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Learn how to survive as a small business in COVID-19 times, whether it’s by securing a small business loan during COVID-19, or applying for federal funding.

Federal and provincial closures of local small businesses in COVID-19 times have wreaked havoc on the 2020 financial year for many of them. If you’re a small business owner, you may have gone from enthusiastically setting goals for this year to worrying about how to stay afloat and trying to secure a small business loan to cope with COVID-19.

Layoffs and closures can be tough on a business, but the federal government has announced several programs to provide relief to your small business and employees. If you combine these programs with a little ingenuity, you’ll give your small business its best chance of surviving the COVID-19 pandemic.

Check Your Cash Flow Reserves and Insurance Options

While it may have taken a few weeks to assess how much your revenue has been impacted by the provincial and federal restrictions, you should have a reasonable idea of whether you can continue to earn an income now. Use the information to forecast your cash flow and assess whether your current cash reserves will cover a prolonged drop in revenue.

This is an excellent time to check your insurance to see if it includes coverage for lost revenue.

Where to Get a Small Business Loan for COVID-19

If you don’t have the cash reserves to weather the financial storm, you may need a loan to cover the difference. The federal government has launched a variety of loan programs for new entrepreneurs, small businesses, new businesses, and rural businesses. These loans are administered in conjunction with local lenders and business development agencies.

The first program to consider is the Business Credit Availability Program, which provides support for small and medium-sized businesses through the Business Development Bank of Canada and Export Canada. These organizations are working with local lenders to guarantee 80% of operating credit and cash flow term loans. These loans can be used for operational expenses, and you don’t need to be an exporting business to qualify. Contact your local lender to apply.

If you’ve exhausted your federal pandemic-related loan options, you may need to look into private loan options to keep your business afloat during the pandemic. You can approach your local lender, or use an online lending platform like Loans Canada, which connects you with lenders offering up to $500,000 in small business loans to Canadians. Interest rates start at 4.70% and terms extend up to 60 months. You could also consider a personal loan such as a home equity loan, but be aware that this type of loan uses your home as collateral. If you default, your home may be seized by your lender. Read more about The Best Business Loans for Small Businesses in Canada.

Learn more about Loans Canada

Manage Staffing Issues

Many small businesses will face the difficult task of managing staff during these trying times, both due to the decrease in revenue due to business restrictions, but also physical distancing requirements as required by public health authorities. If you find yourself needing to make staffing changes, it’s essential to be honest with your employees. Make sure they know you want to keep them on payroll, but may not be able to.

Before committing to laying off employees, consider other options. You could reduce your staff’s hours if revenue is an issue, or you could apply for the Canada Emergency Wage Subsidy. This subsidy covers 75% of employee wages if your business has suffered a 15% drop in revenue in March and a 30% drop in April and May. This program runs until June 6th.

If your current office cannot comply with physical distancing requirements, you don’t have to send your employees home automatically. Instead, consider implementing work from home protocols or requiring employees to work in shifts to allow you to continue doing business without interruption.

If you find yourself with no other option but to lay off your employees, you should make sure they are familiar with the Canada Emergency Response Benefit, which is available to all laid-off workers in Canada. This taxable benefit ensures your employees access up to $2,000 every four weeks for 16 weeks. Read Our Guide to COVID-19 Emergency Benefits and Financial Relief.

Be Proactive With Suppliers and Other Expenses

If you make regular purchases from suppliers for products that you may no longer need, communicate openly with your suppliers about stretching payment terms and lowering interest rates. Ideally, you’ll be able to defer payments long enough to remain in good standing with creditors.

If you’re having trouble making your rent payments, you can take advantage of the 75% rent reduction subsidy being offered by the federal government in conjunction with the provinces, who have authority over rents. This program is called the Canada Emergency Commercial Rent Assistance program. The program is a little complicated, but here’s how it works:

You’ll apply for a forgivable loan to cover 50% rent payments for April, May, and June. If your landlord agrees to reduce your rent by 75% during those three months, the loan is forgiven, and you’ll pay the remaining 25% to the landlord. The landlord must also commit to not evicting you during this time.

To qualify for this rent reduction program, you’ll need to pay less than $50,000 per month in rent and demonstrate your revenue has dropped by 70%.

Get Creative

Ideally, you could avoid laying off employees and taking out small business loans entirely by getting creative with how you earn revenue. By rethinking your small business in COVID-19 times and finding new ways to deliver your product or service, you may be able to manage without subsidies or benefits.  You may even find a new business niche and see an increase in revenue. Here are some examples of how businesses have adapted to the COVID-19 climate:

  • Offering curbside pickup for products
  • Launching an online store with delivery so customers can shop from home
  • Shifting production to in-demand items like cloth masks or hand sanitizer
  • Delivering services virtually through online meeting portals like Zoom

The Final Word

During a pandemic, we offer the same advice for small business owners as we do for individuals. Since no one could have seen this situation coming, it’s incredibly challenging to prepare for it in advance. If you are struggling to make your business profitable during this time, don’t be too hard on yourself. It’s unlikely that 2020 will be a successful year for many companies in Canada.

The best you can do is try to keep your business afloat by practicing financial diligence and taking advantage of all available subsidies and benefits. You may need to make difficult decisions, like laying off employees or temporarily closing your doors. Still, a prudently-run business should be able to bounce back and operate as part of a ‘new normal’ in the long run.

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