What you need to know about federal support for Canadians, businesses during COVID-19
Published Friday, March 27, 2020 9:24PM EDT Last Updated Friday, March 27, 2020 9:28PM EDT
OTTAWA -- The federal government capped an unprecedented week Friday by announcing a slew of measures to help small businesses cope with the COVID-19 crisis, bringing Ottawa's total planned support in response to the pandemic to at least $200 billion. The Bank of Canada also pitched in with a surprise cut to its benchmark interest rate and a promise to buy billions in government bonds.
Here is what you need to know about what rolled out this week:
HELPING MOM AND POP
The most significant initiative for the small-business sector was a pledge to increase wage subsidies, with the government saying it will cover 75 per cent of employees' wages after committing to cover only 10 per cent last week. The measure is aimed at keeping employees on company payrolls and, in the words of Finance Minister Bill Morneau, primed to get back to work once the pandemic passes. Morneau did not say whether the government was placing a cap on either how much it would spend on individual subsidies or overall, saying details will come next week.
Hold on to your taxes - Companies are also being told to hold on to whatever GST and HST they were expected to pay Ottawa over the next few months and instead use the money to keep themselves afloat. All GST and HST payments are being deferred until the end of June, which according to Morneau will leave billions in the hands of companies in need of extra cash to pay their bills. The government already announced last week that individuals and businesses could defer income-tax payments until the end of August, which was expected to leave around $55 billion in circulation.
In an effort to get even more cash into the economy, small companies are being allowed to take out up to $40,000 in bank loans that will be interest-free for the first year. Morneau said up to 25 per cent of the loan will be forgiven if it is repaid in full by Dec. 31, 2022. Export Development Canada and the Business Development Bank of Canada are also working with the banks to provide loans worth up to $6.25 million to small- and medium-sized companies that will be largely risk-shared between the government and banks. All told, Morneau said the measures should provide up to $65 billion in credit to companies in need.
VERY INTERESTING, MR. BOND
The Bank of Canada is making it easier for companies and individuals to borrow money, with another unscheduled rate cut Friday that brings its key interest rate down to a crisis-level low of 0.25 per cent. The central bank referred to the new rate as “its effective lower bound” or the lowest level that rates can be set. Governor Stephen Poloz also announced the Bank of Canada plans to start buying “commercial paper” in the form of stocks and bonds from Canadian companies as well as municipal and provincial agencies to shore up their respective cash flows. And it plans to add even more money into the mix by buying long-term government bonds, a process known as quantitative easing that was adopted by the U.S. Federal Reserve two weeks ago.
CHEQUES IN THE MAIL
The measures for businesses announced Friday are in addition to the $52-billion emergency aid package approved by Parliament earlier this week that promises to provide, among other things, up to $2,000 per month to Canadians whose livelihoods have been hurt by the COVID-19 crisis. The government plans to open the application process for the new Canada Emergency Response Benefit in early April.
This report by The Canadian Press was first published March 27, 2020.