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Empty storefronts are seen in Toronto, on April 16, 2020.Nathan Denette/The Canadian Press

Ottawa opened up its latest financing program for small- and medium-sized businesses Wednesday, offering partly forgivable loans through Canada’s six regional development agencies.

SMBs generate more than half of Canada’s economic output, and many found themselves in dire financial situations once provinces and territories began shutting down sectors for safety purposes nearly two months ago. But strict application requirements for Ottawa’s wage subsidy, rent relief and Canada Emergency Business Account (CEBA) loan programs left many entrepreneurs either denied for funding or unable to apply.

Starting Wednesday, entrepreneurs who can’t access those programs can apply through regional development agencies for interest-free loans of up to $40,000 that will be one-quarter forgivable if the business meets repayment terms, similar to CEBA. Larger loans will also be available for some businesses, but not necessarily forgivable. Grants will be available to not-for-profits.

The $962-million program, now known as the Regional Relief and Recovery Fund, was announced last month, but Ottawa unveiled how it would allocate the money on Wednesday. As it undergoes the double shock of oil-price collapses and the novel coronavirus pandemic, Western Economic Diversification Canada will receive the largest portion, at $304.2-million. Southern Ontario will get $252.4-million; Quebec, $211-million; Atlantic Canada, $110-million; Northern Ontario, $49.5-million; and Northern Canada, $34.3-million.

The Regional Relief and Recovery Fund is small compared with other programs, such as CEBA, which was estimated late last month as having offered $41.25-billion in credit to businesses, plus $13.75-billion that would be forgivable. Jon Shell of the Save Small Business lobby group, which represents more than 37,000 entrepreneurs, said that because of the new program’s smaller size, it “seems only marginally helpful.”

The Canadian Federation of Independent Business (CFIB), a long-running group that also lobbies for entrepreneurs, said Wednesday that the regional funding could help businesses that slip through the cracks as long as it flows quickly. But Dan Kelly, its chief executive, warned that the program “doesn’t displace the need” for fixes to CEBA and the federal rent-relief program.

Entrepreneurs have called for rent help since the pandemic began, but the program Ottawa unveiled last month has been widely criticized for funding landlords instead of tenants, and for being too vague. CFIB’s latest survey of small businesses found that 80 per cent wanted rent relief to flow to tenants if their landlords don’t apply, and 88 per cent wanted provinces to temporarily ban commercial evictions.

The federal agencies are mandated to address region-specific issues – Western Economic Diversification Canada was launched by the Mulroney government to diversify the region’s output beyond commodities, for instance. Ottawa is encouraging the agencies to use their regional expertise to disburse funds to sectors and businesses that need it most.

The federal government highlighted tourism, tech, manufacturing and Main Street small businesses as potential beneficiaries of the Regional Relief and Recovery Fund. Prime Minister Justin Trudeau announced the details Wednesday, although the federal government began to share some details Tuesday night.

Economic Development Minister Mélanie Joly acknowledged that the regional funding program was created in response to many criticisms from entrepreneurs that its other programs left too many small- and medium-sized businesses behind.

“Not only did we have to move our position from an approach that was based on liquidity, and support to businesses through subsidies – but also that these measures, while they were positive, were not tailored to all business models,” Ms. Joly told The Globe and Mail late Tuesday.

The Community Futures Network of Canada, which provides support to small businesses in rural areas, will also help disburse the new program’s loans.

Many businesses are already excluded from the CEBA program because of its strict eligibility criteria. Participants must have a payroll between $20,000 and $1.5-million – a requirement that excludes the smallest of businesses and many medium-sized ones as well, as well as sole proprietors or businesses who pay staff as contractors.

Editor’s note: (May 14, 2020): An earlier version of this article included an incorrect payroll range for a government aid program.

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