While the Canada Emergency Business Accounts (CEBA) are welcome relief for small businesses able to access them, many are reporting that eligibility requirements are shutting them out, according to a new survey by the Canadian Federation of Independent Business (CFIB).
“Nearly 80 per cent of small businesses are fully or partially closed due to COVID-19 with little or no revenue coming in, while their bills continue to pile up,” said Dan Kelly, CFIB’s president. “The Canada Emergency Business Accounts allow the banks to offer a loan of up to $40,000 backed by the federal government with no interest and up to $10,000 forgivable when fully repaid by December 2022. While more debt isn’t the answer for every business owner, thousands of small firms have applied for this much needed lifeline. Unfortunately, the smallest businesses – those with payrolls under $50,000 – are not eligible for the support.”
CEBA loans require a business to have between $50,000 and $1 million in payroll. As many small firms pay the owner and the owner’s family through dividends rather than salary, this test excludes thousands of long-standing firms. Others, including micro-sized business and newer firms, are also finding themselves ineligible for the program.
“We’re hearing from many hard-hit businesses that need the loan but don’t qualify, whether it’s because they’re too small, too large or don’t have a payroll,” added Jonathan Alward, CFIB director, prairie region. “… we are hoping the federal government will change this program to cover more of those in need as it did with the Canada Emergency Wage Subsidy.”
CFIB recommends improvements to CEBA:
- Eliminate the $50,000 minimum payroll eligibility to access the loan; or drop the minimum payroll requirement to $10,000; allow dividends paid to family working in the business to be included.
- Increase maximum threshold from $1 million to $2.5 million and/or consider alternative means of assisting firms (such as forgivable loans) that have been completely shut down but require larger amounts of cash to help them with their fixed costs.
- Ensure all businesses have access regardless of where they bank, including through smaller credit unions; allow businesses to use the loan to access $10,000 as an immediate grant to help cover costs, including rent.
“As we enter a second month of a virtual shut-down of most small businesses, all solutions need to be structured with flexibility in mind,” concluded Kelly. “The CEBA is a good initiative and could help many businesses hold on, if they are allowed to access the program.”
Manitoba survey results as of April 13:
- 31 % of businesses remain fully open, 50% are partially open, 16% are fully closed
- 13 % of businesses have no sales/revenues, 29% have seen declines of 51 to 99% of gross revenues
- On average, the COVID-19 disruption has cost Manitoba small businesses $148,000 (206,000 nationally).
- 47% of business owners are uncertain that their business will survive if the current restrictions remain until the end of May
Survey methodology
These preliminary findings are based on 10,620 responses, collected from CFIB members, to a controlled-access web survey that is still active. Data reflect responses received between April 10 and April 13, 2020. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/-0.9%, 19 times out of 20.
