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Small family-owned businesses and companies that rely on contractors can now apply for $40,000 loans backed by the federal government after waiting months to gain access to the Canada Emergency Business Account (CEBA) program.

The new CEBA rules, which came into effect on Friday, open up the loan program to businesses that pay their employees on contract or using dividends, and to companies with a payroll under $20,000, as long as they have at least $40,000 in eligible expenses. Banks, which are administering the loans on behalf of the government, began accepting applications on Friday.

Ottawa launched the CEBA program in April to provide no-interest and partly forgivable loans to small businesses hit hard by the pandemic. For the past 2½ months, however, many sole proprietorships and family-owned businesses have been excluded from the program because of payroll eligibility requirements.

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“The main groups that are going to benefit from this today are groups with no or little payroll, because they pay themselves with dividends,” said Dan Kelly, chief executive of the Canadian Federation of Independent Business. “Also those that have contract workers and no paid staff, and companies, like salons, that rent chairs as their business model.”

The federal government pledged to expand the program in May, but it has taken five weeks to launch the new system needed to process a broader set of applicants. The launch was supposed to happen last Friday, but was delayed a week because of technical problems.

The expanded program will be administered by banks, as with the earlier versions of CEBA. However, applications will now be screened up front by Export Development Canada, which is overseeing the program.

“They want to make sure that they’re supporting legit businesses, and not facilitating the creation of a newly invented business, in order to game the system,” Mr. Kelly said.

He said the increased caution is reasonable, but the slow rollout of the changes has caused considerable pain to thousands of businesses excluded from the program.

“In this emergency situation, we have to be prepared that government is going to make some mistakes, and that there will be some bad situations slipping through the cracks. But if we don’t allow for at least a degree of that, a huge amount of the legitimate business community in Canada is going to fall apart,” he said.

For Rob McGregor, who runs a business consulting firm in Vancouver called Spirit West, the changes could not come soon enough. He was initially excluded from the program because he pays himself with dividends – a common model for owner-operated businesses – and pays his employees on a contract basis.

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“Access [to the CEBA loan] means that we can stay afloat, it means that we might be able to get back to doing some business development,” Mr. McGregor said.

“That said, you wait four months, three months in a situation like this: I’m concerned that a lot of companies have already just faded out and people have gone on to find some other way to make a living,” he added.

Small businesses are still waiting for one additional change to the CEBA program, which excludes owner-run companies that do not have a business bank account. This includes people such as Rob Gordon, a Toronto orthopedic surgeon, who has been off work since March after elective surgeries were cancelled.

“For 30 years, I’ve been paying my staff and my researchers out of my personal account; no need to have a business account because I have a business number and I do a T4,” Mr. Gordon said.

“I have been able to tap into the wage subsidy for one person. I had to let another person go: I can’t pay them. But if I had the ability to access the loan, then clearly, I might be able to keep on supporting people. But it’s getting very hard,” Mr. Gordon said.

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