The federal government extended two pandemic business-loan programs Monday, but held back from stretching its pandemic rent-relief program for entrepreneurs into September, leaving thousands of businesses without a crucial lifeline.
Ottawa will now accept applications for interest-free Canada Emergency Business Account loans of up to $40,000 for small businesses until Oct. 31, and said that its Business Credit Availability Program for larger businesses would be extended until June, 2021.
But the government left ambiguity around small businesses’ biggest concern: the federal-provincial Canada Emergency Commercial Rent Assistance program, which has seen little uptake and was set to end Monday.
The program requires landlords to apply on behalf of tenants, and entrepreneurs have warned for months that this structure has left them in powerless, financially precarious positions. The Parliamentary Budget Office reported Monday that it projected Ottawa’s contribution to CECRA would be $931-million for 2020-21. That’s just under 40 per cent of the $2.4-billion the government has earmarked for the program, further fuelling criticisms that CECRA’s design prevented it from achieving what it was intended to do.
But Small Business Minister Mary Ng and Deputy Prime Minister Chrystia Freeland, who took the reins of the finance portfolio in August after Bill Morneau’s resignation, signalled at a press conference Monday that the federal government was working on a solution for rent concerns that could differ from just extending CECRA. “We’re going to have more to say about [rent relief] very soon,” Ms. Freeland said.
Members of the small-business community interpreted the ministers’ comments with cautious optimism. “The ministers’ ambiguous response, I’m hopeful, is a sign that something more substantive is coming,” said Dan Kelly, head of the Canadian Federation of Independent Business or CFIB.
Jon Shell, co-founder of Save Small Business, a lobby group created during the pandemic, said that “so few people benefited from CECRA that extending it to those people doesn’t feel like the right allocation of resources.”
But the lack of detail was seen by some entrepreneurs as dangerous. “No CECRA extension means lights out for thousands,” said Michael Wood, managing partner of Ottawa Special Events, who added that his bank cut his firm’s line of credit by 40 per cent last week over the risk presented by his diminished revenue. “Between the bank and the government, I could easily be put out of business.”
Ottawa also said that it would extend applications for the Canada Emergency Business Account interest-free loan program to Oct. 31, after having approved 730,000 applications. The CEBA program lets entrepreneurs apply for up to $40,000 through their financial institutions – a quarter of which can be forgiven and effectively turned into a grant if the loan is repaid by the end of 2022.
More than $29-billion worth of loans have been approved through the CEBA program, Ms. Freeland said, from an envelope totalling $55-billion. The qualifications for the CEBA loan program were also expanded Monday to include entrepreneurs who use personal accounts to run their business.
CFIB had been advocating for changes to CEBA while Mr. Morneau was finance minister, including to open access to entrepreneurs using personal accounts, though Mr. Kelly said he was not receptive to any suggestions. The Globe and Mail has reported that Mr. Morneau was not often receptive to outside perspectives, and that he clashed with Prime Minister Justin Trudeau, arguing for more fiscal restraint in designing pandemic programs.
“I’m absolutely thrilled that Minister Freeland’s presence has made a big difference already,” CFIB’s Mr. Kelly said.
The $65-billion Business Credit Availability Program, which helps medium-sized and larger businesses with operating costs in conjunction with Export Development Canada and the Business Development Bank of Canada, was extended through June, 2021. Depending on their size, businesses can apply for BCAP loans of up to $80-million.
CECRA was initially available for rent relief for April, May and June, but was later extended through July and August.
Ms. Freeland and Ms. Ng said Monday they had discussed rent relief with both entrepreneurs and with provincial finance ministers in recent days. Many small-business owners have criticized CECRA as leaving them powerless at the whim of their landlords, while the governments of both Saskatchewan and Manitoba have asked Ottawa to revamp CECRA to put power in tenants’ hands.
Many small businesses already struggle with thin profit margins, and were among the first to see revenue plummet during economic shutdowns. Rent is almost always their biggest monthly bill. After six weeks of cries for relief from entrepreneurs, Ottawa announced CECRA in late April, offering to cover half of their rent from eligible applicants if they paid a quarter and their landlord absorbed the remaining quarter of costs. Landlords were required to apply on their tenants’ behalf.
Landlords are eligible to apply for CECRA if their tenants pay less than $50,000 a month in rent, bring in less than $20-million in gross annual revenue and have seen revenue drop by at least 70 per cent because of the pandemic.
The PBO’s report adds further fuel to arguments from both small businesses and landlords alike that the program was flawed: While tenants are powerless to apply, the landlords that do apply are stuck with mountains of paperwork they didn’t ask for.
Although 63,000 small businesses had been approved for CECRA by the end of July, that only accounted for about 16 per cent of those that should be eligible, according to CFIB research.
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