LOWER, MIDDLE AND HIGHER SMALL BUSINESS (CEB)

How and Why CEB leaves out many small businesses

Just like middle class has three broad categories, lower middle class, middle class and upper middle class, small businesses too have a similar strata.

When Trudeau launched the Canada Emergency Business measures for small business, offering C$40,000 interest free loan, with $10,000 forgivable if $30,000 is fully repaid by December 31, 2022, business gave three rousing cheers.

The Eligibility Criteria:

However, this did not last long, since most did not qualify.

One of the key qualifying criteria of $50,000 payroll reported in fiscal year 2019 in line 14 of T4SUMM.

This implies that only those business that had issued T4, meaning contributing to Canada Pension Plan and in some cases to the Employment Insurance program, would qualify.

As Sole Proprieter I took Dividends - Do I Qualify?

This leaves out many actually small business, corner stores, mom and dad pop shops, convenience stores, that have a store front, with fixed costs and who, at the end of the year take renumeration as dividends, that is a T5 slip.

Dividends, qualify for a lower tax rate as opposed to an otherwise a monthly salary, of same amount, hence, owners of small business either issue only dividends or they take a combination of Salary, that is a T1 and a T5, a dividend income.

Canada has left out these, and has opted to provide relief to high small business.

There are business who after all fixed expenses barely make less than $36,000 in actual salary to the owner, who should be treated as small businesses, or lower small business or start-ups. It is for these businesses that government should come out with loans.

Even if there is an interest rate of 1%, and no amount forgivable, payable over three years, then too these businesses will at least avail of the financial support to keep afloat and will gladly repay the amount, once things go back to normal.

The New Relaxed Criteria

The previous criteria of having the businesses show a 30 per cent drop in revenues compared to last year, has now been relaxed and now, companies can compare their lost revenue to the average of what they made in January and February of 2020, and instead of 30 percent, will only need to show a 15 per cent decline in March,2020.

However, for April and May months, businesses will still need to show a demonstrate 30 per cent losses. Employers can now also measure their revenues either based on as they are earned or as they are received.

Charities, who also get government support, now will have the option of choosing whether or not to include government revenues in their calculations of lost revenue when applying.

Banks have launched dedicated portal link to apply for the loan

CIBC Link For Canada Emergency Business Account

Forty Thousand Dollars Loan, Ten Thousand Forgivable - Conditions Apply

Canada Emergency Business Account offers

1. 0% interest per year.
2. No principal payments required.
3. Eligible for $10,000 forgiveness if $30,000 is fully repaid by December 31, 2022

Canada Emergency Business Account

For more information and updates, click here to read CRA website

Government Support for businesses

Then A Stern Warning

Trudeau, thankfully, has shown a willingness to be flexible and is open to further refinement in his business supporting measures, to be more inclusive.

For those who are thinking about taking unfair advantage of the system, Morneau warned that business owners found to be misusing the funds could face up to five years in prison and heavy fines, like having to pay 225 per cent of what they received.