By Mario Toneguzzi

Prime Minister Justin Trudeau has announced new measures to support businesses so they can keep their workers on the payroll and weather the COVID-19 (coronavirus) pandemic.

The new bridge loans, not bailouts, are intended for larger businesses to keep them afloat during these challenging economic times.

"We know that times have been tough, and Canadians are concerned about their jobs, and the health and safety of their families. We promised that we would be here to support all Canadians, and that is why we are announcing new measures that will help save middle class jobs, safeguard workers' benefits, and protect our economy. This will help businesses keep workers on the payroll, and put more Canadians in a position to recover quickly once we make it through these uncertain times,” said Trudeau in a statement.

"Employers, large and small, are facing challenges due to the COVID-19 global pandemic. Our government has their backs. We know that many businesses of all sizes need our help in order to keep their many employees on the payroll and their suppliers paid until the economy recovers. That is why today's measures will help both large and mid-sized employers to get access to the financing they need to make it through this extraordinarily challenging time,” added Minister of Finance Bill Morneau.

The new measures include:

Establishing a Large Employer Emergency Financing Facility (LEEFF) to provide bridge financing to Canada's largest employers, whose needs during the pandemic are not being met through conventional financing, in order to keep their operations going. An objective of this is to avoid bankruptcies and help them weather the current economic downturn; and

Expanding the Business Credit Availability Program (BCAP) to mid-sized companies with larger financing needs. Support for mid-market businesses will include loans of up to $60 million per company, and guarantees of up to $80 million.

“It’s generally one of the last pieces of the liquidity puzzle to fall into place. The large companies’ liquidity support was something that was missing in the Canadian package,” said Adam Legge, President of the Business Council of Alberta. “So this is the last piece. It will mean for any of the larger retailers that are struggling this could be an opportunity for them to take advantage of that.

“The other piece being given that retailers offer a direct reflection of the health of the economy overall the more that other companies can take advantage of this and keep people on payroll the greater the consumer spend that will be able to be supported through this broad-based program.

“In the traditional ways of accessing money a lot of them are blocked off right now for companies. So this is that emergency valve for companies that are facing some challenging times that have good potential and good reason to stay viable. It’s something that can help them avoid heading down a path that would leave them without the resources to continue to survive.”

Karl Littler, Senior Vice President, Public Affairs at the Retail Council of Canada, said the federal government announcement is closer to a one-size fits all solution than perhaps the organization might have wanted.

“But to be fair, there’s obviously certain sectors that are similarly distressed even if the circumstances are not identical and obviously they moved to provide something on a broad basis rather than on a retail or rental specific basis,” he said. “They significantly extended the BCAP program for financing of up to $60 million and then they’ve created this LEEF program for entities that are looking for financing at a larger level than that.

“Bill Morneau specifically indicated in his press conference this could go to leases that companies need to pay, different sectors will need funds for different reasons, the retail sector may need this for rent. So obviously he sees this as a significant part of the answer there too.”

*SPRING GARDEN ROAD IN HALIFAX. PHOTO: FLICKR*

“There’s no question that businesses of all sizes need some kind of support and some of the programs have been oriented more at the small where there may be a need for other instruments, other types of programs for larger companies,” said Dan Kelly, President of the Canadian Federation of Independent Business. “The wage subsidy is the most flexible of them. That’s of relevance to small, medium, and large employers.”

The Canada Emergency Wage Subsidy (CEWS) supports employers that are hardest hit by the pandemic, and protect the jobs Canadians depend on. The subsidy generally covers 75 per cent of an employee's wages – up to $847 per week - for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15 per cent in March, and 30 per cent in April and May. The program will be in place for a 12-week period, from March 15 to June 6.

Other government programs include the Canada Emergency Business Account (CEBA) which will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.

And there’s also the Canada Emergency Commercial Rent Assistance (CECRA) which will lower rent by 75 percent for small businesses that have been affected by COVID-19. The program will provide forgivable loans to qualifying commercial property owners to cover 50 percent of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.

*WHYTE AVENUE IN EDMONTON. PHOTO: LOOPNET*

But critics say the program is a mess, confusing, relies on the voluntary participation of landlords, and has too high a threshold of revenue loss for businesses to apply.

Also on Monday, BDC, the Business Development Bank of Canada, announced it has created the Mid-Market Financing Program to bring liquidity to medium-sized companies particularly impacted by COVID-19 and whose credit needs exceed what is already available through the federal government's Business Credit Availability Program (BCAP), as well as other measures previously announced by BDC.

"The current situation is putting pressure on all business owners, big and small. With this additional support, medium-sized companies will be able to maintain their staff, preserve supply chains and manage cash flow. We understand it will take time for both the economy and Canada's businesses to stabilize and this new financing program is designed to serve as a bridge through this crisis," said Michael Denham, President and CEO of BDC.

BDC said it will make additional credit available to complement businesses' existing debt facilities, working closely with their primary lenders. The Bank anticipates that qualifying companies will have annual revenues in excess of approximately $100 million. These commercial loans, which will take the form of a junior loan done jointly with the business' primary lender, will range in size between $12.5 million and $60 million each. To be eligible, companies must have been financially stable and viable prior to the current economic turmoil.

Mario Toneguzzi, based in Calgary has 37 years of experience as a daily newspaper writer, columnist and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, city and breaking news, and business. For 12 years as a business writer, his main beats were commercial and residential real estate, retail, small business and general economic news. He nows works on his own as a freelance writer and consultant in communications and media relations/training. Email: mdtoneguzzi@gmail.com

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