REFILE-Many Canadian small businesses shut out of coronavirus crisis help

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TORONTO/OTTAWA (Reuters) – Many Canadian small businesses reeling from losses due to the coronavirus outbreak may be ineligible for federal government and bank aid designed to help them survive, industry experts say, with several already shuttered or rapidly running out of cash.

FILE PHOTO: A man wearing a protective face mask passes a boarded up restaurant during the global outbreak of the coronavirus disease (COVID-19) in Toronto, Ontario, Canada April 6, 2020. REUTERS/Chris Helgren

The measures bit.ly/3e3A55Y include a number of government-backed loan options for small businesses, and a three-month 75% wage subsidy for all qualifying firms, regardless of size, as well as higher credit lines and payment deferrals from lenders.

Small businesses are defined as having fewer than 100 employees, and account for 97.9% of all Canadian firms. The coronavirus outbreak is expected to tip the G7 economy into recession, and the loss of too many small businesses would undermine a recovery after the pandemic passes.

Lenders will not begin accepting applications for the Canadian Emergency Business Account (CEBA) until this week, with approvals likely to take at least a few days. Meanwhile, it will likely be six weeks before the wage subsidy is delivered.

Business leaders say the timeframes are simply too long, despite the good intentions.

“Most small business have three weeks’ cash in the bank,” said Canadian Chamber of Commerce Chief Executive Perrin Beatty. “Many of them now have been in lockdown for three weeks… They’re running out of cash at a dramatic pace.”

Finance Minister Bill Morneau said last week the government is “going as fast as humanly possible” to get money to firms. Ottawa has also promised additional help for the energy, aviation and tourism sectors.

Many firms also do not fit the criteria bit.ly/34maKQ3 for assistance because their payroll is outside the CEBA requirements and their revenue has not declined enough or they are too new to qualify for the 75% wage subsidy.

Several are deemed too risky for expanded credit options being offered by lenders on a case-by-case basis.

A late March survey of 9,678 Canadian Federation of Independent Businesses (CFIB) members showed 56% do not have the capacity for additional debt and about a third of closed firms were unsure they will reopen.

Some 80% of the hotel industry’s 300,000 workers have been laid off, Hotel Association of Canada CEO Susie Grynol said.

While some members are getting help from lenders, “the members that need it most are not getting the flexibility and that’s because they are the most at risk,” she added.

Most credit unions are also currently excluded from guarantees by Export Development Canada (EDC) under a separate credit program bit.ly/2JKpbUw, leaving their customers shut out. Many small businesses in Canada use credit unions as their primary financial institution.

“We are continuing to escalate this message to the highest levels,” the Canadian Credit Union Association said in a statement last week. It noted that EDC has said it is working on an expedited process to add more credit unions.

Ottawa-based Kimberley Sabo, who sells specialty teas at craft fairs and pop-up shops, had an accident a few years ago, leading to late personal debt repayments, making her a credit risk.

Sabo is among the 15% of Canada’s workforce that is self-employed bit.ly/2XfkcTY, and like the majority of those, she does not employ anyone else bit.ly/2V7G5lq.

As sales evaporated, she had hoped for some relief from CEBA, but found she does not qualify.

“I’ll probably have to close,” she said. “When your cash flow is reduced or non-existent, or you have debt up to your existing limit, (banks) won’t loan you more.”

(This story corrects to add dropped word in headline.)

Reporting By Nichola Saminather in Toronto and Kelsey Johnson in Ottawa; Editing by Denny Thomas and Dan Grebler

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