ATHABASCA - For businesses struggling to decide if they should keep their doors open, it is important to understand the relief benefits packages available from the federal government, all of which have different qualifications that must be met by applicants.
Navigating the complexity of the applications and making sure all the boxes are checked can be a challenge though and may require the assistance of a chartered accountant.
“The information that's coming out of the federal government is not complete; they're still working on it,” Athabasca chartered accountant Glenn Martin said. “We're up to date on all of that.”
One of the programs incorporated businesses can automatically gain access to is the 10 per cent wage subsidy. The Temporary Wage Subsidy is reflected as a reduction in the remittances that are sent to Canada Revenue Agency (CRA) and is a calculation done by whoever remits the payroll and it applies automatically for the benefit period.
“If you're continuing paying your employees after March 18 there's a 10 per cent wage subsidy that you can reduce your remittance to Revenue Canada,” Martin explained. “There's certain parameters on maximums per employee and how you go about it.”
David Stetic and Brad Severin operate their own accounting firm in Edmonton.
Stetic noted the Canada Emergency Business Account (CEBA) is one program people are going to have less information about.
“It's basically forgivable loans for small business,” he said. “Portions of it are a forgivable loan.”
Severin added the CEBA is a $40,000 loan for small businesses, not-for-profits and charities.
“If you repay this loan by Dec. 31, 2022, up to 25 per cent of the loan is forgivable,” he explained. “So, you can get up to $10,000 of the loan forgiven.”
The criteria for qualifying is both a low threshold and a nebulous concept, Severin added, as the federal government has not specified how much of a loss of income the business has to have before qualifying.
“The business had to have paid between $50,000 and a $1 million in total payroll for 2019 so it's a fairly low threshold to meet,” he said. "And here again, we have this nebulous idea of a temporary reduction in revenue, but no specific criteria as to how much of a reduction you have to have.”
Martin added the federal government is guaranteeing the loan though, so small businesses do not have to put up collateral if they qualify.
“Basically, the government's guaranteeing the loan so there's no real collateral that’s needed to qualify for this because the government's guaranteeing it 100 per cent,” he explained. “But they still have threshold that they need to achieve to be able to (apply).”
Severin noted that the Department of Finance recognizes there are a number of businesses that have just started up and they're working on some criteria on a case-by-case basis, but there are concerns about delivery of the funds.
“The real problem here of course is timely delivery of funds,” he said. “There are two things that I see that are really preventing the government from acting efficiently here, No. 1 is this notion of having to calculate this amount on a backwards-looking basis for each particular month. So, essentially you have to wait for the month to be completed, look back at the month, compare it to the previous year and say, ‘Okay, did I decline 30 per cent?’ If I did, now I can go ahead and apply.
“The other thing is the fact that this is just so administratively heavy, you've got to apply every month in order to be able to access the program. So, I applaud the government for taking steps to try to support business, but I think they've really missed the mark in terms of getting your money into the hands of the businesses that are really going to need it the most.”
Martin agreed adding if the business did decline 30 per cent, they would qualify for the 75 per cent in wage compensation, but that the wait could put strain on businesses who have to get through the month before applying. The CRA will send a maximum of $847 per week to the business for the purposes of paying the employee.
Another federal program includes deferring GST payments so businesses have a bit more money on hand to cover expenses.
Severin also noted that mortgage payments should not be deferred if at all possible.
“If you have cash, you should pay it if you’ve got the ability to pay your mortgage,” he said. “If you're going to struggle then you do have to do it, but it's not going to help your credit rating. It's not going to help you in the future. It's just going to help you right now.”
Severin advised small business owners to re-evaluate their businesses during the pandemic to come up with a plan to come out the other side even stronger.
“(It’s) probably in your best interest in this downtime be evaluating all aspects of your business and how you're going to make a return and what the landscape is going to look like,” he said. “This is a great opportunity to reevaluate and target your emergence from this crisis; be bigger, better, stronger.”
Heather Stocking, TownandCountryToday.com
Follow me on Twitter @HLSox
.jpg;w=120;h=80;mode=crop)
