There is no denying the health, social and economic impact of Coronavirus pandemic within Canada and worldwide. With the number of confirmed cases on the rise, Canadian businesses have exhibited a drastic shift in their approach from what was cautionary a few weeks ago to reducing or even temporarily shutting down operations. This became necessary as calls for social distancing resulted in event cancellations, fewer customers showing up at restaurants and coffee shops, and closure of fitness and recreational centres, to name a few. Meanwhile, certain operating costs are increasing as is the risk of employees having to go in self-isolation or quarantine.
As a small business owner, it is important for you to identify and put into place critical measures to deal with the economic fallout of COVID-19. Some key financial and business suggestions are noted below.
1. Most businesses lack contingency planning, but it’s never too late to assess the state of your preparedness and develop suitable plans in case your business is impacted by the worsening economic situation. Some resources to get you started in this direction are suggested below:
2. Secure a line of credit or working capital loan from your bank, even if you are not yet feeling the liquidity crunch. You should have access to funds that can keep your business afloat for two quarters or more. The Federal Government has recently announced its economic stimulus plan to aid small businesses. While the overall dollar value of this plan is yet to be defined, the Government will provide lending of $10 billion to cash stripped businesses through two crown corporations (BDC being one of them). Along with the reduction in interest rate, this measure is designed to provide businesses with easier and cheaper access to financing. Make sure that you explore funding options and costs being offered by your bank as well as BDC in arranging liquidity for your business.
3. Support your employees in these stressful times, so that they do not have to worry about job stability while in self-isolation or quarantine or if they have to work from home due to closure of schools and childcare facilities. Businesses need to determine if they can put into place a telecommuting arrangement, allow employees to use vacation time, or grant them unpaid leave. It is important to note that the Ontario government is proposing to legislate protected leave for employees who are on unpaid leave due to self-isolation or quarantine. Meanwhile, the Federal Government has waived the one-week waiting period for those in quarantine or in self-isolation and claiming Employment Insurance (EI) sickness benefits as a result.
4. As an employer, you may benefit from the recent enhancements by the Federal Government to the Work-Sharing Program to help employers and employees avoid layoffs as businesses struggle with reduced activity due to COVID-19. The maximum duration of Work-Sharing agreements has been extended to 76 weeks across Canada, over which period eligible employers and employees will agree to a reduced schedule of work while income support will be provided to employees by Service Canada.
5. The Federal Government has announced that businesses affected by COVID-19 may apply for flexible arrangements to meet tax payment obligations to CRA. While details are not yet available, it is expected that government will be providing tax relief measures and additional details as it finalizes the federal budget by the end of the month.
You are bound to have questions in these uncertain times. Please feel free to reach out to us if you would like help in analyzing your financial situation and determining the way forward.
J-MAK CPA Team
We are a CPA firm in downtown Toronto that provides tax, accounting, corporate and advisory services to businesses. We would be happy to answer any questions that you may have.