Update on Government Assistance
MARCH 8, 2021
With some decent luck and hopefully a solid vaccine roll-out, we hope the government assistance will come to a close this summer. But for now, there is ongoing help for companies with declining revenue.
Wage subsidy
Details were announced for the extended three wage and rent subsidy periods from March 14 to June 5.
The basic formulae is unchanged from recent periods. The claim has two components:
Base Subsidy: For revenue drops of 50% or more, the subsidy will be 40% of qualified payroll costs (qualified payroll is capped at $847 per week per employee). For revenue drops less than 50% the subsidy will be the product of qualified payroll costs and the revenue drop percentage multiplied by 80%. For example, if your revenue is down 30% the subsidy will be then 24% of qualified payroll.
Top Up Subsidy: This only applies for revenue drops in excess of 50%. If revenue has dropped 70% then the subsidy will be 35%. If the drop is between 50 and 70 there is an even sliding scale from 0 at 50% to 35% at 70%. For example, if corporate revenue is down 60% the top-up subsidy will be 17.5%.
In determining the revenue decline the rules continue to permit flexibility. The key rules:
For each period you can choose the larger decline from either the previous month or the current month. For example, in period 14 which runs from March 14 to April 10 corporations can claim either the February decline or the March decline.
Beginning with the March month you compare to March 2019 since March 2020 was impacted by Covid. For all months after March revenue is compared to 2019 rather than 2020.
The option of comparing to the average pre-pandemic revenue computed as the average of January and February 2020 continues to be available. However, this option is only available if you have been using it consistently.
Rent subsidy
The rent subsidy program continues to mirror the rules for wage subsidy program
Other programs
The Canada emergency loan was increased from $40,000 to $60,000 last fall. The period for applying closes on March 31, 2021. It's important to remember that this loan is available to all companies that have non-deferrable expenses such as occupancy costs and wages. Payroll must fall between $20,000 and $1.5 million for incorporated entities. Sole proprietors, partnerships and corporations paying family members through dividends can also qualify. For the final $20,000 the business must also attest to having a need – so if your results are strong and you cannot demonstrate a need, you should not apply for the extra $20,000.
For companies severely hit by the lockdown the Highly Affected Sectors Credit Availability (HASCR) program provides BDC guarantees for loans between $25,000 and $1 million. The main criteria is a revenue decline of at least 50% in 3 months over the eight months prior to application – the months do not have to be consecutive. The program provides loans at 4% with repayment terms up to 10 years, with no principal due in the first year and is available until June 30, 2021. Corporations must apply through their primary financial institution.
If you have any questions or need assistance please reach out to a team member at RMT.