The spread of Covid-19 has inflicted considerable damage on our economy over the past several months. Both individuals and businesses are being impacted by decreased revenue, employee layoffs, and a large amount of uncertainty. We have all been personally affected in one way or another.
The Canadian Government quickly created an economic response plan to help Canadians get through this difficult time financially. For businesses, they’ve implemented programs for financial aid.
The Canada Emergency Business Account (CEBA) and the Canada Emergency Wage Subsidy (CEWS) are significant parts of the Government’s plan for recovering our economy. We need to understand these resources and utilize them accordingly if we need them.
CEBA – Canada Emergency Business Account
CEBA supports businesses by providing financing for their expenses that cannot be avoided or deferred. This $55 billion program offers interest-free loans of up to $40,000 to small businesses and not-for-profits. Since its inception, nearly 800,000 businesses have been approved for this program ushering in $31 billion of government support for those who are struggling.
Businesses that pay their loan balance on or before December 31, 2022, will receive loan forgiveness of 25% (Up to $10,000). If you own a business but haven’t thoroughly looked into it, we recommend you do.
As of October, the Canadian Government announced further plans for CEBA to be extended for businesses and not-for-profits that continue to be significantly affected by Covid-19. The application deadline has been extended to December 31, 2020. They can access an interest-free loan of up to $20,000 in addition to the original CEBA loan of $40,000. Half of this additional $20,000 loan will be forgivable if paid by December 31, 2022.
For further information on CEBA, you can visit the Canada Emergency Business Account page on the Canadian Government website.
CEWS – Canada Emergency Wage Subsidy
Canadian employers that have seen a drop in revenue due to Covid-19 could be eligible for a subsidy to cover part of employee wages through the CEWS. The subsidy’s primary goal is to enable businesses to re-hire workers, help prevent further job losses, and ease companies back into everyday operations.
The department of Finance Canada released an article on October 14 about the Canada Emergency Wage Subsidy potentially being extended. “The government intends to introduce legislation that would implement the extended wage subsidy.” The CEWS is a significant component of Canada’s goal for creating over one million jobs and restoring employment to pre-pandemic levels.
Employers can receive the subsidy for up to 75% of employees’ wages dependent on several factors. One factor is how much revenue decreased from covid-19.
Since its official launch, over 3.7 million Canadians have had their jobs supported through the Canada Emergency Wage Subsidy, with more than $41 billion paid out in subsidies as of October 4, 2020.
For further details and recent changes for this program, you can visit the Canada Emergency Wage Subsidy page on the Canadian Government website.
Why You Need to Stay Informed
In times of uncertainty, things change quickly. For example, a change could be additional restrictions for businesses in a particular industry. On the other hand, a change could occur with a government aid program your business is participating in. We recommend regularly checking the business support page on the Government of Canada website. As business owners, it’s essential to stay informed to pivot ourselves as quickly as possible.
The Importance of Having Updated Bookkeeping
It’s never been more important to keep your books accurate and updated. The Canadian Government requires a clear understanding of your business’s books to determine if you are entitled to support programs. For example, your business’s books need to clearly show a decrease in annual revenue to qualify for the Canadian Employee Wage Subsidy. Furthermore, the subsidy rate varies, depending on how much your revenue has dropped. Having accurate books can make the difference between qualifying for financial support or not.
Being organized with accurate bookkeeping can also save a lot of headaches later on. This is especially true for businesses that are accepted, but then audited by the government at a later date. If a CEWS audit determines that the business no longer qualifies for support, the claimant would be required to repay amounts previously paid as well as applicable interest. Significant penalties may be applicable in regard to cases of serious non-compliance.
Keeping our bookkeeping accurate and updated is especially crucial during these times of uncertainty. We need to do everything we can to put our businesses in the best position possible.