Feds roll out loans for big firms, rent aid as economic reopening brings new challenges
OTTAWA -- With more businesses moving out of hibernation, Prime Minister Justin Trudeau said the federal government will continue to roll out targeted financial assistance and expand existing commitments, saying that seeing as many Canadian businesses reopen as possible will be key to the overall economy’s well-being.
This comes with Wednesday’s double-barrelled announcement that large companies impacted by the current economic downturn can now apply to access multi-million dollar loans, and that landlords will soon be able to apply for the commercial rent relief program with the promise of a quick turnaround on funding.
These programs will roll out as more economic and social activities are being restarted because the pandemic curve is flattening across the country.
And while some restrictions are starting to be cautiously loosened, in many cases it doesn’t mean a return to business as usual, meaning that even though the gradual restart is “welcome news” as the prime minister said, it comes “not without its challenges.”
Many companies are facing a new reality, whether their workspaces need to be modified to contend with physical distancing requirements, having to find ways to make money while fewer customers are spending, or facing the challenge of purchasing new equipment to satisfy the heightened need for disease control measures, such as plexiglass barriers and face masks.
“People need help getting back on their feet,” Trudeau said. “Your business matters to your employees and to our country. In fact, it matters to our whole economy, so a concern for you is a concern for us too."
He said getting the economy into better shape is going to hinge on as many businesses as possible making it through the pandemic.
“We know that if many businesses aren't able to make ends meet and do go under at this point, it'll be a lot slower to pick up the economy and that'll be bad for Canadians,” he said.
Adding to this, Chief Public Health Officer Dr. Theresa Tam issued a new national stance on ongoing public health measures on Wednesday. She said that adherence to hand washing, physical distancing and cough etiquette will need to continue through the summer as the “bare minimum” efforts taken. She is also now recommending wearing non-medical masks any time physical distancing can't be maintained.
She said that while this is not the “grand reopening” some Canadians may have hoped for, the precautions need to continue over the summer to buy Canada more time to prepare “whatever may come this fall and winter,” and to continue to research treatment and vaccine options.
LARGE FIRMS OFFERED BIG LOANS
Ahead of Trudeau’s address, Finance Minister Bill Morneau offered new details on the promised multi-million dollar loan program.
Called the Large Employer Emergency Financing Facility (LEEFF), big companies across most sectors will now be able to apply to access millions in additional liquidity to keep their operations going and avoid bankruptcy.
The program is intended to be a short-term offering until these firms can access traditional market financing, the government said Wednesday.
Eligible companies are those who can demonstrate having a “significant impact” on the Canadian economy, by having a large workforce or operation in Canada, and commit to keeping their domestic business activities alive with the assistance of the loan.
As already announced, eligible companies have annual revenues of $300 million or higher and are seeking loans of $60 million or more. Businesses in the financial sector are not eligible, nor are any firms convicted of tax evasion in the past. Morneau said there is no upper limit on these loans.
The loans are being offered for the next 12 months, and the size of each loan offered will vary on a case-by-case basis dependent on a businesses’ need.
The application process includes a non-disclosure agreement and companies can apply as long as the “current economic situation persists.”
The large loans come with a series of uniform terms and conditions that Morneau said are aimed at protecting Canadian taxpayers.
This includes agreeing to allow the government to take an ownership stake in publicly-traded companies. If not publicly-traded, then companies will have to put a up cash equivalent to ensure that existing lenders share in the risk.
Morneau said the intent of the conditions of the funding “is to make sure that if a firm does well that Canadians, and Canadian taxpayers share in that upside.”
In all cases, these companies will need to agree to a strict limit on their ability to issue dividend payments, share buy-backs, and capping executive compensation at $1 million.
Big businesses looking to secure this financial assistance also need to sign attestations committing to report annually on how their operations are supporting environmental sustainability and national climate goals.
The program is being delivered through a subsidiary of the Canada Development Investment Corporations.
Loans will be provided in tranches over the next year. The duration for the unsecured part of the loan will be five years, while the secured amount can be paid back at any time without penalty.
COMMERICAL RENT AID COMING SOON
Trudeau said that the application portal for the Canada Emergency Commercial Rent Assistance Program, will open on May 25.
The application documents are now accessible on the Canada Mortgage and Housing Corporation’s website.
The program is aimed at helping smaller businesses cover their rents between April and June, and despite June rent due just days after the application portal is set to open, Trudeau is promising applicants will “receive your relief quickly.”
Commercial property owners are being offered forgivable loans to cover 50 per cent of three monthly rent payments. The loans will be forgiven if the property owner agrees to reduce eligible businesses’ rent by at least 75 per cent for the three months.
But because this program—established as a cost-sharing program with the provinces and territories—requires landlords agreeing to buy-in, it’s yet to be seen how many property owners may participate, but Trudeau had a message for them Wednesday: “If you’re a landlord, and you and your tenant are eligible, please apply.”
Questioned further on the incentive for landlords to take part, Trudeau said his government “expects” landlords to be part of the solution. He said that if businesses in their spaces go under, property owners will also be in a hard spot as more companies consider the viability of working from home or online commerce, therefore limiting the commercial space they need to rent.
ONGOING PUSH TO REHIRE
These financial aid programs are part of the government's ongoing push to encourage employers to bring their employees back on the payroll, after two months of job losses prompted by the pandemic.
Between March and April approximately three million Canadians lost their jobs, and the unemployment rate has soared to 13 per cent, the second highest unemployment rate on record, according to Statistics Canada.
Last week, as part of the effort to kick-start the economic rebound, the government announced that the 75 per cent wage subsidy on employee salaries was being extended to the end of August. Trudeau continues to urge employers to rehire their staff and take the government up on this subsidy offer.
So far, more than 215,000 claims for the subsidy have been approved, with the government set to cover 75 per cent of the wages for nearly 2.8 million Canadians, a fraction of the take-up the government has anticipated.
On Tuesday the government also offered up interest-free loans of up to $40,000 to a wider range of business owners who may also need help reopening.
To-date the federal government has committed more than $150 billion in direct COVID-19 economic aid, while offering billions more in loans and other liquidity. More than 8 million people have now applied for the $2,000-per-month Canada Emergency Response Benefit and $38 billion has been sent to Canadians through this program.