Show Notes:

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Lecture Slides:

Welcome to YouCounsel.

This is an updated lecture on Canada Emergency Business Account for businesses and nonprofit organizations. The government has announced some changes to the eligibility criteria and there is some more information about the process of application that we would like you guys to know about. Please know that the changes that we have made from our previous lecture, they are all noted in blue, so you will be able to easily follow what changes we have made.

We begin with our usual disclaimer that this lecture is not legal advice. If you have any specific questions you should contact your financial institution, Export Development of Canada, contact a lawyer or a paralegal or the law society of Ontario for a referral.

The topics we will cover will be the purpose of this loan; we will talk about the eligibility; we will talk about some of its features and how to apply.

With respect to purpose: not much has changed.  It is a $40,000 loan for small to medium sized businesses or nonprofit organizations.  The loan is to be used for operational expenses that cannot be deferred. This is important.  These expenses could be rent, payroll, supplier bills, insurance, etc. Please note that you cannot use these funds for payment of your existing loans or indebtedness or refinancing or payment of dividends or distribution and increase to management compensations. These are some of the things that you cannot use the funds for.  Please make sure that the funds are used for the purpose that they are provided.

Now in order to get this loan the businesses must be eligible. What is the eligibility criteria and how it has changed? Let’s look into that. Previously you need to have paid anywhere from $50,000 to $1,000,000 in salaries to your employees in 2019. That has been reduced from $50,000 dollars to $20,000 and an increase on the other side up to $1,500,000. If you have paid at least $20,000 in salaries to your employees in 2019, you will be eligible. The business has to be in operation as of March 1st 2020. It must have a federal tax registration number and it must have an active business checking / operating account.

Now it is important to note, that this account has to be in the business’s name. For a lot of sole proprietors who do not have an account in the business name and they have been operating their business through their personal account—which is allowed—unfortunately they are not eligible. If you are in that situation you should contact your financial institution to see if there is a way to get over that obstacle. The account has to be open prior to March 1st 2020. You cannot open a new account in your business name to overcome this hurdle.  The account has to be in operation prior to March 1st 2020. The account cannot be in arrears on “existing borrowing” by 90 days or more. For eligibility you should not have used this program previously and you cannot apply again from a different financial institution. You also need to show or confirm the intention to continue your operations or if your operations are closed, to show the intention to resume operations.  You also need to agree that you will respond to government surveys or surveys conducted by agencies related to the government.

Let’s talk about some organizations that will be ineligible. These will be any organizations that are government bodies or organizations owned by government bodies.  Also a Union, charitable, religious or paternal organizations are not eligible or any entities owned by them are not eligible and the only exception is for organizations that are registered T2 or T3010.  These are for nonprofit or charity organizations that generate a portion of their revenue from the sale of goods or services. Any organization owned by individuals holding political office is ineligible and finally the organization must not promote violence, incite hatred or discriminate on the basis of sex, gender, sexual orientation, race, ethnicity, religion, culture, region, education, age or mental or physical disability.

Let’s talk about some of the features of this loan—which we have previously explained. Number one: duration. It will be a revolving line of credit until December 31st 2020.  After that it will become a non-revolving loan.  A 5-year term which will mature on December 31st 2025. Respecting interest—there is no interest until January 1st 2023.  After that it will become 5 percent interest per annum which will be payable monthly. There is a 25 percent loan forgiveness opportunity here. If you have a balance as of January 1st 2021 and you pay 75 percent of that balance by December 31st 2022, then the remaining 25 percent is forgiven.

An example is if you have $40,000 balance as of January 1st 2021 and you pay $30,000 by December 31st 2022 – then $10,000 will be forgiven. In order to apply, you should contact your financial institution.  They all have online application processes available.  So please follow those processes and apply for these loans.

Hopefully, if you were not eligible previously, because of the new changes, your business is now eligible and you can benefit from this loan.

Thank-you for watching.