Finance Minister Chrystia Freeland introduced legislation on Monday that would overhaul the government’s approach to rent relief for small businesses as well as extend the federal wage subsidy until June 2021.
The new bill delivers all of the three big changes Dan Kelly, head of the Canadian Federation of Independent Business (CFIB), had been asking for.
First, it takes landlords out of the equation, delivering the aid directly to small business owners. The CERS’ predecessor, the Canada Emergency Commercial Rent Assistance (CECRA), was widely criticized for relying on buy-in from landlords, many of whom did not participate in the program.
Second, the new rent-relief program will run until the middle of 2021, crucially extending federal aid over the winter and through the spring, Kelly says.
Third, it makes the subsidy available on a sliding scale, with the amount of the subsidy businesses stand to receive proportional to the size of their revenue losses.
“We’re very pleased with the draft legislation,” says Kelly, who credits Freeland, who succeeded Bill Morneau at the head of Canada’s Finance Ministry in August.
But the Liberal government’s false start on commercial rent relief comes at a cost, Kelly says.
Nearly a month passed between when the federal government first outlined the CERS and when it tabled the draft legislation for it. While the subsidy will be available retroactively to cover October rents, it may be several more weeks before small businesses are actually able to access the program.
“I’m 50/50 as to whether the program will actually be delivering any cash by December,” Kelly says.
Kelly urged lawmakers to quickly make any necessary amendments and pass the bill by the end of the week.
“Every day that goes by without the program being in place, there will be more and more businesses making decisions to permanently close their doors,” he says.
The Conservatives used their time on the House of Commons agenda Tuesday to ask the Liberals for extra flexibility in the rent-relief and the wage subsidy programs.
The Canadian Chamber of Commerce told the Canadian Press the legislation, as written, doesn’t remove arbitrary caps on rent relief that had been a key concern raised with the Liberals as the government revamped the program.
“This punishes businesses that have several locations, especially those in expensive downtown cores,” said Drigola, the chamber’s director of parliamentary affairs and of policy for small and medium enterprises.
While the bill makes its way through Parliament, here’s what we know so far about the proposed subsidy:
How much can small businesses receive?
The program would cover eligible fixed property expenses, including rent and interest on commercial mortgages. The amount of the subsidy would depend on the revenue losses suffered.
Based on what we know for now, a revenue drop of 50 per cent compared to pre-pandemic levels, would qualify a business for a subsidy of 40 per cent of eligible expenses, according to the CFIB.
A revenue loss of 60 per cent would unlock a subsidy of just over 50 per cent, the organization says. And those for whom revenues collapsed by 70 per cent or more would be able to receive a 65 per cent subsidy.
In addition, Ottawa is proposing a 25-per-cent top-up for businesses affected by government lockdowns. This would raise the maximum subsidy to 90 per cent.
It remains unclear, so far, whether only businesses that must completely shut down would qualify for the additional support, Kelly says.
“What happens if you’re a restaurant and you’re allowed to open for takeout and delivery, but you’re not allowed to open for indoor dining?” he wonders.
Clarifying this issue could complicate the implementation of the subsidy, Kelly says.
Also, the subsidy parameters announced so far would only apply until Dec. 19, the government has said. Ottawa may change subsidy rates after that as circumstances warrant, he says.
But Kelly says he’s not concerned about those potential future tweaks.
Once the program is up and running, small changes on the margin shouldn’t cause any significant disruptions, he says.
How long will the program run?
The program is set to run from November 2020 to June 2021. However, the subsidy will be available retroactively to cover rent starting with the period running from Sept. 24 to Oct. 24.
It’s not clear yet when the application process will start.
While applications are not expected to open until November, claims can be made retroactively to cover the period of Sept. 27 to Oct. 24, once available.
Who will run the program?
Like the Canada Emergency Wage Subsidy, the CERS will be handled by the Canada Revenue Agency.
That’s good news, according to Kelly.
“I’m not usually CRA’s biggest fan, but they have done a pretty good job of administering the wage subsidy once it got up and running,” he says.
The government has said the subsidy is meant for businesses, charities, and non-profits that have suffered a revenue drop. More details remain TBD.
What about missed rent payments from April to September?
Although most small businesses received no support through the old rent subsidy, CECRA, which covered April through September, there is no retractive help in the current program to cover any missed months of rent during that period, Kelly says.
“The challenge with that is that a lot of business owners are sitting on $50,000 or $100,000 worth of unpaid rent bills and they have no revenue from which to pay them,” he says.
CECRA ended on Sept. 30 for new applications and Oct. 30 for extensions.
What about new businesses?
Federal aid for small business has so far largely cut out new business, Kelly says.
The new rent program, the wage subsidy and the Canada Emergency Business Account (CEBA), which provides interest-free and partially forgivable loans, require a business number, tax records from 2019 and 2018 or the ability to compare revenues to pre-pandemic levels, he says.
“There remain thousands of businesses that are just not able to access any of the support programs. And that’s not changing with this new revised legislation,” he says.
— With files from the Canadian Press