live blog post as we look to make updates as more developed over the coming weeks and months.
*Updated April 22, 2020