Despite being able to resume operations following the lifting of certain governmental restrictions related to COVID-19, many business owners continue to experience unprecedented financial challenges. After months of decreased revenue - or possibly even periods without any revenue - business owners may be struggling to cover their operating costs from month to month. In many cases, these challenges have been exacerbated by the unexpected costs associated with implementing safety measures to protect staff members, customers and others who might have contact with the business. Unfortunately, some of these safety measures, such as limiting the number of customers inside a retail store at one time, can also have the effect of limiting revenue.
Professionals, such as dentists and chiropractors, have faced similar financial pressures in adapting their practices to implement enhanced safety measures to protect their staff members and patients (many of which have required the purchase of supplies and equipment). Again, reduced revenue is expected while these professionals continue to incorporate protocols such as treating fewer patients to allow time between appointments to clean treatment rooms.
The Canada Emergency Business Account
The level of uncertainty earlier in the pandemic and the rapid announcement of government relief programs may have made it difficult for business owners and professionals to determine whether to apply for COVID-19 related support, which programs to apply for, and how to apply. With the application deadline for the Canada Emergency Business Account ("CEBA") recently extended until October 31, 2020, we would like to take the opportunity to remind you about this program.
CEBA provides small businesses and not-for-profits access to interest-free loans of up to $40,000. These loans are intended to help businesses cover operating expenses such as payroll, rent and utilities to help businesses survive the strain resulting from the pandemic. General information concerning CEBA can be found here.
Eligibility and How to Apply
Businesses may apply for CEBA under one of the two eligibility streams:
1. Payroll Stream - This application stream is available to businesses with employment payroll between $20,000 and $1,500,000 during the 2019 calendar year.
2. Non-Deferrable Expenses Stream - If a business did not have more than $20,000 in payroll in 2019, it can still apply for CEBA if it can demonstrate eligible non-deferrable expenses between $40,000 and $1,500,000. The categories of eligible non-deferrable expenses include costs such as rent, utilities, property taxes, and wages for independent third parties (for the full list, see the CEBA website). To be considered eligible, these expenses must be incurred during the 2020 calendar year.
Please note that the above is not an exhaustive list of the eligibility requirements. CEBA applications are being administered by financial institutions, which will be able to provide interested businesses with more information on the eligibility requirements.
Considerations regarding Expanded Eligibility Measures
Extending access to CEBA until October 31st has brought along additional measures to allow more small businesses to access the program who did not previously qualify, including professionals with newer practices and those who are practicing as associates.
In the case of a newer practice with less than $20,000 in payroll, it may still be possible to qualify for CEBA through the non-deferrable expenses application stream. As long as the practice was opened prior to March 1, 2020, has a Canada Revenue Agency business number, has filed a 2019 tax return (even if the tax return was a nil return), and can demonstrate having valid business expenses between $40,000 and $1,500,000 in 2020, the business may qualify for the program.
Valid business expenses are characterized as eligible non-deferrable expenses that are incurred or are to be incurred in 2020. These expenses may include rent or lease payments, insurance, property taxes, utilities, wages, fees required to maintain licenses and authorizations in order to conduct business, as well as expenses arising out of a legal or contractual obligation that cannot be deferred beyond 2020.
Dentists and other professionals who practice as an associate may also qualify for CEBA, regardless of whether they are practicing through a professional corporation. The associate must meet the same eligibility criteria as a newer practice, and they must also have a business bank account, rather than a personal one, used for business income and expenses.
Family-owned corporations that are providing remuneration in the form of dividends rather than payroll may also be eligible under the expanded CEBA program, provided that they can demonstrate non-deferrable expenses between $40,000 and $1,500,000 in 2020. Wages that are paid to family members, including a spouse or children, may not be included when calculating non-deferrable expenses. Only wages that are paid to arms-length parties will count toward the minimum non-deferrable expense threshold.
If you think your business may be eligible and could benefit from CEBA, please contact your financial institution and consult the CEBA website for more information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.