The Key to COVID-19 Business Health: Cash Flow Support
The COVID-19 pandemic caught the world off-guard. And while businesses focus their efforts on reacting and adjusting to the new economic climate, it’s just as critical to look to the future and how companies can manage their cash flows to sustain their activity in the coming months and beyond.
Even businesses that are traditionally able to sustain themselves with organic cash flows are searching for new ways to improve their access to cash as they navigate the volatile business landscape. Thankfully, federal and provincial governments have launched several stimulus programs to help businesses gain access to additional cash and financing options to evolve their cash flow planning and strategic investments. These are offered by a variety of organizations and levels of government and are available to York Region businesses at the time of writing.
Business Credit Availability Program (BCAP)
The Canadian federal government has allocated $65 billion in business stimulus for companies seeking access to cash. The funding from this initiative will be provided by the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). Both BDC and EDC are working with private sectors to find credit solutions that will work for individual businesses, including the tourism, air transportation, and oil and gas industries.
This initiative is broken down into several components, each with their own focus and funding allotment.
Interest-Free Loan Programs for Small Businesses and Not-For-Profits
Through the Canada Emergency Business Account, small businesses and not-for-profits can apply for interest-free loans of up to $40,000 to help cover their operating costs during a period where their revenues have been temporarily reduced.
In order to qualify, your organization will need to demonstrate it has paid between $20,000 to $1.5M in total payroll in 2019, and operating as of March 1, 2020. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000).
Learn more about the Canada Emergency Business Account from the BDC COVID-19 page.
EDC BCAP Loan Guarantee
EDC is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25M to SMEs. These loans are now available at various financial institutions and credit unions.
Additional details are available on the EDC COVID-19 page.
BDC Co-Lending Program for SME Businesses
BDC is working with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25M through the program. Loans would be interest-only for the first 12 months, with a 10-year repayment period, and will be available through your primary financial institution.
Learn more about the co-lending program from the BDC COVID-19 page.
Farm Credit Canada (FCC)
Like most Canadian businesses, those in the agri-food industry – such as farmers, food producers, and food processors – are facing challenging times. There are concerns about lost sales due to the financial downturn and having the cash flow required to focus on business-critical functions.
York Region is home to over 700 farm-based businesses and 270+ food and beverage manufacturers that contribute to the Region’s economic vitality. The entire agri-food sector provides 57,000+ jobs in the region. Thankfully, business owners have support during these unprecedented times.
On March 23, 2020, Farm Credit Canada (FCC) received $5B in additional lending capacity from the federal government, which was made available immediately.
Farm Credit Canada is contributing the following for agri-businesses, producers, and food processors:
- Deferral of principal payments up to 12 months; or
- Deferral of principal and interest payments up to six months for existing loans; and
- Access to an additional 24-month credit line up to $500,000 at a rate of Prime +1% and no fees, secured by general security agreements.
- FCC is asking existing customers to contact their FCC relationship manager. New customers may call the FCC Customer Service Centre at 1-888-332-3301 or their local office to discuss their individual situation and lending options available, as each application is assessed on a case-by-case basis.
Proactive Government Funding
In addition to taking advantage of the enhanced financial support from organizations such as EDC and BDC, York Region business owners have even more opportunity to succeed and “recover” from this economic downturn by tapping into Canadian government funding.
Identifying funding programs that align with your upcoming strategic priorities can provide your organization with the capital to execute growth projects, ultimately accelerating recovery. Leveraging government funding to offset project costs is especially beneficial when cash flow isn’t the primary source of business investment.
The potential business funding accessible from government programs can be significant. Thankfully, many programs that your business may be eligible for are accepting applications. We’ve highlighted three you should know about:
Business Scale-up and Productivity (BSP) Program
Administered by FedDev Ontario, the BSP program helps businesses adopt/adapt innovative technologies that support productivity, grow southern Ontario operations, and increase exports to global markets. It is targeted towards large-scale expansion projects where new innovative technologies will be used to develop globally competitive services, products, or processes.
- Amount: Applicants may receive a repayable contribution (no-interest loan) of up to 35% of eligible project expenses to a maximum of $500,000 to $10M.
- Eligibility: Must maintain profitable operations in southern Ontario for 2+ years, have ≥5 employees, and be an incorporated business or Indigenous organization.
- Project Examples: Commercializing/producing new innovative products, processes, or services; acquiring, adopting, or adapting innovative technologies; and late-stage technology development to support new markets and/or industrial applications.
Community Economic Development and Diversification (CEDD)
Another program available via FedDev Ontario, CEDD supports projects committed to improving productivity, capacity, and competitiveness of businesses to increase employment and growth opportunities, as well as enhancing the resilience of communities.
- Amount: Incorporated, for-profit businesses may receive a no-interest, repayable contribution from $250,000 up to $5M per project.
- Eligibility: Eligible applicants for this stream are to be legally incorporated businesses, including Indigenous-owned businesses, with operations in rural areas of eastern and western
- Project Examples: Adoption of new equipment; market development, diversification, and expansion; and facility improvement or expansion to support greater economic diversification.
Available to most established businesses looking to export, CanExport provides support for marketing and expansion activities involving new international markets. The program helps exporters improve their sales and brand exposure in international markets through marketing activities, packaging modifications, market research, and other initiatives.
- Amount: Canadian businesses may access up to 75% of costs associated with export marketing projects to a maximum $75,000 per application.
- Eligibility: 1-500 FTEs on payroll, $100k-100M in annual revenue, 1+ years incorporated with taxes filed, and project expenses must be at least $20,000. The applicant’s sales must be under $100,000 (or less than 10% of total sales) in the target export market over the previous 24 months.
- Project Examples: The CanExport SMEs program is not currently approving travel or event-related project costs due to the COVID-19 crisis. Many other categories of market development activities remain eligible, including marketing tools creation, IP protection, and market research.
Lead Your Business Through COVID-19
All of the above programs should be considered as part of the many components of a business’ cash flow planning strategy. York Region businesses can also take advantage of the deferred income tax payments, deferred sales tax remittance/customs duty payments, improved Work-Sharing Program, and COVID-19-specific wage subsidies. Banks are also taking measures to defer some required payments and offer more flexibility for select offerings.
This is a monumental moment in our history and a true test of all businesses’ fortitude. It’s critical that businesses are using the support measures available to them today so they can succeed in the future.
Find the latest updates on York Region’s response to COVID-19 visit: york.ca/covid19
For York Region business updates related to COVID-19, please visit: yorklink.ca/covid19
Additional questions about what government funding programs your business may be eligible for, email: firstname.lastname@example.org
- Part 1: Immediate Actions York Region Employers Should Take In Response To COVID-19
- Part 2: The Key To COVID-19 Business Survival – Cash Flow Support Programs
- Part 3: COVID-19 Planning – Government Funding For Industry Sectors
- Part 4: York Region Businesses COVID-19 FAQ