How To Get A $10,000 Gift And Potentially Double It In Two Years

This Corona Virus pandemic has devastated the world economy and has caused enormous hardship on many fronts — for individuals and businesses.

Throughout the pandemic, many governments around the world are providing support to their citizens and businesses to weather the storm caused by this virus.

The Government of Canada is playing it’s role and has continued to focus on ways to keep Canadians safe and healthy and to help families pay their bills. Consequently, the government have introduced several measures to protect middle class jobs and support businesses. One of these measures is the introduction of the Canada Emergency Business Account (CEBA).

Below is a quick summary of CEBA:

• Launched on April 9, 2020, the CEBA provides zero-interest, partially forgivable loans up to $40,000 to small businesses that have experienced diminished revenues due to COVID-19, but face ongoing non-deferrable costs such as rent, utilities, insurance, taxes, and employment costs. Twenty-five per cent of this loan is forgivable if repaid by December 31, 2022.
• The CEBA is administered by Export Development Canada in partnership with Canadian financial institutions to deliver the loans to their existing business banking customers.
• When first launched, the CEBA was designed to allow for rapid deployment of credit to businesses with 2019 payroll between $50,000 and $1 million. The government then expanded the eligibility parameters of the program, by increasing the payroll eligibility range to between $20,000 and $1.5 million.
• Since the CEBA’s launch, over 600,000 loans have been approved, representing a total of more than $24 billion in credit.

Based on these eligibility criteria, many small businesses did not benefit from this program as they were left out.

In response to this, the Prime Minister, Justin Trudeau, on May 19 announced an expansion to the eligibility criteria for CEBA to include many owner-operated small businesses.

The changes to the CEBA will allow more Canadian small businesses to access interest free loans that will help cover operating costs during a period when revenues have been reduced, due to the pandemic.

The program will now be available to a greater number of businesses that are sole proprietors receiving income directly from their businesses, businesses that rely on contractors, and family-owned corporations that pay employees through dividends rather than payroll.

To qualify under the expanded eligibility criteria, applicants with payroll lower than $20,000 would need:

• a business operating account at a participating financial institution
• a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return.
• eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.

The government noted that these expenses will be subject to verification and audit by the Government of Canada. Funding will be delivered in partnership with financial institutions. More details, including the launch date for applications under the new criteria, will follow in the days to come.

“Our government has been taking action since the start of this crisis to support the small businesses that define our Main Streets and provide jobs that Canadians rely on. We have been listening to you throughout this, and will continue to, to make sure we’re delivering the support Canadian businesses need to get through this tough time and be well positioned for success once the recovery begins.” — The Hon. Bill Morneau, Minister of Finance

The government also noted that they will continue to work on potential solutions to help business owners and entrepreneurs who operate through their personal bank account, as opposed to a business account, or have yet to file a tax return, such as newly created businesses.

So we expect to see further expansion of this program that will benefit many sole proprietors we work with.

So, what does this mean for you? What potential opportunities can this program create for you?

1. If you qualify, you’ll get a gift of $10,000 from the government, as long as you repay the loan by December 31, 2022.
2. For businesses that are not generating revenue at the moment and qualify under the current guidelines, this $40,000 can sustain them for a period of time. However, businesses will need to make significant adjustments to their operations to conserve as much of this cash as possible.
3. If you have a business that is still generating a decent amount of revenue and you qualify under the current guidelines, you could use the $40,000 to repay high interest loan debt; create new products and services that align with the new normal; invest in real estate; invest in short-term debt instruments; etc.
4. If you currently own a business that is not significantly impacted by COVID-19, could you find opportunities where you can take the $40,000, invest it wisely and earn an additional $5,000, $10,000, $20,000 or more before the December 31, 2022 repayment date? Essentially, you will have the potential to double the $10,000 gift from the government.
5. Could you invest all or a portion of this loan in yourself by learning something new that can potentially yield a higher return?
6. If you currently don’t have a business, could you consider buying one of the many businesses that are closing shops now for next to nothing? Apply for the $40,000 loan. Come up with creative ways to turn the business around, either my moving sales and services online or through other methods. When buying a business, focus on the list of customers the business has.
7. If you’re considering starting a business, this could be a great time to start one as you may qualify under the expanded eligibility criteria, particularly in the coming days as more information is made available by the government.

You buy a business to get access to its customer list. Facebook paid a lot of money to acquire Instagram, not because they couldn’t develop the technology, but because they wanted access to the millions of subscribers on the platform. You should have the same mindset when buying a business.

Why is the government investing so much in this program?

Obviously, the government loves businesses, and small businesses for that matter. Small businesses are the engine of the Canadian economy. And this is true for most economies around the world. Essentially, the government is paying you to keep your business open or in some cases, they are paying you to start a new business. So, why not jump in now if you’ve been considering starting a business.

What can you do now?

1. If you own a business, whether as a sole proprietor or corporation, and you did not qualify under the existing criteria, you may qualify now as long as you can show proof of non-deferrable expenses of at least $40,000. In addition, you will require a business account at a participating bank and must have filed your 2018 or 2019 tax return.
2. As the government noted that expenses will be subject to verification, consider organizing your 2018 and 2019 financial records now to ensure easy access to supporting documents for your expenses.
3. At the moment, the banks don’t have the full instructions to proceed with applications under this expanded program. However, it is a good idea to call your bank regularly so you can prepare ahead of time.
4. For the rest of you, be on the lookout for more details from the government on how you can potentially qualify for this loan.

For many businesses, we understand that there is plenty of confusion and frustration with this program. However, I always recommend that you direct your energy on looking for ways you can turn this frustrating experience with this pandemic into opportunities that will potentially be beneficial for you and your community.

As your business advisor, I’m always here to help!