Canada: COVID-19 - Canadian Federal Government’s credit access measures

In brief

On 13 March 2020, the Government of Canada announced its COVID-19 Economic Response Plan. Among the various measures to support businesses laid out in the Economic Response Plan are two credit access programs to facilitate extraordinary lending measures to Canadian businesses: the Business Credit Availability Program and the Canada Emergency Business Account. Both programs are to be accessed through the Canadian financial institution that is the primary lender to the business.  Additional details regarding these programs are expected to continue to be provided.


Business Credit Availability Program

The Business Credit Availability Program has two components: (i) guarantees of new operating credit and cash flow term loans by Export Development Canada (EDC); and (ii) a co-lending program between eligible financial institutions and the Business Development Bank of Canada (BDC). The Business Credit Availability Program is only available to small and medium-sized enterprises, being an enterprise with between five and 499 employees. Loans under the Business Credit Availability Program are limited to amounts of CAD 6.25 million and will be priced at market rates.

In respect of the EDC guarantee program, financial institutions will be allowed to issue operating credit and cash flow term loans to existing clients in amounts up to CAD 6.25 million, with 80% thereof being guaranteed by EDC. Any amount lent under this program must be used for operational expenses and not for any distributions of capital, shareholder loans, bonuses, increases to executive compensation or the repayment or refinancing of other debt.

In respect of the BDC co-lending program, financial institutions will facilitate loans from BDC to borrowers according to the following tiered availability schedule:

  • Loans of up to CAD 312,500 to businesses with annual revenues less than CAD 1 million.
  • Loans of up to CAD 3.125 million to businesses with annual revenues between CAD 1 million and CAD 50 million.
  • Loans of up to CAD 6.25 million to businesses with annual revenues greater than CAD 50 million.

These loans will have a 10 year repayment period with interest-only payments for the first 12 months.  

Canada Emergency Business Account 

The Canada Emergency Business Account is available to Canadian employers with between CAD 50,000 and CAD 1 million in total payroll in 2019, beginning 1 March 2020. Under the Canada Emergency Business Account, financial institutions will be able to provide interest-free credit facilities of up to CAD 40,000 to eligible businesses. If repaid prior to 31 December 2022, 25% of the principal amount, up to CAD 10,000, will be forgiven. If not repaid prior to 31 December 2022, the remaining principal balance will convert to a three-year term loan, with interest payable at 5% thereon.

Both the Business Credit Availability Program and the Canada Emergency Business Account are being administered and made available by various financial institutions and credit unions. Borrowers should contact their primary banking relationship contact for more information and to access these programs. 

Should you have any additional information about these programs and whether they can be of assistance to your business, please contact Baker McKenzie Toronto.

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