Click here to learn about Canada’s COVID-19 Economic Response Plan and support available for individuals and businesses
We continue to update this information as new updates become available, but should you have questions about any of these government initiatives or programs, please contact your Smythe Partner directly.
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Given the current economic uncertainty, effective cash flow management will be critical for the success of many businesses. This will likely involve a combination of:
Working capital management can take the form of:
A tool that should be utilized to help with managements’ decision making, is a cash flow forecast. This will help you assess the impact of working capital and expense management decisions, as well as determine whether additional financing will be required.
If you decide that you need to obtain financing (see below), it is likely that the lender will require a forecast as part of the application process.
On April 24, 2020, the Federal Government announced initial information on the Canada Emergency Commercial Rent Assistance (CECRA) program in partnership with the provinces. The program is designed to reduce the rent burden of small businesses by 75 percent.
The CECRA will provide forgivable loans to qualifying commercial property owners to cover 50 percent of the rent payments for April, May and June 2020 of eligible small business tenants affected by COVID-19. The loans will qualify to be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 percent for the three corresponding months under a rent forgiveness agreement. This agreement must also include a term not to evict the tenant while in place.
The small business tenant would be responsible for paying the remainder, up to 25 percent of the rent.
For qualifying tenants and mortgaged property owners, the result will be responsibility for the existing rent to be split 25 percent to the tenant, 25 percent to the property owner and 50 percent to the government.
The CECRA will be administered by the Canada Mortgage and Housing Corporation (CMHC). It is expected to be operational by mid-May and will be available retroactively for April and May.
The Federal Government has also indicated that more information will be released in the coming days, including information for larger businesses and non-mortgaged property owners.
As part of the economic stimulus package, the Government of Canada is working to ensure businesses have access to traditional financing, from both the government and private lenders.
Among the products being targeted to COVID-19 relief are:
To ease the cost of borrowing, the Bank of Canada lowered its target for the overnight rate by 50 basis points to ¼ percent, resulting in the Bank Rate being ½ percent and the deposit rate being ¼ percent. This brings the policy rate to its effective lower bound.
If your business requires cash flow management or additional financing, please contact your Smythe Partner directly as additional reporting may be required. Our team can match your business with the appropriate product and guide you through the process and provide financial information to the lending institutions.