An Entrepreneur’s Guide to COVID-19 Financial Resources
Last Updated: April 16, 2020
With the onset of COVID-19, many small business owners and self-employed workers are struggling financially to make ends meet. You might be wondering, how do I pay my expenses with no income? How can I keep my business going? How can I provide for myself and my loved ones?
Thankfully, the federal government has been rolling out financial support programs for entrepreneurs and self-employed workers to help weather financial challenges due to COVID-19. We’ve compiled all the currently available financial resources for small businesses and self-employed individuals, including what you need to be eligible and how to apply.
Note: this article is accurate up to the date listed above. Due to the shifting nature of COVID-19, please visit the Government of Canada COVID-19 home page for the most up-to-date information.
Financial Aid for Small Businesses
Small businesses are in dire need of COVID-19 relief, especially with self-isolation and social distancing in place across Canada. The federal government has stepped in to provide several different financial resources for entrepreneurs.
Cover Employee Wages through the Emergency Wage Subsidy
This subsidy applies to every business, of any size, who experiences a 30% decline in revenue compared to the same period last year, including small businesses, non-profits, and charities. You can apply for the subsidy for up to 12 weeks, and it covers 75% of employee wages on the first $58,700, with a maximum of $847 per week per employee.
Am I Eligible?
To qualify for this subsidy, you must be able to prove you are doing everything you can as an employer to pay the additional 25% of all wages for your employees. You must also show there has been a 30% decline in revenue compared to the same month last year.
As an employer, you will need to reapply for this subsidy each month (March, April, and May 2020). Your employees cannot collect Employment Insurance Benefits (EI) or the Canada Emergency Response Benefit (CERB) if they are already receiving this subsidy.
If you do not qualify for the Emergency Wage Subsidy, you may be able to qualify for the previously announced Temporary Wage Subsidy, which provides 10% of remuneration paid to employees from March 18th to before June 20th, 2020, to a maximum of $1,375 per employee and $25,000 per employer. More information about this financial support can be found on the Government of Canada website.
How Can I Apply?
Small business owners can apply for the Emergency Wage Subsidy in the next 3-6 weeks through their CRA My Business Account. Make sure your business is enrolled in direct deposit with the CRA to ensure payments are not delayed. Many financial institutions are now offering Direct Deposit services so you can get your subsidy payments faster, so check with your bank about this option.
Once funds become available, they are paid as a reimbursement to the employer, not a deduction of payroll remittances. Full details for the Emergency Wage Subsidy can be found on the Government of Canada website.
Get a Business Loan through the Emergency Business Account
This program provides small business owners with access to an interest-free loan of up to $40,000 to help cover operating expenses. If $30,000 is paid back by December 31, 2022, $10,000 may be forgiven by the lender. If you are not able to repay the loan by December 31, 2022, it can be converted into a term loan via your banking institution.
Am I Eligible?
To be eligible for this loan, you will need to show that you paid between $50,000 to $1 million in payroll in 2019.
How Can I Apply?
This program is slated to roll out in mid-April, so monitor the Government of Canada website for updates. Once the program becomes available, be sure to connect with your financial institution to arrange the loan. For example, RBC is currently working on an online enrollment system for entrepreneurs to make it easier to apply for this program.
Financial Support for Self-Employed Individuals
If you are self-employed, working on contract or as a freelancer, you qualify for financial aid through the Canada Emergency Response Benefit (CERB). This benefit can also replace maternity or paternity leave pay through EI. CERB provides $2,000 a month per person for up to four months.
Am I Eligible for CERB?
To qualify for CERB, your self-employment earnings must be at least $5,000 in 2019 or during the last 12 month period preceding your application. To access this benefit, you must be able to show you have absolutely no income for a minimum period of 14 consecutive days within each four-week period.
If you are already on EI, or have applied for EI before March 15, you do not qualify for CERB. You will need to wait until your EI benefits expire to be eligible for CERB.
If you applied for EI after March 15, your application will automatically be converted into an application for CERB.
How Can I Apply?
Applications for CERB open on April 6, 2020 and are staggered based on birth month. The schedule for applying can be found on the Government of Canada website.
To get your financial benefit within three business days after you apply, make sure you have a CRA account with direct deposit. If you do not have direct deposit through the CRA, you can expect your payment within 10 business days via mail.
Defer Payment on Income Tax, Student Loans, and Other Expenses
To support small business owners and self-employed individuals, the Canadian government has announced a deferral program to help reduce expenses for Canadians during COVID-19. Under this program, you may be able to defer the following taxes and payments:
- Personal and Corporate Tax: As part of a tax extension program, you can defer payments up to September 1, 2020, but you must file personal and corporate tax by June 1, 2020.
- GST/HST payments: Payment can be deferred up to June 30, 2020, but you still have to file your GST/HST return by your respective due date.
- Mortgage payments: Contact your lender directly, as many financial institutions are being encouraged to offer clients payment deferral, loan re-amortization, and other special payment arrangements.
- Canada student loan payments: As of March 30, 2020, a six month interest-free moratorium has been applied on all Canada Student Loans, with no payment required or interest accrued.
Whether you are an entrepreneur or a self-employed individual, these emergency support programs have been introduced to make it easier for you to cope during this challenging time. Be sure to stay informed on the latest changes to these programs so you can access the best financial resources for your needs.
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This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.