New Government Loan Program for Small and Medium-Sized Businesses Affected by COVID-19

 In Business Law

The COVID-19 pandemic has been a trying time, especially for small businesses. The government at the federal, provincial, and municipal levels has implemented various measures to help small businesses, such as Canada Emergency Rent Subsidy and the COVI9 Energy Assistance Program. Recently, the “Highly Affected Sectors Credit Availability Program” (HASCAP) was introduced to provide loans to small and medium-sized businesses facing challenges due to the pandemic. In order to understand whether this program is right for you, there are a variety of factors to consider:

  • The loan amount ranges anywhere from $25,000 to $1,000,000 with a set interest rate of 4%. The repayment period varies but can be up to ten years and you may be able to receive a postponement of up to twelve months at the beginning of the term for principal payments.
  • While the loan is being guaranteed by Business Development Bank of Canada (BDC), you can likely apply for it directly through your primary financial institution.
  • The program began on February 1, 2021 and is available until June 30, 2021.
  • There are various requirements to be satisfied in order to qualify for a loan. They are as follows:
    • Your business is Canadian based and was financially stable and viable prior to the pandemic.
    • You received payments from the Canada Emergency Subsidy or Canada Emergency Rent Subsidy by demonstrating at least a 50% decline in revenue for a minimum of three months within the eight-month period prior to applying for the HASCAP loan. If you did not qualify for the Canada Emergency Subsidy or Canada Emergency Rent Subsidy but meet all of the other remaining criteria, you are required to include financial statements showing the 50% decrease in revenue for at least three months in the eight-month period before submitting your HASCAP application.
    • The loan is meant to cover operational cash flow needs. So, if you plan to use the loan to pay off an existing loan or to purchase a property for your business, that would not be allowed.
    • If you own multiple business entities, you can apply for a HASCAP loan for each one but the maximum total loan amount you can obtain for all of your entities is $6,250,000.

* Please note that the list of criteria above is not exhaustive and that the government has indicated that other conditions may apply.

Since the HASCAP program only began recently, deciding whether it will be a success or not is difficult. Hopefully, the HASCAP program will help alleviate some of the stress small and medium-sized business owners are facing, allow them to get through the challenges presented by the pandemic, and result in some of the funds trickling down to their employees who have also been negatively affected. Time will tell.

For more information on HASCAP, click here.

This blog post was written by Jason Peyman, a member of the Real Estate and Business Law teams.  He can be reached at 613-369-0376 or at jason.peyman@mannlawyers.com.

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