Are you one of the thousands of Canadian businesses that has been benefiting from one or more of the federal government’s emergency subsidy and loan programs? If so, even though the fourth wave is upon us, many of these programs are now winding down, which means you need a plan to cover those costs. 

First, in case you’ve forgotten the details, here’s a quick look at the programs we are talking about and when they are expected to come to an end. 

Canadian Emergency Wage Subsidy (CEWS). Eligible businesses could apply for a subsidy to cover part of their employee wages in order to re-hire workers, help prevent further job losses, and ease business back into normal operations. It’s expected to expire in October 2021. 

Canada Emergency Rent Subsidy (CERS). Eligible businesses, non-profit organizations and charities could apply for this subsidy to cover part of their commercial rent or property expenses. It’s also expected to expire in October 2021. 

Canadian Emergency Business Account (CEBA). This program provided interest-free loans of up to $60,000 to small businesses and not-for-profits. To keep it interest-free, and to get up to $20,000 (33%) of the loan forgiven, the balance must be repaid by December 31, 2022. 

If you are receiving CEWS and/or CERS, they have been cash flow fixtures for over a year. If your business has come to rely on that monthly influx of cash, no longer receiving it is going to be an adjustment. If you haven’t already, write a financial forecast that doesn’t include CEWS and/or CERS payments. An easy way to make up at least some of the difference is to aggressively chase receivables; we know that many of our clients have gotten a little too comfortable in their efforts to do so knowing they had reliable federal payments to help manage cash flow. 

If you received a CEBA loan, you are still 16 months away from the repayment deadline, which isn’t as far away as it may feel. Now is the time to build a financial plan to figure out how you will meet that deadline. Remember, the loan is only interest-free until December 31, 2022, and must be repaid by the deadline in order to qualify for the debt forgiveness portion.

Your options are:

  • Talk to your lender. Pick up the phone and call your bank. Lenders rarely move quickly and don’t take kindly to credit asks that come out of blue. Negotiate additional credit or new lending terms as early as you can.
  • Start saving. If your business has a little extra money at the end of every month, start saving. This is not the time to spend unnecessarily, every little bit you save means less credit you will need next year.
  • Miss the deadline. As of January 1, 2023, the loan will be subject to 5% per annum interest. This is always an option, but as you lose out on the debt forgiveness amount, it’s not the most financially sound advice we can give.

 The economy is different than when you first applied for these programs and how you manage your financial forecast needs to be different too. We go beyond the basics of financial services to pinpoint the numbers that are critical to your business’s performance now and in the future. We help you keep your business healthy and successful.